Great lessons from an Angel Investor Matt Coffin
This is one of the best videos I have ever watched to help startups see what makes sense in coming up with an idea and other great lessons, how to avoid building something no one cares about, what angels want…esp. minute 4-7 if you only have a sort amount of time.
Especially useful for Internet Startups.
It’s all good…watch it!
Matt founded LowerMyBills back in 1999 (full details about his inspiration come during the first part of his interview) and later sold it to Experian for over $300M. Since then he’s become an angel investor and advisor to startups around the world (including Mahalo).
Saw this on the excellent “This week in startups” with Jason Calacanis.
How to find Angel Investors…the “smart” way!
My friend Bob Karr, CEO, Link Silicon Valley, LLC is one smart cookie.
He regularly sends members of his website http://linksv.com very useful, timely and detailed information about funding transactions going on in the Valley.
This is useful because the info. his database holds, when connected to transactions and investments, allows you to triangulate on VCs and Angels making the investments. Even better he links these folks not only to their Link Silicon Valley bio but also to any LinkedIn profile.
In short, you can now view who’s getting funded and by whom. You can use this to see if your startup is in a similar space and is a good fit for the investors and use the “link” that they invested in XXX startup and they may be interested in you.
This also helps you find new investor names, or see who is active and in what “space’”.
You can also use the power of the Network and get any of the mutual LinkedIn connections to make an intro for you.
See what Bob sent me today and see what I mean – I have highlighted the investors in red:
"inside connected angels" are often replacing traditional VC
In some promising startups the "inside connected angels" are replacing the VC’s. Check out Milo.com who announce their 4M A round today. http://www.linksv.com/compSummary/es/58227/Milo.com. At the bottom check out the angel investors, Board and Advisory Board.
Business description: Milo.com is a free Web site that enables shoppers to research online and buy local, providing the best of both worlds. The leader in the local product search space, Milo.com tracks the real-time availability and prices of more than 1.5 million products at over 42,000 stores across the U.S. By combining the resources of the Web and the immediacy of local stores, Milo.com makes it easy for shoppers to research the best products, find the right prices and check where products are available near them. Shoppers save time and money, get to see and try products before they buy them and get the product they want right when they want it. Retailers with products listed on Milo.com can better compete with e-commerce and can use the Site to drive valuable intent-based foot traffic into their stores. Based in Palo Alto, Calif., Milo.com boasts leadership from comScore and Google, and is backed by True Ventures and prominent Silicon Valley investors and entrepreneurs from Mint.com, PayPal, Yelp, YouTube, and others. For more information, please visit www.milo.com.
Management Team
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Join LinkSV today and start getting ahead of the curve…it’s another smart way to find money in today’s tough market!
Make sure your business plan gets read – build a “killer” exec summary
Like most people I hate writing business plans, I want to get on with the business at hand rather than keep writing and re-writing lots of words about what I plan to do!
This must also be true for many investors too as they don’t like reading them, they prefer a pitch or PowerPoint! However, they DO want to see a plan eventually to decide to invest or not.
Business plans do have their place – they are a very useful way to logically sort through the teams thoughts and to have one cohesive document that summarizes the intent of the business and in that regard they are very important.
In addition, once you have some interest in your business idea you do need to commit it to paper for the deeper dive people will want to give it once you have their interest. Indeed many investors still not even think about interacting with you until they have some form of “paper” document to read first.
This is where the “killer” executive summary comes in…it’s like your “elevator pitch”, you can’t get through all the apathy and lack of interest in the business plan unless you can get people to be excited about reading it.
What is an Executive Summary anyway?
In theory, it’s a very punchy overview of the business plan in condensed form. However in my view it goes beyond that, it’s like the headline in a newspaper, it’s the “pitch for the pitch” – it’s job is to sell the reader to keep reading, just like a headline.
The executive summary is often your initial face to a potential investor, so it is critically important that you create the right first impression. So you need to think of the summary as being your one and only opportunity to engage, enthuse and move the investor to action. To make them WANT to read past the first page and to talk to the team further about the business.
Often this is the ONLY part of the business plan that get’s read and it’s certainly the only part you will get to forward in the first instance to potential investors.
As a result it had better be “killer” otherwise you stand no chance at all of getting into the tiny % of startups that get to stand in front of investors and actually raise funds. Only 3 out of the 60-100 plans seen by the Band of Angels per month get to pitch, the first pass in the process of weeding out the startups is the plan!
What should I include?
OK so now we know that this is a critical document and it is also a sales document, not a dry summary. Therefore the first stage in the process is to understand the sales process it want to achieve and the outcome required.
The sales process should follow the age old A:I:D:A process. This means:
A: Attention – The very first line of your summary had better be hard hitting and get the readers attention (like the headline in a newspaper) or you will lose the impetus. So consider very carefully what’s so exciting about your startup and put that first. This could be your “elevator pitch” in writing. Make the statements direct and specific, not abstract and conceptual. Do you have some world-class advisors, big name companies as trial users, a brand name founder, investor or advisory board member…put these details up front!
Try and make it stand out and be exciting…(just like headlines!)
I: Interest – This quickly builds on the first statement developing the readers interest in your idea. Here you tell the reader in “plain English” what the idea is, what the “massive pain” that exists in the market is and how you plan to solve it with your idea. Keep this simple and easy to understand. Make it clear that the problem you are fixing is big (i.e. there is a large market opportunity, pref. of $1bn if you are pitching VC) and that there is an immediate need from the market (i.e. someone has a big headache and you have come up with the aspirin, not a vitamin) and how you plan to win against the competition.
You will also need to include the basics of the full plan like: the team (highlight what each team member brings to the idea specifically i.e. one is a technical expert, one has worked in this market on knows it intimately etc), go to market strategy, value proposition, competitors, market details (what’s your segment), your sustainable competitive advantage, your business model, financial summary, money required and for what purpose, SWOT analysis etc.
D: Desire – Now I know that you have a good idea (and understand what you do), you need to build up my desire to move forward to learn more. In the summary you can now tell me a little about how talented the team is and how successful you have been in the past, or how you have special knowledge and skills that will make you the one to “back”. You can add any customer successes, feedback from research or “proof” that this going to be a huge opportunity. Finally, you can also add any investors that have backed you to date and any money raised. I would even let the investor know that you have done such a good job that there isn’t much time to invest before all the money you need has been provided by others unless they engage now…!
A: Action – This is the desired outcome from the investor after reading the summary! See next.
When you have finished you should have a 1-2 page document max that explains in condensed form why you have a great opportunity and why the investor should act NOW.
What is the outcome required?
This depends on how the summary is being used, for example if this is designed to get the interest of the “network” and have a friend get you into a VC or investor then that should be the focus of the summary – as a way to get an intro. If it’s being sent to an investor directly then it needs a slightly different approach and if it’s for a bank or other type of institution again it needs a different approach. I used to have 3+ versions for these interactions.
- As a way to get into an investor via a third party: In this case there is an extra and critical component and that’s the intro letter. Again, this is designed to get people to engage and move to action! In this case you need to write a compelling mini-summary with your elevator pitch that can be “forwarded on” by your network. The summary itself can be in your own format.
- Directly to an angel group, investor or VC: In this case you will probably need to format the summary in a special way that the recipient requires. Check the website of the Angel group or VC and ensure you deliver what they need in the form they need it. DO remember however that originality and getting attention will be key to standing out from the rest. Use the content already created but format how they want it.
- For the bank or a supplier: In this case when trying to get people to back you or support you but not necessarily invest directly you need to take a slightly different approach. perhaps you don’t want to give the same level of detail for suppliers (not giving away any secret sauce) or in the case of the banks more financial info as they prefer facts and figures.
In all these approaches you need to consider the “audience” and to write accordingly. It’s no good just sending out a generic summary to everyone, you are selling and need to focus on the needs and wants of the person reading the document if you wish to persuade them to deliver the desired outcome.
What not to include
NEVER come across as arrogant and overconfident – I know this is a sales document but it needs to be based on FACTS and not B.S. Make sure you don’t fall into the traps outlined in my other posts about what not to include in your plan.
Never, ever, ever make any claim you cannot backup! If you say the market is $X big then have details to how you came up with the number. If you have a customer then you had better be prepared for a reference call to them, the same goes for connections and contacts. If you say a big named person is a backer you can bet the investor will contact them….NEVER be afraid of being open and honest. Do not use complex jargon, too many adjectives, long sentences, “waffle” and things that don’t concisely convey your message.
Try and focus your efforts on building credibility by showing a balanced approach to the risks and rewards of the idea and any problems/issues you see going forward. This is the best approach to gain trust and then eventually $$ investment.
You may want to write the full plan first and then come back to the summary in the end so that you can get all the core facts ready in advance. If you want some further details on business plans and how to craft some of the “parts” I suggest you read some of my other posts here:
http://www.tobeanentrepreneur.com/blog/category/entrepreneurship/business-plans/
How To Create A Unique Selling Proposition
How to write a winning elevator pitch
Watch this: http://ecorner.stanford.edu/authorMaterialInfo.html?mid=1920 (superb video from Ron Conway)
Need to raise a smaller VC round, say 1-2M, see this list
I asked a friend Bill Romans to recommend to me smaller VC funds that like to offer smaller amounts of funding and are happy to work with $1-2M and variations around that level.
These guys are VCs but tend to be more boutique or smaller funds that prefer a smaller round to the bigger names.
These are ideal folks to work with if you are above the Angel threshold in terms of valuation, the amount you need or the need to syndicate a smaller round.
Here’s the list and a good place to start your search:
- ATA Ventures
- Blue Run Ventures
- Catamount Ventures
- Pacifica Fund
- Quicksilver Ventures
- Sippl Macdonald Ventures
- Startup Capital Ventures
- Windspeed Ventures
- Altos Ventures
- American River Ventures
- Clearstone
- Globespan
- Onset
- Venio Capital Partners
- Woodside Fund
- Intel Capital
- Maples Investments
- Gabriel Venture Partners
- Artiman
- Incubic
- Rembrandt
- True Ventures
- Horizon Ventures
- Novus Ventures
It’s probably worth checking out the latest news on the guys at their sites and at the funded (www.thefunded.com) to ensure there is a fit for your business idea and stage.
I would also check the state of their fund and if they are currently looking at new deals.
Great advice on pitching VCs…common mistakes and how to avoid them
Tim Ferriss has had the foresight to ask some of the presenters at this years TiE conference (TiE’s annual conference on entrepreneurship, TiECON 2009 May 15/16) some very useful questions:
- What is the best pitch meeting that you remember and why?
- What are the most common mistakes or assumptions smart founders make in pitch meetings with VCs?
- What unfavorable terms do founders often miss or underestimate in term sheets?
- How can someone get you to look at a business plan if they don’t know anyone in your network (e.g. outside Silicon Valley elite, didn’t go to Stanford)?
Here are a few clips from the article from 4 VCs:
What is the best pitch meeting that you remember and why?
1. The best pitch meetings are those that have real technology breakthroughs applied to solving large and growing problems.
2. After the first introductory slide Jasvir Gill, the CEO and founder jumped straight to a demo…
3. For early stage companies (where you are not pitching demonstrated revenue growth), good pitches rely on either a compelling entrepreneur or a compelling idea. Great pitches rely on both.
4. The pitch meeting was the best because the service concept made intuitive sense, the service was validated by a major customer win, the market was large with proof points of successful outcomes…
This feedback illustrates some very important distinctions for me, mostly that you will see some similarities and many differences to the same question!
In other words you need to have all of these types of requirements/questions/expectations covered and need to be very flexible in your approach.
A cookie-cutter pitch will not work. Also, with advice like this you can make sure that you approach each investor/VC better prepared and we all know about the 5 P’s don’t we..!?
More here:
