Getting venture capitalists to invest in an early-stage startup after a pandemic is not easy. Even more so if you are creating a B2C startup. And if you are a founder, prepare yourself for an arduous effort because, in Europe, the businesswomen received just 0,9% of 2022 investment capital.
What is difficult to understand as a founder is that the venture capitalists They thrive on risk, but are cautious in crises. So, with global events like the Ukraine war, market crashes, and inflation casting a shadow, they tend to stick to the familiar: typically, B2B male founders of established, late-stage businesses.
But raising capital before the end of the year doesn't have to be a far-fetched dream. There are many angel investors who are often more confident than the average VC. They've been through the process and built companies themselves, they've seen fluctuating markets and crises before, and they know from experience that now is an optimal time to invest in early stage companies.
Here are some tips for raising a substantial round without VCs by focusing solely on angel investors.
Tools and resources needed
Beyond capital, angel investors often provide experience, networks, and moral support. But they won't be found hiding in plain sight unless you have the right set of tools. Before starting, make sure you have the following aligned:
- LinkedIn Subscription: Yes, $79.99 per month is expensive. But with unlimited access to message anyone who looks like a potential investor on LinkedIn, the LinkedIn Sales Navigator Core package is a must-have for a successful angel fundraiser.
- Crunchbase Subscription: Totally necessary too. It is the first port to help find investors in companies similar to your own.
- A good CRM: For example, if you use Notion you will no longer be able to live without it. When talking to 500+ investors, you need some way to track conversations, angel quirks and preferences, and progress. Structuring it in a kanban view, depending on the stage of the conversation, makes the job easier.
- Strong propaganda: Stick to two or three sentences maximum, with links to articles published about the company, if available. The message should be simple, allowing potential investors to easily understand what the company does and what the founder seeks to offer them: an investment opportunity.
- A test presentation: People should get excited about the case by describing the key selling points (usually the size of the opportunity, the main benefits of the product, the team, and existing sponsors) without giving everything away. The key objective here is to get you a call. Five pages maximum.
- Longer Form Presentation Deck: here's looking to dig deeper - there's a ton of great content available on submission platforms.
- A lawyer with practical orientation: From terms and conditions, convertible notes and early subscriptions to investment and shareholder agreements, there are quite a few documents that need to be able to be produced quickly when fundraising accelerates. A practically minded attorney can help make that process much more comfortable and efficient, and they are often good communicators as well.
For now, we simply have to ensure we have these resources. They will allow you to maximize the network and fill the portfolio.
Knowing the objectives: it's a numbers game
When you think you know how many venture capitalists you need to contact before locking up their funds, in the case of angels, multiply that number by ten.
It usually takes around 50 interviews to raise funds with venture capitalists, as they specialize in specific industries and their interests are more obvious. Founders can direct their pitches to the right venture capitalists, saving time and effort. However, angel investors have a wide range of interests and backgrounds. This means that founders must reach out and meet with many different angels to find the perfect match.
Despite the numerous emails, Zoom calls, and coffee meetings required to raise money from angel investors, a wealth of experience and knowledge always comes back. Angel investors are often passionate about helping startups succeed, providing founders with invaluable support in addition to capital.
Fill your portfolio before you start disseminating
This is where the two or three sentence blurb comes into play. Send emails to friends and former colleagues asking them if they can think of other people who might find the business case interesting and if they would be willing to share the proposal. This tactic can help multiply the network in a matter of seconds. It should be as easy as possible for them to help; The greatest asset is to include inspirational, concise and easy-to-transmit propaganda.
As members of your friends and family networks begin to show interest, they may be surprised at the trends that are discovered based on their fields and professions.
No response doesn't mean no. (Silence after three messages is usually enough, however.) People are being asked for their time and money, so respect and persistence with respect, kindness and charm are essential.
LinkedIn helps deduce who a high net worth individual (HNWI) might be from their experience and title. Anyone with a C-level degree in a growing company is usually a good bet. To assess who is actively investing, look for investors who are tagged in other founders or deal announcements, as well as their posts, followers, and shares.
Sifted Round ads (among other similar ones) can also help. These additional channels are used to learn about interesting leads and reach any new contenders that appear along the way. If the lead is cold, it is tested with investors who have expressed passion for companies similar to the one presented. The bets of investors and founders on Crunchbase are shown.
Find other points of contact
There is no need to go the conventional route and use platforms like AngelList. Instead, it can be channeled through those who are in regular contact with investors (for example, lawyers, bankers and family office managers). These people are good “communicators” as they can connect with potential angels and will typically like to be able to present good deal flow to their investor contacts. They may not be able to provide the funds themselves, but the nature of their business presents a group of contenders with the means and interest to invest.
Angel investors can also be contributors. For example, an angel investor who believes in the vision can bring an additional group of investors alongside them in a syndicate.
That's where a good CRM like Notion comes into play. You need an easy way to track everything from meeting notes to which interlocutors introduced which investors.
Close quickly with real facts
The nice thing about raising funds with a VC at the helm is that they provide their standard term sheet, it is negotiated by the founder, and then it is presented to everyone joining the round as the locked-in terms. But with angels, you have to be prepared to articulate the terms, before you have a clear clue on the round to follow.
You have to confidently lead a list of terms and conditions; Otherwise, a larger portion of the company than initially planned could be given up. It is essential to define the investment amount, valuation, option set and other terms in advance and without fear. This can shape future investment rounds, who joins the board, and even exit opportunities.
It's about maintaining momentum. Getting a yes from 10 investors in January but not closing until June, you can lose half of them along the way. A yes or no must be reached quickly. Avoid spending more than three or four weeks talking to angels and set the first closing when you are between 25% and 30% of the full round committed. Do not delay the closing to wait for the commitment of an investor. Even if it's a big one.
Navigating the final stretch is the most difficult part of landing an angel price round, and even after having a firm commitment, some angels can pull out unexpectedly. Therefore, staying active in that funnel of new investors is key and continuing to move towards the finish line. The importance of perseverance in this game is essential.
All in all, raising a substantial round with angels is very doable with the right strategies and tactics; You will also gain the benefits of the network you form, experience and ideas easily accessible.
