I just finished reading Seth Levine‘s post $5k to Pitch Your Business? Who Falls For This? Which is about the 10th(?) post/tweet I have read about investment groups requiring companies to “pay to pitch.” Jason Calacanis has lead an interesting and vocal campaign against the practice going so far as to start the Open Angel Forum.
As vehemently as I have seen active investors (angel and venture) speak out about the practice, I have heard frustrated entrepreneurs ask what other opportunities are available.
Having just seen several of my friends close rounds (big and small), and spent the better part of the past three/four months raising money myself, I have come to believe this to be true:
Fundraising is about YOU. If you are not getting meetings, you are not trying hard enough.
There are two components to any fund-raise: the idea and the entrepreneur.
Investors tend to think about the following questions around the idea:
- Is it in a big market?
- Is the idea interesting/disruptive enough (IN THE OPINION OF THE POTENTIAL INVESTOR) to ramp users/revenue quickly?
- Is the idea innovative?
- Is it well thought out?
- Is it unique?
- What are the costs to getting the idea off the ground?
- Does it solve a REAL problem? (It doesnt have to be an IMPORTANT problem)
- Does it excite me? (Dont underestimate the importance of this. I have good friends that are VCs who are not investing in my project because its fundementally not interesting to any of the partners)
Investors tend to think about the following questions around the entrepreneur:
- Do I believe s/he can build this company to size?
- Do I believe that s/he will steward my investment properly?
- Do I believe in the entrepreneur?
- Can I work with them for the next 3-5 years?
- Do I believe that s/he can recruit a solid team/board?
More often than not, an investor will invest in a “B” idea with an “A” entrepreneur attached. Most investors will never invest in a “B” entrepreneur with an “A” idea (unless they feel they can bring in an “A” team around the entrepreneur).
But, what if you cant get the attention of any investors?
You arent trying hard enough.
Here is what I did.
- Made a list of everyone I thought would make a major difference as part of my investment group.
- Made a list of everyone that would be interesting in our NEXT round.
- Made a list of everyone that I wanted to pitch the concept to, whether they wanted to invest or not.
Then I called/emailed and asked for appointments. Where I could, I leveraged people I knew to make intros. I asked people I pitched to refer me to other people on my list (I had 4 different people introduce me to a firm that I think would be amazing in our next round, until they finally took a meeting.)
I called CEOs of companies that firms that I was interested in invested in. I pitched the concept to the CEOs to get their feedback on if it was interesting for their investors. In some cases, I got meetings because of that. In all cases, I got amazing feedback.
My pitch was refined after every meeting. I listened to commonalities rather than direct advice. Should I put my team slide early or late? Did it matter? Was market size really important? What resonated with potential investors?
I spoke to potential customers. I asked them what pains they currently felt. I asked for DATA. I spoke to potential users. I asked for more DATA.
Overall, I ended up speaking to probably 40-50 people. Maybe more. Some expressed interest in investing. All are people that I feel I could reach back out to for advice.
Quick note on my investment deck:
An investment deck should answer these questions (the order varies on whom you are speaking to):
- Whats the problem
- Why do YOU care
- Whats the solution
- Why is YOUR solution the best
- Product Demonstration
- Whats the market size/composition
- What are your revenue projections (3 years)
- What are your revenue sources
- Who is the team
- Summary (3 bullets)
- How much are you raising (and why).
My deck is 16 slides (including a title and conclusion slide). Not sure if its the best deck out there, but it worked for me.
When I graduated college and moved to DC with a friend, I had a place to stay for 2 months and $300 in my pocket. No job. My friend Larry and I decided that looking for a job WAS our job, and we spent 40+ hours a week, sending resumes (this was in the Paleolithic Era), walking into companies to ask what jobs they had available, asking interviewers to recommend us to other companies. All in June/July/August in DC. In sport coats and ties.
When you are looking for investment, that is YOUR JOB. Yes, you have to keep your company moving forward as well, but if you NEED investment, then its YOUR JOB. Treat it as such.
And remember if you cant find investors, its not their fault. Its yours.
BTW, those that know me, know that I am friends with the Foundry guys–Brad, Seth, Jason and Ryan–and David Cohen. I got exactly ZERO intros from them (I ended up not asking for any, which was probably stupid on my part) to my final investor group. In my investor group, there are two people that I knew prior to starting the fund raising process.
When I started this post, I didnt mean for it to be so preachy, but it really angers me when I speak to entrepreneurs that are having undue difficulty raising money. If you are struggling to raise money, look back at the decision points:
- Does your idea excite the people you are talking to;
- Do you excite the people you are talking to;
- Are you talking to the ‘right’ people (not the ‘easy’ or ‘big name’ people)?
There is money available, but it takes work to find the right investors, and paying to pitch is just a short cut that hurts your company in the long run.
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