We recently closed an angel round a couple of weeks ago, and I thought that I’d share my thoughts on the process.
As a first-time entrepreneur, you will initially be judged by proxy. The main criteria people will use to evaluate you and your business is what other people think about you and your business. Frustrating? Sure. But the people you are most interested in pitching are the ones with the least time to spare–which is why Ron Conway only meets people on referral. Getting the first bit of outside validation is the most difficult part of the entire fundraising process. (Note: signing up advisors doesn’t count as outside validation.)
We went to a lot of meet-ups, presented at various start-up competitions, and took every meeting we could get, but by far the best resource we found to jump-start the process was Open Angel Forum. They do an incredible job vetting the applicants, and the angels that come are earnestly engaged and actively looking to make investments. It was here that we got our first commitments, from Joshua Schachter, Cyan & Scott Banister, and Jason Calacanis–all of whom we’re grateful to have on board!
With this validation in hand, we turned to Venture Hack’s AngelList. There is no better way to get into the inboxes of quality investors–truly, they’re all on AngelList. But as they stress on their application, already having the buy-in of respected players is really important.
I honestly don’t know how we would have raised our round without OAF and AngelList.
As for actually pitching angels, here are my take-aways:
- Show product. This is especially true if you’re a consumer-facing product. The first concern for potential investors is can this person get quality product out the door? Don’t use a PowerPoint presentation. Spend whatever face time you have walking through the product you’ve built and the vision for where you’ll take it.
- Tell a story. Describe a problem or inefficiency in today’s world and how you’re fixing it. Sell people on your version of the future.
- Write your own term sheet. You have a lawyer already, right? Great. Get them to write you a plain-vanilla term sheet that has all the normal rights and provision. The people you are pitching have seen hundreds of these–this isn’t a place to be innovative. It turns out that you don’t need a lead for an angel round.
- Expect it to take longer than you think. Then be patient when it takes even longer.