Raising your first round of investment.

I’m writing this post for other founders starting out on their investment journey. ?

It’s something that I get asked a lot about.?

There are loads of different takes on how to approach raising money, I’m simply giving my opinion, and not trying to write a white paper!

This is my take, and I hope it’s a useful addition.?

I’ve now raised over ￡2m in funding over 3 investment rounds, so have been through the process a few times, and have learnt more each time.?There is always more to learn!

[Valuation should probably be the topic of another post, so I won’t get into that here. I will say that the terms and the quality of your investors are much more important in the long term, so prioritise that.]?

How should I approach raising my first round?

It’s tempting in the beginning to ask around and hope that our connections make introductions to wealthy angel investors who will just write cheques because they know you’re great. This rarely happens. It’s true that people invest in people, but you have to understand that investing is a game.?

Rules of the game

There are different objectives for different players. ?

• VCs will have different outcome requirements depending on their fund size. ?
• Angels will have different goals - sometimes they want to be involved with businesses they are personally interested in - or just where there is good chemistry with the founders.?The mindset of an angel will change depending on recent exits or failures of other companies.?They might be investing a percentage of their savings and might be just starting out or hoping to do one final investment before taking a break.?
• Angel syndicates are a funny bunch, they might consist of a large group of people, that are part of the syndicate, but aren’t actively investing. They like the networking, but they’ve run out of cash to invest.??

So you have to play the game too. ?

Many ideas when first heard seem unlikely to succeed. ?

It’s only when they start to work, that it becomes obvious that they would. ?

A huge part of persuading investors to invest requires building credibility in you as a founder. ?Then as they see that other investors are also investing that helps build a view that they aren’t completely mad. ?

The games begin

Raising money is essentially a sales process.?You are selling your idea, and your team’s capacity to deliver it under your leadership.?

Finding your first investor. ?

This is often the hardest part - but once you have an early commitment, raising money becomes so much easier.?

If this person is willing to commit a sizeable chunk and ‘lead’ the round, then even better. ?

Finding more investors - using your network. ?

It’s great to reach out to other founders who have raised money and ask them who they’d recommend speaking to. I was always surprised when the lists didn’t come flooding back.?Why is this often the case?

Don’t ask the question “Can you introduce me to some investors?”

Having been on the other side now, here is what I know to be true. ?

When someone asks generically - “Do you know any investors I should speak to?” The answer requires some serious time and thought - it’s not just a case of passing over the names and emails of A, B and C. ?

Every connection should ideally be an introduction

From the list of investors that have invested in Float, some are not currently investing, some only invest at a certain revenue threshold, some only invest with certain syndicates, and some only invest in areas that are of interest.?

Build your list

The best thing to do is to share a short list of investors that you’d like to speak to.?To do this you need to build a list. There are many ways to pull these lists together - but a google search will generally get you started.?

Then the?real work begins:?

• If it’s VCs or angel networks, check their website - see what areas they normally invest in and what stage.?You can rule some out immediately, and some might seem like a perfect fit.?
• If they are angels you have heard of and don’t have a website, search up companies they have invested in, then see if you have connections to those companies, and then when you get an intro - ask directly about that individual investor.?(You can always ask directly if you have any other ideas, but the real work is often to think about how best to approach that investor. ?
• In the UK you can look up Companies House, and find lists of the names of recent investors.?This won’t catch everyone, but it should also give other names that you can ask around about. ?
• Use Crunchbase to find articles and names of investors that have invested recently - it’s a goldmine.?
• Then compile your list with 3 tabs, ‘Top priority’, ‘Unsure’, and ‘Ruled out’.?Add a column with the reason you think they might be interested. Leave room for notes that you can add as you gather more info.?

Now with this list you can share it, or share some names on it - and ask the question specifically to other founders:

Are there any names on this list where you feel you could help share some insight on, or potentially make an introduction to?

?This question is SO much easier to think through. And your results will be so much better. ?

Next steps - prepare a teaser deck and short intro paragraph. ?

The teaser deck only needs to be a few slides which give some insight - it’s not the deck you would use to pitch if you’re formally pitching, with slides you need to explain.?It’s just a very simple proposition and its purpose is to get a call or meeting.?

Founders are focused on building their own companies - but most want to help.?Just make it easy. ?

Normally they will ask the investor they are introducing if they would be interested to hear more.??

Make those emails super easy to write - by giving them the text:?

“Sue’s company is solving ____ problem for ____ people, and they are currently looking to speak to investors with experience in _____.?Let me know if you’d like an intro, or if you’d like to hear more?”

Closing thoughts

As I said in the opening paragraph there is so much more that could be said here, and this is only the beginning of the journey.?But never just ask for a list of names, put the work in, be specific, treat it like a project, and build your list remembering the goal is to get great warm introductions, rule out bad investors, create a buzz and generate buy-in over time. Then move to a close creating a fear of missing out!

Good luck!?

Ps - A note to any investors reading this. ?

The worst, WORST thing you can do as an angel investor is to be slow.?I get why people do this, you want to buy some time, you aren’t sure, you want to see who else invests, you’re conflicted - you like the team, but aren’t convinced on the idea.?You don’t want to disappoint, appear rude, or pull out last minute.?In my experience, the best investors give clear signals of where they are at.?

Please just give a quick no or set a date that you will make a decision.?As a founder, it’s the worst thing in the world to have to chase investors that you’ve met with on a number of occasions, and have shown interest in but won’t commit.?When you’re being asked for money. Sh*t or get off the pot.?And the worst of investor sins, committing and then pulling out.?It’s not only soul-crushing for the founder, it potentially signals something that could cause others to have doubt, reverse FOMO.?Please let your yes be yes and your no be no.??

Onwards.?