Recap of Startups Uncensored #5: Raising Angel Money from Investors
I want to start by saying that raising funding or Angel Capital is something I have ABSOLUTELY no experience with, so, it was absolutely great to hear a panel on something where I was thoroughly engaged. Not to mention the rock star line up of Los Angeles Technology entrepreneurs that were on the panel: Brett Brewer, Rick Smith, Matt Coffin, Bryce Benjamin, Kamran Pouzanjani, and Jeff Tinsley.
Anywho, big thanks to Jason Nazar and Docstoc for setting this up again at the Santa Monica Public Library. As usual, in true Jason fashion he started out talking about Docstoc and their approach to raising capital. Then he started introducing the Panelists and the one thing that I could definitely say that all the panelists mentioned was “the Ecosystem in Los Angeles has never been this strong” and that they have “never seen this much startup energy in LA.” Everyone talked about the trials and tribulations along with how tough it was to get people to invest in a Los Angeles technology company.
It basically turned into the Matt Coffin hour once he started talking and I have to say, I wanted to constantly take notes, but I didn’t have to because I was so intrigued by hearing his story. He mentioned that Lower My Bills at the time was struggling and that they went all over to look for investors and ended up in Minnesota, of all places. Just goes to show that being creative about finding funding is important. He also mentioned that the startup environment was much different in ’01 vs. ’09 in that people that have been through it are a bit more open. Matt also really talked about how most the time, they are looking for momentum and/or the passion the entrepreneur has. He mentioned “0nly 10% of people who pitch to me, follow up,” which leads me to the most important thing that stuck out to me. Matt talked about how he wants to hear from you, but, not just to small talk, but to hear progress. He really went into this in detail, but, essentially, he wants to hear that you have set a goal and not only met it but exceeded it, every time he talks to you. It doesn’t have to be a feature being complete or anything, but, could be as simple as just working out something that was an idea that needed to be flushed out. Basically, show that you have some wins and exceed expectations.
Some other great points that were made that stuck in my head were by Kamran Pouzanjani of PriceGrabber. First and foremost he said that you can’t expect to leave you comfortable job and expect to make more money immediately. You are going to have to work long hours, you are going to have to “suffer through it,” and finally you are going to have to change your lifestyle drastically. (Although, I have to admit it was a bit funny hearing that someone left a job making 4x me that had to “suffer”, but, I can totally imagine that it must have been difficult no matter how much you make). The other big point that he made was that he doesn’t want to hear another pitch about a … wait for it … wait for it … “Web 2.0 company!” (Amen, checking my watch, I believe it was about 6:45 PM on March 26, 2009 that we can say Web 2.0 is officially dead!…ok maybe not just yet, but thought that was hilarious.) If you are starting another “me too” site or coming in at the end or starting another “video” site, you are basically irrelevant. He also mentioned that he doesn’t want to see the starters either (a la twitter), you basically want to come in right after that when its starting to rise to more mainstream audiences.
Jason then went into his keys to building a relationship with Angel investors and keys to raising Angel Capital and his overall experiences. Here they are:
- Get in and tell them about yourself and tell them about you, remember, they are investing in the entrepreneur and not the idea.
- Take the time to talk to them over a 6 month period and it could take that long.
- Build a relationship over time and continue to make wins and show wins in that time frame.
- Selling yourself is the most important factor, remember, they are investing in you.
- Be 100% transparent and honest
- Be persistent and relentless, but, don’t be pushy
- After the investment, continue that relationship. Getting the investment is not the end of your discussions with the investor, it is the beginning of the relationship.
Finally, there were some other real good points made:
- Although investors are mostly focused on the people and the entrepreneur him/herself, sometimes the idea sparks interest.
- There are 3M’s important to investors: Management, Market Size, and Momentum
- No investors like someone that has a huge EGO or thinks they know the only way to get things done. They like people that are open and know they have a lot to learn. They want someone that knows they might have to shift the company if the market requires it.
- Again, Don’t be the guy that is still pitching web 2.0, because, that time has passed.
- And again, I can’t keep saying it enough, they are investing in you, so, keep showing and talking about wins wins and that you are exceeding expectations.
Thanks Jason and the DocStoc crew for putting on another stellar night!