Software is slowly eating venture capital, and it’s making fundraising easier for startups.
In a not so long distant past, big ideas started on napkins, and made their way to powerpoint presentations. We used to e-mail business plans, pitch over the phone, stalk vc’s and superangels to simply get an opportunity to pitch. Raising a round, if successful could take anywhere from 3 to 9 months.
Business Angel Networks
My experience with Business Angel Networks (BAN’s) wasn’t too positive and mostly a waste of my time. I had to fill out archaic old-school forms, attaching business plans, include revenue projections for the coming 3-5 years and in most cases even think of possible exits. Once accepted I was “allowed” to pay a fee to present in front of a bunch of passive angels. I only remember being super-frustrated by the lack of responsiveness and interest in my space.
Most BAN’s haven’t changed all that much. And even though most started using Gust, they remain set in their old ways.
Traditional “Business Angel Networks” are too passive and docile for the fast-paced tech-entrepreneurs.
The Techcrunch effect
There used to be a time when getting a post on Techcrunch was enough to boost interest in a startup, and get instant introductions to many big-name vc’s. A few years ago I got 17 intro’s to big name vc’s/angels, including Lightbank, following a post by Robin Wauters on Techcrunch.
But as more quality tech-blogs (The Verge, Pandodaily, The Next Web, Gigaom, …) gained notoriety, the “fundraising” value of a post on Techcrunch (and any other), has diminished to almost zero.
These days most posts on Techcrunch are of the “X raised Y to do Z”-format, which doesn’t help fundraising at all.
Startup competitions and events
As many entrepreneurs, I’ve attended Techcrunch Disrupt and Leweb Paris/London, with the hope of meeting investors. That doesn’t work.
If you’re not on stage at Techcrunch Disrupt, you’re wasting your time and money.
Although stories about startups like Layer (which I love by the way), the winner of Techcrunch Disrupt SF in 2013, may seem like an overnight success, mainly thanks to Techcrunch, they aren’t. Tomaz, the co-founder of Layer, and his team worked non-stop for a year, and raised funding, before they even got on stage.
Building a startup takes guts, perseverance, hard work and most of all ultra-focus. Time is your most valuable resource. Don’t waste it going to events where you are not the main attraction.
If you do want to attend an event, don’t expect to close your round right there and then. Do it to grow your network, and meet as many new people as possible. Manage your expectations. Events are great to meet investors, you already know, and improve relationships, since they’re in one place. But you’ll need to set up meetings long in advance.
The value of influencers like Robert Scoble
Uber-startup evangelist/blogger Scoble has a huge following, including many a-tier vc’s, angels, startups and fellow-bloggers. And if he really likes a startup, he can become your best evangelist. Many may remember his efforts to push Highlight.
If you have a chance to meet and talk to Scoble, get him to use your product instead of talking about it. Again, manage your expectations.
If you have something cool, a post by Scoble may move mountains or may not. But it’s still fun to try.
The Accelerator “mafia” era
Accelerators are the new MBA programs on steroids. Fred Destin (Atlas Venture), an investor in my previous company, suggested I should try Seedcamp. I did, and never regretted it. I joined Seedcamp in 2011 in New York.
I got instant access to hundreds of mentors, introductions to big names in venture capital and hands-on support (fundraising, product, marketing, positioning, pitching). It’s a rough experience, where your assumptions and beliefs are tested to the core, and much of the time you will hesitate, and doubt most of your assumptions. But in the end, this truly helps you become a better entrepreneur.
If you have a chance join an accelerator like Seedcamp, do it. You’ll meet great entrepreneurs. Even if you don’t succeed the first time, you’ll learn how and get access to a network which will catapult your next venture.
VC’s are more inclined to believe in you, if you have gone through an A-brand accelerator (Seedcamp, Techstars, 500startups, Angelpad, …).
AngelList : The Linkedin for Angels and Entrepreneurs
AngelList is a must-have for any startup. Even if you are just starting out, you should get an account and start building your entrepreneur footprint. Start early on creating a profile for yourself and your startup. But only publish it, once it’s ready. You need to stand out, and your profile should answer most questions an investor may ask. You only get one shot. My startup was “trending” on AngelList for 4 months. It got us +2.000 followers. Read here how we did it and learn from our experience.
AngelList is also great to check out the competition, meet fellow founders, apply to accelerators and start your fundraising effort.
Like with all good things, there is a back-draw. You can only send a message to someone, if that person follows you. That’s where Angie comes in.
Angie: Matching Angels and Entrepreneurs on Mobile — Tinder-style
Apart from being the leading mobile app for AngelList, Angie recently introduced investor/startup matching. Every day Angie will show startups a list of investors they should connect to, based on shared markets and interests.
Thanks to Angie’s startup discovery-engine, your startup’s profile ends up on investors mobile screen, and you can start getting followers.
99% of startups on AngelList are invisible to investors. Angie solves that by matching startups with investors.
Caveat: Public versus Private fundraising
Although it may seem a great idea at first, be aware that many of the people who may want to invest in your startup, after seeing a post on Facebook or a tweet, may not be eligible. Most of them won’t be accredited investors. Using public fundraising may provide more issues than benefits (for now at least). Once non-accredited investors can join, we’ll need to revisit this question.
By taking your fundraising public, you are actually limiting your changes to raise from friends, family and “fools”.
Consult your lawyer.
Stop wasting time traveling to overpriced events, attending pitch contests or demo-days, stalking vc’s and angels or begging for posts on tech-blogs. Join AngelList, install the Angie app and use Angie investor matching. And spend the time you save on building a better product.
You can raise smaller amounts, as many times as you want, or need. No one is forcing you to start raising $500K or $1M immediately. The pre-seed, seed, A, … rounds were the standard before, because you had to work within a framework built by traditional vc’s.
Times have changed, play by your own rules. Use all resources and instruments.
You can start by combining a $50K round via mobile invest on Angie, with a crowd-funding campaign, and do a follow-up investment, as you are growing and achieving new milestones.
And most of all, tell your story, engage with your customers and turn them into your ambassadors. Some may even become your first investors.
- Seedcamp Berlin winners announced: Get ready for a “Dropbox for email” and a “real-time story creator” (venturevillage.eu)
- AngelList: VCs in sheep’s clothing? (vcwithme.co)
- Recap of our 2nd US trip this year: http://t.co/DCVmtuuYLo apply to @Seedcamp London if you want to be part of the next one! (seedcamp.com)
- Guest Post: How I (finally) found a technical co-founder and got accepted to Seedcamp by Steven Renwick (seedcamp.com)
- Everyone Can Learn Angel Investing Using Kiva (adammcnamara.com)
- AngelList’s Naval Ravikant on His Syndicates Program, Two Months In (strictlyvc.com)
- The Great Unbundling of Venture Capital (davelerner.com)
- How to decide whether AngelList syndication is right for you | PandoDaily (pando.com)
- 4-Hour fundraising: Tim Ferriss, the JOBS Act, and why Miley Cyrus could be an instant VC (venturebeat.com)
- What You Need to Know to Become an Angel Investor (online.wsj.com)