How to Find an Investor for Your Business
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Teddle Co-Founder Alex Depledge looks back at raising investment for her business and shares her top ten tips for finding an investor.
I use to nod sympathetically when I spoke to other founders who had spent months raising money, secretly thinking arrogantly that it wouldn't be us. We only had a 6-month survival window that we could keep Teddle afloat without investment so it couldn't possibly take longer than that. It did. Double in fact.
And that is the psychology of raising money. Just because you are in love and emotionally attached to your business idea, doesn't mean everyone else will be. In fact you are asking people to part with something they love second only to children; their money. Take a look at the chart below, it outlines how much we thought we were going to be able to raise at any given time between July'12 and April'13 when we finally closed the round. It also conveniently doubles as a map of my emotional state with the Y-axis being my stress levels.
I spent a great deal of that time unable to sleep, waking up in the middle of the night. My business partners felt relatively calm in that period as each day they had the fulfillment of completing lines of code. Not me, I felt like an abject failure that had to listen to investors tear our business apart, point out our failings or express concern about its viability. Picking myself up last winter became harder and harder with each day that past.
So there is one piece of advice I would offer above all else and that is grow a thick skin and double the amount of time you think it will take you.
With that, here's my top ten tips for finding investment:
1. Before approaching any investor over prepare. I often hear that all you needed is an excel spreadsheet or business plan. Yes maybe, but you'll impress investors if you have more than they ask for. Think about the statement it makes. Look at this for ideas: http://www.thebusinessangel.org/due-diligence.html
2. Practice on people you are not trying to raise money from so you start to formulate answers to many possible questions.
Both times we lost major investment was when they asked us how we were going to achieve something and we didn't have an adequately prepared answer.
3. Learn and understand how rounds of investments are structured. Don't get caught out when potential investors start asking about convertible notes or dilution clauses and you have no idea what they are referring to.
4. Begin compiling a list of Angel groups/networks (these can be found all over the internet) and then use LinkedIn and Angel List to add to it to include individual angels.
5. Research each individual’s/group’s background, record of investment, who they have invested in and how recently. Pick angels that have experience or interest in your area. Also chasing an angel that has made 16 investments this financial year is unlikely to bear fruit for you as they have probably coming to the end of their investment cycle.
6. Get a warm intro wherever possible - hello LinkedIn my friend!
7. Use the phone. It is easy to ignore an email. Don't ask them right out for investment. Flatter them 'Oh hi there sorry to bother you but I know you have deep expertise in X and I was wondering if you had 5 minutes to give me some advice on Y.'
8. Use a spreadsheet to track calls, emails, meetings and outcomes.
9. Pitch anywhere and everywhere. It is the best way of networking and raising your company’s profile. Angels often ask each other what they think of so and so's company. You want as many people including non-investors to know who you are.
Remember that in the nicest possible way, investors are sheep. Hook one as a lead and it often leads to a domino effect.
Investors are looking for a vote of confidence, they don't want to be the first in, but once people start committing they are scared of missing out. Create hype around yourself!
Having said all of that it is also of vital importance to remember that securing investment is merely a means to an end and not an end unto itself. For me and many other founders the actual drawdown of the investment is a strangely anticlimactic event. Much like completing the sale of a house, you are in a constant state of fear that something catastrophic will go wrong right up until the moment the deeds are exchanged. When it does happen exhaustion is about the only emotion left at your disposal. And that is the point the real fun begins.
Alex Depledge hails from the North of England, but started her career in US politics while living in Chicago. She returned to UK in 2006 where she joined management consulting firm Accenture working predominantly with Energy clients. She made the leap into entrepreneurship in 2012 after years of harassment from her best friend Jules. Together, they have co-founded Teddle, a platform for finding cleaners online.
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