Where Can I Find Angel Investors?
The business side of the Expo blog is going to pick up some steam over the coming months. We’ll write about the product review space and other interesting notes, but one thread of the blog is definitely going to be general guidance for people starting online companies. Prior to Expo, I was a venture capitalist and prior to our raising venture capital late in 2006, we spent a few years as an angel-backed company…a hard existence to be sure, both for us and for our angels…to whom we owe everything. Given those two set of circumstances, I get a lot of questions from fellow entrepreneurs. It felt like it was time to start writing it all down. Here’s the first post with this theme…logically, all about getting starting with angels:
Perhaps the most common question I get and the core answer is actually very straight-forward: you already know your “anchor” angel investor. It’s someone in your network who possesses three critical elements: a) a belief in you, b) financial wherewithal, c) the constitution to take a flyer with some of their capital. While I am sure that there are plenty of stories of companies that raised money exclusively from people that they didn’t know beforehand, they would still be the exception to the rule and I have to think that that process is vastly harder (with a higher failure rate) than the other path.
There are two obvious comebacks to this idea and I’ll address them (bluntly) in turn:
1. “I’m not comfortable asking people in my network to give me money. I’m worried it might strain these valuable relationships”: If you aren’t willing to look friends and family (there’s a reason this phrase is so common) and ask for money, you need to turn around and go straight back to your cushy corporate job. You’ll save yourself a lot of heartache.
2. “I don’t know anyone who could invest & no one I know knows anyone.” I’ve got pretty much the same response as above. If you don’t think you have the contacts to raise some capital, you either lack the creative thinking (you don’t know ANYONE?) required to be an entrepreneur or you almost certainly also lack the contacts required to get vendors, customers and employees that will be essential to building a business. The only caveat to this last comment is that if you are some kind of freakishly talented programmer who can “build it and they will come”, then scale back your thinking and build the first version of your solution without capital.
Once you have your “anchor” investor (who, by the way, may not end up being the largest investor), now you need to leverage the heck out of that person’s network. They are absolutely your best reference and everyone with money knows other people with money. Ideally, you can get two or three independent “branches” of interested angels going, but even these all might come back to the same “trunk” (your anchor). Once the dynamic of angels telling other angels about your deal is working, your round is basically done as long as you vigorously follow-up and keep the momentum going.
Add comment April 6th, 2007
RSS Feeds