After a few weeks (or forever in my head), we finally finished our seed investment round. As a first-timer with Angel Investors, I learned that a lot of what we thought was important wasn’t even relevant. Along the way, I met many like me and realized that young entrepreneurs have the mostly the same problems across the board. So, here are my insights:
The Younger, The Merrier: Quite a few young entrepreneurs believe that their age is an issue, maybe their team isn’t experienced enough and what the hell they know about a business plan. Although The Social Network changed a lot (thanks Mark), we, and some others talked to, still felt the need to ‘hide’ the age factor. Prior to our first meeting, we prepared our CVs to look more attractive and impressive, but after ten minutes into our first Angel meeting, the first thing I wrote in my notebook (yeah, I write in meeting and, yes, I know …) was: “Don’t waste time on CVs.”
Don’t get me wrong, you do need to tell about yourself before starting your pitch, but as long as Angels concern, it’s not your weakness, it’s your strength. FYI: The second most common reason that an Angel becomes an Angel is to meet the next young Zuckerbergs, Pincus and to join them on a journey full of passion, energy and, hopefully, success. Your age is part of your story … and your story is you.
Between Thought and Expression Lies A Lifetime (@aweissman): Because you are not bringing to the table tons of business experience or success, you need to bring something else. As one of the smartest people we met along the way, Yariv Erel (CEO and co-founder of JustAd.tv , a very cool startup that will change the way we consume TV), told us, “If you can’t manage or develop your startup, then don’t start it up at all.” An idea is simply not enough.
As I have told many fellow entrepreneurs, try to maximize your own potential and development before raising the first dollar. Another part of your story is your ability to solve the need you are talking about. This point is even more important when you go the VCs, as they often want proof (100,000 users, 100,000 app downloads and so on) that your idea works and people love it; I know, they just have a thing for the number 100K.
We turned to Angels only when our laptops collapsed (4 fans replaced after the laptop over heated) and, even between meetings, we kept developing. That gave us the ability to show the Angel a working system, not just another mockup or demo. This demonstrated that we have the ability and skills to lead Yotpo to the future. Give your Angels the feeling that the train already left the station, the only question is whether or not they want to join you on board.
Go with the Flow: So this is a tricky one. You are sitting in front of an Angel and your hands are getting sweaty, you are very excited … so why the hell am I about to tell you to be calm and just go with the flow? Well, after a couple of meetings, I saw that different people have different perspectives (strange, right?), meaning that some understood our business plan, but didn’t not the marketing plan. Some didn’t even understand the product itself in the beginning. The outcome was that every meeting is a different story.
Know when you are boring (speed up with the presentation), when to answer quickly and when it’s important to make your point. In one of our meetings, one of the Angels sent us to his advisor for a second meeting (we knew that if we will get the advisor’s green light, then the Angel is in). We started our regular routine and after 10 minutes, I remember thinking to myself that the advisor didn’t say a word, but just nodded again and again. When we finished explaining the general idea, we asked him if he had questions. He didn’t have questions, just plain criticism.
He said we weren’t aware if he wants to ask questions and that is why we won’t pay attention to our users. In that moment I knew we lost an Angel that loved us from day one. So look, you will meet a lot of people, some of them are smart and some aren’t, some of the are nice and some are just not. Just go with flow and pay attention to the man/woman in front of you.
If you’re not working on your best idea right now, You’re doing it wrong: @dhh . In every meeting, tough questions arise. You need to answer them and sometimes you don’t have an answer. Saying “I don’t know” is much better than giving a very unconvincing explanation, hence backfiring by convincing the Angel not to invest. The most important thing is to be true with yourself and to question your most basic assumptions. Believe in your idea and product, but have the confidence to say “I don’t know” when you don’t, no one expects you to know all of the answers (no wait, some of them do). If at the end of the day you still believe you have a great product. you will find the funding.
The difference between the pig and the chicken: In a regular egg and bacon breakfast, do you know what the difference is between the chicken and the pig? While the chicken is involved the pig is f****** committed! You need to find your lead investor, the one that will be on board and will be committed to your company and dream. There are Angels who will give you only capital (not saying it’s bad), but as a first timer you will need a company builder, one that will help bring other angels. He will agree with you on all the terms and will be a true part of your dream.
As a first-time founder, this is probably the time I hated most so far. My energy levels changed after every meeting and we didn’t know if the Angel would eventually invest. We had a very hard time to continue developing our product and it basically took us out of our comfort zone.
There are a lot of new legal/financing phrases and issues (cap tables, different warrants, liquidations and more) that you need to understand and learn. Get better from meeting to a meeting and remember, if you play your cards right, you will get the financing you need. Oh, and the beer after is always one of the best.
You can contact Tomer if you have questions: firstname.lastname@example.org