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MenuWhat is the best way to get connected to investors? Do I absolutely need a business plan?
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Vehemently disagree with Noam that you should spend anytime on a business plan. You should be spending *all* of your time getting your product to market. The likelihood of any investor investing at the pre-product level is low. While it does happen, it is almost always when investing in a proven entrepreneur or team that is very experienced.
Once your product is in market, you will craft a deck that outlines the usage data in the best possible light to tell the story of how your product can grow into a viable business. At the time you have your product in the market, you can talk to me or a number of great Clarity advisers on what a good deck looks like, but at the moment, you are best served by spending all your energy getting the product shipped and getting some early traction.
Any investor that wants to judge an internet business based on it's business plan is really not an investor an entrepreneur should want investing in their Company. It's a sign of significant inexperience.
Would you give your money to someone who doesn't have a written plan you can look through?
Nobody parts with their money unless they are convinced they will see a return (unless they're a good friend who does you a favor and doesn't care about seeing their money back).
There are more options for financing than Angels and VCs.
You need to first go back to the business modeling drawing board: a good business plan is flexible, short and shows potential investors you have thought about all potential problems and have taken into account all aspects of the business.
Schedule a call with me to get honest and experienced feedback on your funding potential, and start working on your business plan together to maximise your funding potential.
In the second phase, we will also work on your pitch and networking within the different investors communities.
Related Questions
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What due diligence should be expected for a seed investment from seed fund(s) and individuals?
Very little. At the angel/seed stage, they're investing in the founders, so there's no expectation of patents, etc... They might check that you're incorporated in good standing, and ensure you have a solid startup/corporate lawyer, and have good employment and IP ownership agreements with your staff and contractors, and that's about it.JM
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How do you get exposure on AngelList to attract angel investors?
What of the following things does your startup have? > Founders who have graduated from prestigious universities / previously exited companies to known acquirers / worked for a known companies (with known being a brand-name company such as Google, Amazon, Facebook etc) > Three or more months of statistically meaningful growth (e.g. for easy sake, double digit growth of a number in the thousands) > At least one investor who is active on AngelList (defined in the ideal state by at least one investment in a company who raised their round through AngelList and ideally whose social graph is connected to "high signal" members of the AngelList network) If you have none of these things, then at least, have advisors and referrers who have a strong AngelList profile. And another option is to seek out the AngelList scouts and pitch them directly. They are more open to this than anyone else and I've seen companies with very little traction and very little social proof get featured because a scout believes in the founder and/or the story. Without any or most of the above, it will be difficult to stand out or build relationships via AngelList, in my opinion. I assume now AngelList operates on a concept similar to the LinkedIn "degrees of connection" model, whereby an entrepreneur can now send unsolicited messages to investors so long as there is a degree of connection between the investor and the company. I get a few unsolicited emails a week from companies whose advisers or investors aren't people I follow but that because of the way they determine "connection strength", these unsolicited emails still gain my attention. I assume this is the case for all investors. So the more that you can build your list of advisers and referrers, the more connections you can solicit. That said, AngelList's inbound email system is almost entirely ineffective for "cold" emails to really high-profile investors. Happy to share with you what I think to be your best options for raising profile for your company.TW
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What happens to a convertible note if the company fails?
Convertible notes are by no means "earned." They are often easier to raise for early-stage companies who don't want to or can't raise an equity round. Equity rounds almost always require a simultaneous close of either the whole round or a defined "first close" representing a significant share of the raised amount. Where there are many participants in the round comprised mostly of small seed funds and/or angel investors, shepherding everyone to a closing date can be very difficult. If a company raises money on a note and the company fails, the investors are creditors, getting money back prior to any shareholder and any creditor that doesn't have security or statutory preference. In almost every case, convertible note holders in these situations would be lucky to get pennies back on the dollar. It would be highly unusual of / unheard of for a convertible note to come with personal guarantees. Happy to talk to you about the particulars of your situation and explain more to you based on what you're wanting to know.TW
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What's the best visual format to display the size of the market when doing a pitch deck.
I like to take a rule from the Steve jobs playbook and use simple circles... one larger than the other but no more than 2. your most immediate target (realistic reachable) and one of the "enemy" competitor company. or overall untapped market cap. **for this to be effective you must provide as accurate projections as possible** no bar graphs and as little or no text as possible... remember that a deck is a companion to the speaker... avoid bullet points and use the deck to entertain rather than educate... is not a class is a pitch. :)HV
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What exit strategies do angel investors want/prefer for a service business?
Keep in mind that investors invest for returns. Telling a prospective investor that you want his or her money to grow your business but don't plan on ever generating a liquidation event that pays him or her a dividend is not likely going to work; angel or not. You may be better served with debt financing where returns are generated in the form of interest payments not equity value growth. BUT, if equity financing is the plan, you're going to want to develop a strategic exit plan right from the start. That means identifying prospective buyers, strategic channels etc and characterizing the value drivers for each right up front. You'll find prospective buyers come in a number of forms; competitors, bigger versions of you, strategic partners, private equity, etc. Each will value your business in different amounts for for different reasons. Understanding this is vitally important for you to navigate to securing the right money, from the right sources, with the most favorable terms. Once you've qualified and quantified each of them, then determine what (specifically) you're going to need to do to align your business with those prospective buyers generating the highest returns. This will drive your business model and go to market strategy and define your 'use of funds' decisions. This in turn result in a better, more valuable business whether you exit or not. Do it this way and you'll have no trouble raising money from multiple sources. You can learn more about the advantage of starting with a Strategic Exit plan here: http://www.zerolimitsventures.com/cadredc Good luck. SteveSL
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