How to find investors for your startup
Startups are about exploiting huge opportunities faster than everyone else. There’s a big difference between starting a small business like a restaurant or a distributor company and a startup.
Startups are all about becoming the next Google, Uber or Snapchat - they’re about fast growth and world domination.
Although my co-founder and I have managed to get Appster to where it is today without any outside investment, the majority of startup founders choose to take a different route and build their business with the help of investors.
Aside from capital, great investors can also provide two other important elements of startup success: expertise and network.
But finding an investor is not an easy task. As a startup, you can expect to go through at least a hundred meetings in a bid to land your first term-sheet. Sure, some get it sooner than others, but that’s what you should get yourself prepared for.
It can be a serious numbers game, but here’s what you should do to land your first investor meeting.
It’s all about referrals
In sales, the only kind of lead that’s hotter than a referral is probably a customer knocking on your door to make a purchase. It’s the same with finding investors, as raising capital is no different from sales.
To get referrals, maximise your network and go the extra mile in securing as many as you can. That means: ask your family, friends, partners, acquaintances, get to meet people, and ask them for referrals too.
Even if you get turned down by an investor, ask them for a referral. Just because they don’t find you a good fit for their portfolio, doesn’t mean their friends wouldn’t appreciate the connection.
Be careful at networking events
All these are great avenues to network - to meet potential investors and entrepreneurs who would be able to provide you with a referral. Make sure you know who’s going to the event and prepare yourself by doing your due diligence.
These events are designed to make it easy to approach people as they’re typically geared towards networking. There are also other more interesting types of events such as pitch contests where you can pitch your idea to the entire audience, usually with a few potential investors in the room.
But be careful – events are sometimes full of time-wasters who pretend to be investors or ‘represent’ some investors who promise introductions in return for money, percentage or equity.
The rule of thumb in the fundraising game is that every time you come across someone who promises to get you an investor in return for money, run!
Reach out to local business bodies or associations
Not many people use this resource, but no matter where you’re from, chances are there is some angel or VC investor association or at least a chamber of commerce, you can get in touch with and ask for help.
You would be surprised but most people in business are very helpful towards other entrepreneurs.
So use Google and find all the relevant bodies that might be of help. That includes investor associations, government bodies, chambers of commerce and other organisations promoting business.
Know how to use AngelList
AngelList is an online platform that allows investors to fund companies online. To successfully get funded on AngelList, it’s good to have at least one lead investor secured before you launch your campaign.
However, a great feature of AngelList is that it allows you to find investor names based on a variety of search criteria like location, markets or average deal size. Find those names and cold approach them. Other great websites include CrunchBase and CapRally.
Some people recommend avoiding cold calling, but there are countless of examples when a startup landed a deal via a cold email/call, like when Box CEO Aaron Levie cold emailed Mark Cuban.
The secret to the cold approach is having a great pitch. Most investors get flooded with a lot of crappy business plans and lengthy emails, so naturally they want to keep it down. However, if you can nail your pitch, engage the investor in a couple of sentences and have something to show like screenshots or traction, your chances will be significantly higher.
Before you start meeting all those VCs and angel investors, make sure you nailed the fundamentals. That means: have a great pitch, do your due diligence, and know who you’re meeting. Great fundamentals will not only improve your numbers but also save your most important asset – your time.
Mark McDonald is the co-founder and co-CEO Appster, a leading mobile app and product development company with offices in Melbourne and San Francisco.