How to Get Meetings with Investors and Raise Money by Aaron Harris | Summary and Q&A

TL;DR

This talk provides valuable insights and tips on when and how to raise funds for your startup, understanding investor motivations, and how to effectively approach and communicate with investors.

Key Insights

• 📅 Timing of raising money: Raising money should be considered carefully as not every business needs outside financing. It is important to determine if you actually need to raise money and at what stage of growth your business requires it. MailChimp is an example of a successful company that has never raised external financing.
• 💰 Uses of funds: Investors expect companies to have a clear understanding of their use of funds. While hiring employees is often cited as a reason for raising money, startups that leverage software can often operate with fewer employees. Other uses such as user acquisition and customer service may be valid reasons to raise funds.
• 👥 Types of investors: There are various types of investors, including friends and family, accelerators, angel investors, seed funds, VC funds, and crowdfunding platforms. Each type of investor has different motivations and ways to get in touch with them.
• 📧 Approaching investors: When approaching investors, it is important to do thorough research on each investor to understand their investment preferences and interests. Customizing your introduction and demonstrating relevance to their portfolio can increase the likelihood of a positive response. Cold emails can be effective if well-researched and personalized.
• 🤝 Investor meetings: Different types of investor meetings include intro meetings, follow-up meetings, decision meetings, diligence meetings, and sometimes fancy dinners. Each meeting stage requires different information and preparation, such as clear explanations of your idea, progress, metrics, and future vision. It is important to be concise, prepared, and professional in meetings.
• ⚠️ Watch out for certain investor behaviors: Some investors may waste your time, be rude or condescending, conduct diligence on you for competitive reasons, or engage in unethical behavior such as harassment. It is essential to be aware of these behaviors and leave meetings if they occur.
• ️ Timing and duration of fundraising: The duration of fundraising varies, but founders should be prepared to dedicate a significant amount of time to the process. However, fundraising should not take away from the company's primary focus of building a big business. Efficiency in fundraising is crucial.
• 👍 Leveraging unfair advantages: Investors who specifically fund certain demographics, such as female founders, can be advantageous for companies led by those individuals. It is essential to utilize any unfair advantage available to secure funding.
• 📌 CEO's role in fundraising: The CEO should primarily focus on fundraising, while other co-founders can continue working on other aspects of the business. This ensures the company continues to make progress while the CEO leads the fundraising efforts.
• 🚧 Considerations when involving the entire team: Bringing the entire team to investor meetings may result in rushed decisions and can put the founders at a disadvantage during negotiation. It is better to have the team involved in decision-making after receiving an offer, providing time for careful consideration.

Transcript

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Questions & Answers

Q: How can entrepreneurs determine if they actually need to raise money for their startup?

Determining the need for external funding depends on the growth stage and goals of the business. It's important to assess whether the blocker to growth can be solved by hiring more employees, focusing on user acquisition, or addressing customer service issues. Fundraising should only be considered if it is necessary for achieving specific milestones and growth targets.

Q: What are some common mistakes that founders make when communicating their vision to investors?

Founders often make the mistake of either going too big and appearing scattered or going too small and not emphasizing the potential size and impact of their idea. It's important to strike a balance between presenting a big vision while also being grounded in reality and showcasing how your business can solve critical problems and create value.

Q: Should founders approach investors who have already invested in competitors?

The approach to investors who have invested in competitors may vary based on the specific situation. If the investor has invested in a competitor in the past but that company is now public or less relevant, they may still be a good fit to approach. However, it's crucial to assess the investor's explicit investment strategy and existing portfolio to understand their potential interest and conflicts of interest.

Q: How can founders determine the credibility of potential angel investors?

Researching potential angel investors by reviewing their past investments, online profiles, and any available references is crucial. Look for visible activity and engagement in the startup ecosystem, as well as any positive testimonials or recommendations from founders they have worked with. Utilize platforms like AngelList to gather information on their investment history and preferences.

Q: How should founders prioritize their time between fundraising and working on their startup?

Fundraising requires time and effort, but it shouldn't take away from the core focus of building and growing your business. Founders should only prioritize fundraising when it is necessary and focus on actively growing their company as much as possible. Utilize co-founders or team members to handle other aspects of the business while the CEO focuses on the fundraising process.

Q: How can entrepreneurs determine if they actually need to raise money for their startup?

Determining the need for external funding depends on the growth stage and goals of the business. It's important to assess whether the blocker to growth can be solved by hiring more employees, focusing on user acquisition, or addressing customer service issues. Fundraising should only be considered if it is necessary for achieving specific milestones and growth targets.

Summary & Key Takeaways

• Deciding when you actually need to raise money for your business is crucial, and it depends on various factors such as the stage of your company and your goals for growth.

• Raising money is a continuum, and it gets easier as you show progress in your business, but it's important to consider if hiring employees and spending on user acquisition are the right steps for your company's growth.

• Different types of investors, such as friends and family, accelerators, angels, seed funds, venture capital funds, and crowdfunding platforms, have different motivations and ways of investing, and understanding them can help you in approaching and convincing them to invest in your startup.