Startup Guide, Part 3: “But I don't have familiar investors!”
Startup Guide, Part 3: “But I don't have familiar investors!”
Part 2
In the previous article, we discussed what to do when an investor rejected you. However, this means you found it. What if you have a startup that requires investment, but you do not know any investors?
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I can share your feelings - when I was working at Mosaic at the University of Illinois, the words “venture investment” meant nothing more to me than “klaatu barada nikto” . I have never met an investor, an investor never talked to me, and I would not recognize an investor even if I had stumbled over his checkbook lying on the sidewalk. I’m not sure that without the help of Jim Clarke I could find funding to start a company like Netscape, even if I had the idea to start a company.
First you need to understand that investors work mainly through connections - they can hear about a promising startup or entrepreneur from someone they have worked with before, for example, from another entrepreneur, manager or engineer of one of those startups they financed, or a business angel with whom previously worked.
The reason for this is purely mathematical: one investor can finance several companies a year, and for every funded startup there are 15-20 other teams, and hundreds more teams want to meet with an investor. He has to rely on connections that will filter hundreds of projects, reducing their number to 15-20. Therefore, simply throwing presentations of investment firms will have the same effect as throwing film studios with scenarios. No Therefore, the trick is to get into those same 15-20 teams that the investor meets on the recommendation, and not to remain among those hundreds, with whom he will not meet. But before doing this, you need to make sure that you have everything prepared. The plan, the presentation, the supporting materials - in general, bring the whole idea to a person who invests in a business and knows what he is doing.
I recommend reading the materials on what you need to make an effective business plan and presentation, then imagine that you have already been kicked off once, then read the previous article and analyze in detail everything you have and correct any errors before how to go to a live investor at the reception.
One of the reasons why investors work on the recommendation is that most startups come to the presentation unprepared . Therefore, your advantage should be to make a good first impression with the preparation of your project. And for this you need to think through everything very well and do a lot of work in order to get a masterpiece presentation as a result.
Based on this, the best thing you can show is a working product . If the product is not possible without funding - a beta version, or a prototype. A website that works, but is not advertised, or a prototype of software with partial functionality, or a demo version, or something else. It is even better if you come with a “trailer” from clients, or some evidence of interest from Internet users, depending on what is suitable for your startup.
With a working product that can serve as the basis of a funded startup, you are much more likely to receive funds. As I wrote in the previous article: if in doubt, modify the product. If you do not have a product and customers, then make as rich a presentation as possible: sketches, prototypes, market analysis, customer research (interviews with real people), etc.
A long detailed business plan is not needed . Either the investor will be interested in a startup with a good presentation in Powerpoint on 20 pages, or not interested in it at all. Conclusion: if an investor needs a long detailed business plan, most likely it is the wrong investor.
Get ready, get ready and get ready again . Explore the investor market, find those who work in your category. It is absolutely useless to offer an internet startup to a healthcare investor, and vice versa. Loner investors are usually involved in specific startups, and the key is to find them.
How to turn out contacts? In my opinion, the best way is to work in a startup that has received an investment, show itself from a good side, get a promotion, and make dating all the time. If you are not taken to a startup - work for a large, reputable company, such as Google or Apple, gain experience, then go to a working startup, show yourself on the good side, get promoted, and all this time make acquaintances. If you are not hired in a large, reputable company, get a higher education in some decent university, where large reputable companies are constantly looking for employees - well, then you understand.
It sounds like a joke, but I am absolutely serious - many entrepreneurs I know have followed this path. But there are other ways.
If still at school, try to get into a large institute / university with good connections like Stanford or MIT. Stanford graduates are known by companies such as Sun, Cisco, Yahoo, and Google, so Silicon Valley recruiters are constantly scouring Stanford for new Jerry Yang or Larry Page. At the University of Illinois, in which I studied, only cows constantly scour.
You can try to participate in the program Y Combinator . This program, created by Paul Graham, funds startups at the dawn of their development (the program works in Silicon Valley and Boston), and then presents the best of them to investors. Great idea and great opportunity.
Read investor blogs - everything, and very carefully. The investor, the leading blog, provides an excellent service to startups, giving them a lot of valuable information, and providing themselves for contacts through emails, comments and even podcasts with presentations. Every investor likes to communicate in his own way, but you read as many blogs as possible, and make contacts with as many of them as possible. Look for a list of such bloggers on my site , and on their sites too. At the very least, you can get a good idea of what exactly and with which companies the investor is interested in. And at best, the investor can encourage readers to send him messages.
Fred Wilson of Union Square Ventures even encouraged entrepreneurs to record podcasts and transfer them to him so that he can listen to them through his iPod. I do not know if he is doing this now, but it’s worth reading his blog and finding out.
Some investors are happy to use modern means of communication, such as Facebook and Twitter. And it often happens that when an investor tries a new way of communication, he is more open to communication. Therefore, as soon as some new thing for communication appears, immediately look for investors there and communicate with them. In terms of decency, of course.
In addition, a good idea is to keep your blog - about your project, about interesting things that happen to them, about their worldviews on this topic. This helps you to develop communication skills, and when an investor learns about you, he can read your blog and get an idea about you and your project. This is another way to leave a good first impression.
To programmers, I recommend participating in an open source project. This is a great opportunity not only to participate in creating the necessary software, but also to build your reputation, which is not related to your current work. It's great to be able to write to an investor, "I am the creator of the open source X program, which is used by 50,000 people, and I want to tell you about my startup."
By doing this for a long time, you will have the opportunity to talk with several investors, and this can lead to talk about financing or meeting other investors. Personally, I hope that the next Google will appear after the email with a presentation that the entrepreneur sent to the investor, after reading his blog. Then all investors on the planet will start blogging right away.
If all this does not fit, then in order of decreasing preferences, the following options are possible:
- business angels;
- self-financing of funds received from first clients or consultation;
- work on a startup in its free time from the main work;
- loans.
Business angels are those who invest small amounts at the beginning of a startup, often before large investors appear. This can be a great way to start, because good angels are familiar with good investors, and they can introduce you, because good investments are useful for you and the angels. Here, of course, the question arises how to get investments from angels - but this is a completely different story.
Three other options, I would not advise you. They have serious problems. But there have been successful startups that have taken advantage of them, so they should be mentioned.
Also read this article on the site of Sequoia Capital. It is one of the best venture capital firms in the world, and they financed, among others, Oracle, Apple, Yahoo, and Google.
In the following articles we will leave the question of financing and concentrate on how to make a startup successful.
Part 4
Part 2
In the previous article, we discussed what to do when an investor rejected you. However, this means you found it. What if you have a startup that requires investment, but you do not know any investors?
')
I can share your feelings - when I was working at Mosaic at the University of Illinois, the words “venture investment” meant nothing more to me than “klaatu barada nikto” . I have never met an investor, an investor never talked to me, and I would not recognize an investor even if I had stumbled over his checkbook lying on the sidewalk. I’m not sure that without the help of Jim Clarke I could find funding to start a company like Netscape, even if I had the idea to start a company.
First you need to understand that investors work mainly through connections - they can hear about a promising startup or entrepreneur from someone they have worked with before, for example, from another entrepreneur, manager or engineer of one of those startups they financed, or a business angel with whom previously worked.
The reason for this is purely mathematical: one investor can finance several companies a year, and for every funded startup there are 15-20 other teams, and hundreds more teams want to meet with an investor. He has to rely on connections that will filter hundreds of projects, reducing their number to 15-20. Therefore, simply throwing presentations of investment firms will have the same effect as throwing film studios with scenarios. No Therefore, the trick is to get into those same 15-20 teams that the investor meets on the recommendation, and not to remain among those hundreds, with whom he will not meet. But before doing this, you need to make sure that you have everything prepared. The plan, the presentation, the supporting materials - in general, bring the whole idea to a person who invests in a business and knows what he is doing.
I recommend reading the materials on what you need to make an effective business plan and presentation, then imagine that you have already been kicked off once, then read the previous article and analyze in detail everything you have and correct any errors before how to go to a live investor at the reception.
One of the reasons why investors work on the recommendation is that most startups come to the presentation unprepared . Therefore, your advantage should be to make a good first impression with the preparation of your project. And for this you need to think through everything very well and do a lot of work in order to get a masterpiece presentation as a result.
Based on this, the best thing you can show is a working product . If the product is not possible without funding - a beta version, or a prototype. A website that works, but is not advertised, or a prototype of software with partial functionality, or a demo version, or something else. It is even better if you come with a “trailer” from clients, or some evidence of interest from Internet users, depending on what is suitable for your startup.
With a working product that can serve as the basis of a funded startup, you are much more likely to receive funds. As I wrote in the previous article: if in doubt, modify the product. If you do not have a product and customers, then make as rich a presentation as possible: sketches, prototypes, market analysis, customer research (interviews with real people), etc.
A long detailed business plan is not needed . Either the investor will be interested in a startup with a good presentation in Powerpoint on 20 pages, or not interested in it at all. Conclusion: if an investor needs a long detailed business plan, most likely it is the wrong investor.
Get ready, get ready and get ready again . Explore the investor market, find those who work in your category. It is absolutely useless to offer an internet startup to a healthcare investor, and vice versa. Loner investors are usually involved in specific startups, and the key is to find them.
How to turn out contacts? In my opinion, the best way is to work in a startup that has received an investment, show itself from a good side, get a promotion, and make dating all the time. If you are not taken to a startup - work for a large, reputable company, such as Google or Apple, gain experience, then go to a working startup, show yourself on the good side, get promoted, and all this time make acquaintances. If you are not hired in a large, reputable company, get a higher education in some decent university, where large reputable companies are constantly looking for employees - well, then you understand.
It sounds like a joke, but I am absolutely serious - many entrepreneurs I know have followed this path. But there are other ways.
If still at school, try to get into a large institute / university with good connections like Stanford or MIT. Stanford graduates are known by companies such as Sun, Cisco, Yahoo, and Google, so Silicon Valley recruiters are constantly scouring Stanford for new Jerry Yang or Larry Page. At the University of Illinois, in which I studied, only cows constantly scour.
You can try to participate in the program Y Combinator . This program, created by Paul Graham, funds startups at the dawn of their development (the program works in Silicon Valley and Boston), and then presents the best of them to investors. Great idea and great opportunity.
Read investor blogs - everything, and very carefully. The investor, the leading blog, provides an excellent service to startups, giving them a lot of valuable information, and providing themselves for contacts through emails, comments and even podcasts with presentations. Every investor likes to communicate in his own way, but you read as many blogs as possible, and make contacts with as many of them as possible. Look for a list of such bloggers on my site , and on their sites too. At the very least, you can get a good idea of what exactly and with which companies the investor is interested in. And at best, the investor can encourage readers to send him messages.
Fred Wilson of Union Square Ventures even encouraged entrepreneurs to record podcasts and transfer them to him so that he can listen to them through his iPod. I do not know if he is doing this now, but it’s worth reading his blog and finding out.
Some investors are happy to use modern means of communication, such as Facebook and Twitter. And it often happens that when an investor tries a new way of communication, he is more open to communication. Therefore, as soon as some new thing for communication appears, immediately look for investors there and communicate with them. In terms of decency, of course.
In addition, a good idea is to keep your blog - about your project, about interesting things that happen to them, about their worldviews on this topic. This helps you to develop communication skills, and when an investor learns about you, he can read your blog and get an idea about you and your project. This is another way to leave a good first impression.
To programmers, I recommend participating in an open source project. This is a great opportunity not only to participate in creating the necessary software, but also to build your reputation, which is not related to your current work. It's great to be able to write to an investor, "I am the creator of the open source X program, which is used by 50,000 people, and I want to tell you about my startup."
By doing this for a long time, you will have the opportunity to talk with several investors, and this can lead to talk about financing or meeting other investors. Personally, I hope that the next Google will appear after the email with a presentation that the entrepreneur sent to the investor, after reading his blog. Then all investors on the planet will start blogging right away.
If all this does not fit, then in order of decreasing preferences, the following options are possible:
- business angels;
- self-financing of funds received from first clients or consultation;
- work on a startup in its free time from the main work;
- loans.
Business angels are those who invest small amounts at the beginning of a startup, often before large investors appear. This can be a great way to start, because good angels are familiar with good investors, and they can introduce you, because good investments are useful for you and the angels. Here, of course, the question arises how to get investments from angels - but this is a completely different story.
Three other options, I would not advise you. They have serious problems. But there have been successful startups that have taken advantage of them, so they should be mentioned.
Also read this article on the site of Sequoia Capital. It is one of the best venture capital firms in the world, and they financed, among others, Oracle, Apple, Yahoo, and Google.
In the following articles we will leave the question of financing and concentrate on how to make a startup successful.
Part 4
Source: https://habr.com/ru/post/237715/
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