Probably the most daunting task for new entrepreneurs is finding people who believe enough to invest into their project. It may be second only to dreading that first customer call. Unfortunately, there isn’t a great deal of information explaining how to get started down this pathway. As a result, many startups begin by googling “startup investors”, find a list of VC firms, and then decide to start sending out emails. It isn’t long before the unreturned emails, or polite list of “no thanks” begin to overburden you.
There is a better way to begin. First, unless you (1) have have created a startup in the past or (2) have special connections, the people most likely to be interested in your startup are angel investors. Angels are typically individually high net worth individuals who typically will invest earlier in companies. The great thing about Angels is that they look at more than just spreadsheets: they prefer to invest in companies they care deeply about, or feel they can contribute a great deal towards. They are also interested in companies with a great team, and whom they connect with. So how do you get in touch with these angels? Two really strong avenues are LinkedIn and Angel List.
- LinkedIn – Angels in less common markets (i.e., everywhere except California and New York) are typically at least interested in investing in a startup in or near their region. The idea is that they want your business success to have an impact on their community. So one good option is to do a search on LinkedIn for angel investors in your area. To return the search results you want, you may have to open a premium account, but this can also be beneficial because you will want to send those investors a message (which you also need premium access to do). You can also use the search function to search by industry, which will help you find investors who closely align with you.
- Angel List – Angel List is like Facebook for the startup community. Each startup typically has its own profile, and investors can browse information you provide to see if they are interested in you. Meanwhile, you can also browse investor profiles to find those who have invested in similar industries as yours. One thing to keep in mind – setting up your Angel List profile takes a bit of time. But it’s definitely worth it!
Once you have a list of people to reach out to, you will want to seek to setup a conversation. One mistake early startups believe is that getting an investment will be a done deal. In reality, it is a much, much longer process — and while most angels are nice people who won’t turn down an opportunity to talk with you, the grand majority will not be seeking to invest in you (at least not right away). So why even try?
Well as these guys see you making progress, and see your team working cohesively, they become more confident in your success. And over time, that confidence can translate into an investment. Even more importantly, once they invest, they are likely to connect you with colleagues of theirs you may not have known about. This is good because (1) the trust the colleagues have for each other allows for a quicker decision by this new colleague, and (2) you are open to a network you didn’t previously know about.
Next up, How to connect with the investors…