The Asked Out (new name still up for grabs) team has been on the fundraising hustle for the past 4-5 months. We have had our successes…we have our rejections…and stumbles along the way. I personally have not been the most integral part of the fundraising process…but I have contributed. Therefore I have been able see the process unfold from a birds eye view (if the bird was flying sideways…eyes are on the side of the head )…without being involved in the real nity gritty. For me…I have made connections, pitched, answered questions and charged the room/Webex with some good ol’ fashion Gen-Y start-upper energy! My first time doing the valley circuit has been a tremendous learning experience not only in the “hows” and “whats” of fundraising; but also in how to align a team, product and vision.
Let me sum up what I learned with a few key points:
The formula is simpler than you think:
Just like a start-up does business development…raising angel and venture capital is a very similar process. One: you take a look at who you have relationships with and see who they have relationships with. Two: You reach out to those connections/ investors, present the opportunity or asked to be put in touch with someone who would be interested in the opportunity. Three: You pass on materials, pitch or demo. Four: You wait and hope. Five: You take on “next steps”.
Yes this is a simplified format and you most likely will be more creative and deviate from this process…however I learned that the process is simple. Don’t over complicate things…investors like simple…they talk to hundreds of people every week/ month.
Traction (whether you like it or not) it is what gets most companies funded:
We have been pitching on the lower rungs of “traction”…meaning what we have to show is some fantastic test partners and alpha feedback. However for products that have any type of consumer side, you almost always need traction. Traction doesn’t mean that your model is scalable…it means you have results. When you don’t have traction…many will love your concept…not necessarily the opportunity. So when it comes to getting a product out there…build lean, deploy quickly, iterate…focus on traction!
“You have a huge vision? So what?
Investors say they love the “change the world type businesses”…however “love” is not always synonymous with investing money. Many investors (mainly angels) like to “hit singles” in this venture ecosystem (as a few of colleagues and advisors have told me). Therefore big dreams can be scary…they may be too robust of a solution for a broad market. Many investors would rather see a niched model that may catch the interest of Google in a few years. When investors do believe in your vision…they next want to assess the team. Can this team execute this grandiose vision or can’t they?
Most won’t give it to you straight (at least a 100% straight):
Most of the investors I have met are fantastic people… interesting, successful and very nice. In some cases their niceness prevents full self expression (at least it seems to). We haven’t hear that our concept sucks once (it is a terrific concept however I feel we should expect at least one “this sucks”). When they do give it to your straight…take full advantage…take in their feedback (don’t always act on it) and ask for advice. They don’t know your model like you do but they might know the space much better so every piece of feedback counts. Basically you will have do some introspection to really figure out why you are getting “no’s”.
Separate your belief in your start-up from your response/ success rate:
Like I said it’s important to take in feedback but it’s much more important not to take feedback to heart. The more you allow “no’s” to bruise your ego the more it will affect the overall start-up. Feedback is simply feedback…it doesn’t mean your model won’t work…or that your team is not right…it’s just feedback (good feedback from incredible people also doesn’t guarantee success). Some feedback you will act on…other feedback you won’t.
The rest of what I learned and have began to implement can be summed up in this video by Naval Ravikant of Venture Hacks. This presentation further expanded what I did not know…always fun to find out you don’t know much :). Watch it!!