Tag Archives: angel investors

Raising money requires you to “connect the dots” for investors

You would be foolish to believe that the first time you meet an investor that they will fall in love with you, your team, and your idea.

This just doesn’t happen, unless of course you’re some type of rockstar entrepreneur that the investor knows through press.  We’re not talking about these rockstars in this short post on raising money.

We’re talking about “no name” entrepreneurs like most of us are.  Guys and gals taking their first swing at the bat.

When you first meet an investor you are creating a proverbial dot on a chart, as described by Mark Suster in his famous blog post titled Invest in Lines, not Dots.

This concept described by Suster is critical for first time entrepreneurs to understand.  Suster states:

The first time I meet you, you are a single data point.  A dot.  I have no reference point from which to judge whether you were higher on the y-axis 3 months ago or lower.  Because I have no observation points from the past, I have no sense for where you will be in the future.  Thus, it is very hard to make a commitment to fund you.

For this reason I tell entrepreneurs the following: Meet your potential investors early.  Tell them you’re not raising money yet but that you will be in the next 6 months or so.  Tell them you really like them so you want them to have an early view (which is what all investor’s want).

Suster goes on to describe how in every subsequent meeting you have with an investor that you can demonstrate how you’ve done what you said you would do creates another dot.

These dots eventually get connected to form lines that an investor can then invest in.

I love this concept.

Please go read Mark Suster’s full blog post on this strategy to raise money here and let me know what you think.

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When you should look for angel investors

I talk to entrepreneurs almost everyday.  Most live in Atlanta, some live in other places outside the Valley.

As an entrepreneur living outside the Valley, it’s important that you have the right mindset if you want to get angel investors in your venture.

First, you have to be real with yourself on whether or not should you should be looking for angel investors in the first place.

I found a great post written by David Cohen from back in 2006 that covers this topic.  The bottom line from the horse’s mouth is that:

If you’re going to go and ask any kind of professional (non-emotional) investor (angel or VC) to open up his checkbook, you had better be talking about building at least a $20M business. Fact.

Remember, that number is from 2006.  So in today’s terms you might want to up it a bit, (for the sake of argument) to a $50M business.

If your business is not going to hit that number in let’s say 2 to 5 years after you get your angel investment, then you are a great candidate for the bootstrappers club.

There are some other rants and nuances that provide more context on David’s blog.  Please go check it out here.