Zack lays out a step-by-step strategy for raising money from an Angel investor. Think of the process as a marriage: you need to be sure to find an investor that will last in the long term. After all, raising money shouldn’t be just about the money; cash can come from anywhere, but a useful investor brings contacts, track records, experience and advice.

HOW TO RAISE AN ANGEL ROUND

Define Angel Round:

An angel round usually 10k-100k checks from an accredited investor or a series of. Typically this investment is after a founder infuses capital into starting the business and raises some sort of money from friends/family or uses other traditional banking to get off the ground.

Other additional options: crowdfunding, banks, credit cards, pre-sales, go fund me, friends/families/fools — this talk is not for that

Credibility + Why do I know what I’m talking about?

I prefer bootstrapping and growing through customers but I have personally raised 196k, 21 investors. I have helped companies raise significant amounts of $$$. I have also invested in 13 companies.

Disclaimer, by doing all of this does not mean it will work for you, just that it did for me and companies I’ve been associated with

Things to ask yourself before looking for an investor

do you really want/need an investor
this is a marriage
you will lose all their money
can they really help you?
do they have a track record in your space?

Are they a good fit as an investor or rather an advisor
not all your business now

Will you need follow on funding

Is your business in the correct ‘standard position’ to raise or should you pick up the phone and get more customers. Many believe that they are in a position to raise capital because they have started a business or talked with someone and they said raise money. This does not mean raising capital is the right fit.

Do you have an investable business (growth, not mom and pop, agency, product, service, etc)


treat raising capital like selling your product to a customer. investors are customer
you will not raise overnight. long process

Problem, Solution, Traction

don’t just give a piece of paper

Prove that you have traction
tell an investor that you will accomplish your win quicker w an infusion of cash

Product solves a problem for a specific target customer
Capital-efficient business – operations @ < $1M funding
Primarily internet-based distribution – search, social, mobile, location
Simple revenue models – transactions, subscriptions or affiliate
Functional prototype before investment (or previous success)
Small but measurable usage – some customers, early revenue
Small but cross-functional team – engineering, design/UX, marketing

Places To Find Investors

angel.co
google angle group in your city
ask service providers: legal, accounting, biz consultants, entrepreneurs, bankers
ask everyone you know, for referrals, meet with everyone. do this anyway for your business

Do your due diligence before and after

Dinners, meetings, networking

Not blogs or posts on facebook

raising $$$ isn’t the end goal

What kind of paperwork will you need?

Business plan? Or what will you do with the money? BP’s are typically asked for by people without knowledge of starting a business. Many knowledgeable investors will not look for a bp, rather a marketing strategy and go to market plan. They want to know you have a good product market fit, but understand that you bp will change and to not waste a ton of time on it.
executive summary
maybe a ppm: A private placement memorandum (PPM) is a legal document provided to prospective investors when selling stock or another security in a business. It is sometimes referred to as an offering memorandum or offering document. 10k-110k

operations agreement: briefcase????
who is paying for legal?
preferred or common stock — ask lawyer —

A preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders, and the shares usually do not carry voting rights.

A common stock is a security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company’s assets only after bondholders, preferred shareholders and other debtholders have been paid in full.

Read more: Common Stock Definition | Investopedia http://www.investopedia.com/terms/c/commonstock.asp#ixzz4CmSw8yzd
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Pick who you want

Get meeting

Show product

Gauge fit

Follow up

Make deal? Rinse and repeat

due diligence in potential investors
-experience as an investor
-expert in field
-help more than cash
-access to more experts and cash
-silent investor?
-track record
-qualified/accredited investor?
-how will they help you?

-what kind of checks can you write?

due diligence companies
-books, how good is your documents
-process
-what is your special sauce, do you have an investable company
-team
-track record or someone on your team/advisor who does… grey hairs
-age
-roi 2-10x
-skin in game
-what will you do with the money
-show proof of concept
-market
-product market fit

how to meet
scripts
the ask
don’t ask for a range
raise from one wealthy or multiple?

What are the terms?

Milestones

Look for lead investor, one that will feed others into the deal aka seeding the tip jar

yes is only yes when the paperwork is signed and the $$$ is in your account


set expectations once the deal is done.
when/how to communicate
what metrics you will be sharing
board, board seats
don’t spend all your money once you get it