This past Tuesday, we were joined by John Meyer on our LIVE! Series to talk about how to secure angel investors for your startup. John is no stranger to raising money from angel investors – having now founded his second venture-backed startup, Homebound and having raised $15M from over 40 investors, he shared advice that helped him personally secure funding. Now, he’s an angel investor himself, investing in social-impact startups and blockchain companies.
Here’s his advice:
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Find holes in your idea before investors do. When you are getting ready to pitch, spend some time critically thinking through your idea and prototype. If you understand all the ways in which your product could fail or falter, you’ll have thoughtful answers prepared for investors before they ask. Don’t have rose tinted glasses on when it comes to your business; it’s critical that you take the time to find the holes.
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Spend some time getting ready to raise. John urges founders to have extensive market research, both on the value proposition and on the cost. Ask people, “Will you use this?”, and if they will, ask, “How much would you pay?” Another great way to validate your company’s VP is to get LOI’s (Letters of Intent) from companies who express their intention to use your product. This tangible evidence proves to investors that there’s already a demand for what you’re selling.
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Find Investors by getting out there! John urges to leverage what’s around you when finding investors. Go on Eventbrite and meetup.com to get a sense for entrepreneurial networking events in your area, and also take advantage of groups like Next Gen to make connections. He guarantees that if you talk with five people in one of these events or groups, at least one will know an angel investor or pre-seed venture fund to connect you with. This advice is rooted in his personal experience; when first raising, John had no feet in the startup world. He just had to get out there and meet people. The good thing is that once you meet one investor, they can introduce you to others. “VC works because it’s based so heavily on relationships,” he noted.
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Make your deck perfect. John says that much of the success of the meeting comes down to the deck. It’s how investors quickly get a sense for the business. It’s important for the deck to be concise – just about 10 slides. After viewing the deck, John estimates that it’s a 50/50 chance that the investor is interested in continuing the conversation. It’s important to continue chatting with the investor if they typically invest in your industry, as investors prefer to invest in industries they’re familiar with.
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Have every possible contingency of the conversation ready. You need to nail down exactly what you’re looking to raise. If the question comes up and you’re not sure, it’s a red flag for investors. Following the review of a deck, there’s typically a 30 minute phone call with an interested investor. You’ll go through the pitch, and then the investor will ask questions, mainly around the areas where the idea can be vulnerable (which is why it’s so important that you’ve identified the holes and are prepared for these questions). Prepare by making sure that you have a sense of Frequently Asked Questions, and do the work on your own beforehand to get into the brain of an investor and anticipate the question they ask.
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De-risk your business as much as possible for the investor. The more you de-risk your business, the more you de-risk the investment for the investor. Much of the risk in an investment is in the founder themselves. So, if the investor asks you a question that you don’t know the answer to, be honest that you don’t yet know, but supplement your lack of knowledge with a plan to figure out, or by emphasizing what you do know. For example, if an investor asks how long you think it will take to be sold by a retailer, you may not know for sure. Instead of guaranteeing a date without any veracity to the claim, you can say something like, “I’m not sure, but I’ve had positive conversations with three retailers in the last few months.” An estimate is worse than no answer at all, so don’t do any fluffing.
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Manage the relationship after the call with a sense of urgency. After the conversation, be sure to send a follow up email and thank them for their time, and provide some timeline around the fundraising process. You need to create a sense of urgency after the call to make any movement happen, but you also need to find the right balance between rushing and nudging. Remember that it’s a big decision for an investor. To create a legitimate sense of urgency, John urges to start small with your fundraising goal for your first round before the next critical phase. That way, if you have already raised $25k of the target $40k, you can create a sense of urgency around the final $15k you need for this round. It will make investors move fast if they’re interested so they don’t miss out on the opportunity.
A big thank you to John Meyer for candidly sharing such diligent and important advice with us on the fundraising phase! John also graciously offered to share two ‘perfect’ pitch decks with anyone who emails him in case you need deck help. You can email him at [email protected].
Looking to meet investors? Our events are a great way to network with them, and apply to participate in a Pitch Competition onsite. You can perfect your pitch by signing up for one of our Pitch Pods! Stay in the loop on all of our opportunities by signing up for our newsletter here.