Paul, What is the secret to finding Angel Investors for seed money? Does seed money really exist? I am hearing a lot of, "great idea, call me when you get it off the ground." They are missing the point...I need help to get it off the ground.
- Malcom P. from Sacramento, California
GREAT QUESTION! Some Angels use the "call me when you get it off the ground" line because
they are too wimpy to say no. Others want to see forward progress before taking a serious look. Me? I like to set short term goals such as, completed this design by the end the month, or land 5 new accounts in the next two weeks. Those questions drive more to the passion of the founder and does he have a clear understanding of his market - enough so that he know how to land 5 new accounts in two weeks. Then again, I have seen a drawing of an idea on a napkin in a bar and fall in love with it to the point that I pull out my check book. And before you question me - yes, I carry my checkbook with me into bars.
All angels are different. Keep building as if you will never have one - which is the smartest way to build an early stage venture. Seek capital only when you have no other options.
Hope this helps,
What is the best way to approach bringing on investors and at the same time protecting my best interests in the company?
- Kim from St. George, Utah
This is a loaded question! An investor is going to want to make money off of your company. Plain and simple, no investors are out there just to be nice. In order to get an investor to back your company, you will have to part with something - either profits, equity, or something else. Different investors will want different things. The most important thing I can say about taking on an investor is that finding one is NOT WINNING. Building the company into something significant IS WINNING. One must weigh the cost of taking on the investor with the return that they will get from doing so. And shop around. Most people jump in bed with the first investor that shows interest without completely understanding the terms of the deal.
I am entirely self-financed and, after 3 years of development, am "going to market" with my turnkey internship solutions for any business and individual with interns. At this most critical point - SO close to what I feel is the Tipping Point, is it in my best interest to seek funding to help with my final push ... or to stick it out and run up the credit cards if necessary (which I haven't btw).
I get this question all the time. You have invested three years and are ready to go big. If you see the tipping point, you do not have a funding issue. You may, however, have a cash flow problem which is altogether a different thing. If you think what you have is great, if you have the passion to make it work, and if you are a relentless SOB like I am :), then jump off the cliff with both feet. Life's greatest reward comes from the greatest risk. In sports, a very good, disciplined team will get creamed by a very good team that will take a risk. Of course, somethings do backfire, but if you worry to much about "how" things will go wrong, I can almost promise you that they "will" go wrong.
If you are ready to get to the next level, close your eyes, run forward, and jump off the cliff with both feet as high and far as you can! There is no better feeling in business! Max the credit cards, sell the motorcycle, cancel the vacation. If you do these things and find yourself in a financial pickle three months from now, look for an angel but DO NOT say "I spent everything I have and now I have bad credit to boot." Instead say, "I am so pumped on this idea that maxed my credit cards, I sold my motorcycle that I loved, and I cancelled our family vacation. I did those things to prove to ME that I am serious about making this business work. What do you think about THAT skin in the game Mr. Angel? Carry the ball as far as you can on your own. When you then look for an angel, he doesn't need to go 100 yards for you. It might be just the last 5! That means you give up less equity and get more capital.
Best of luck, please keep me informed!
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