in Angel Investors

Top 5 Do's and Don'ts for Raising Funding

After what seems like a very short summer break, things have started up again at the Maple Leaf Angels. We held our first investment breakfast of the season in September and look forward to another great season of seeing great companies and closing deals. Since the group was started in early 2007, Maple Leaf Angel members have made investments in over 10 companies.

One of the functions of the board is to do company screening and select the companies that will present at our investment events. Having seen pitches ranging from very good to very bad, I thought I would start off my first post of the season with my top 5 do?s and don?ts of securing investment.

1) Do start early – raising money takes time

Remember that the timeline in the referenced article assumes you go from start to finish and close the deal. You may very well find you get part way through the timeline with one investment group only to be turned down. That means you need to start over again with alternate groups. The best time to look for financing is when you are in a position of strength (i.e. things are going well with your company) and not when you are in dire need of financing to survive.

2) Do ensure you have the fundamentals down pact (product, market, competition, management, financials, goto market)

Throughout the funding process investors will want to gain a comfort level with a potential investment in your company by assessing these areas. Not being prepared with details will seriously weaken your prospects of getting funded.

3) Do be memorable for the right reasons

During the early stages of the investment process, the goal is to stand out from the other companies pitching and get people interested in your company to want to spend the time to undertake a due dilligence process. At any organized investment event you will be one of many companies presenting to a group of investors. All will be pitching with the same message (our company has a great new idea, that can be sold to a large market, and make a lot of money). Often time the amount of interest you garner is largely dependent on the person who is presenting. You have probably all been to industry conferences & events where you have sat through presentations where you had to try hard not to doze off. But every once in a while you have attended a presentation with a great speaker that you leave feeling energized and challenged. This is the type of person you want to give the pitch to get people interested and excited about investing in your company.

4) Don?t have an unrealistic idea on valuation

Valuation can be complicated and difficult to determine an exact value for your company. However, when you are first asked what your valuation is, do not give an unrealistic number if you are an early stage company (i.e. a pre-revenue company is generally not going to support a valuation in the 8 figure range). Also, if asked about valuation during your initial meeting, always preface it that it is open for discussion. At this point each side is only just beginning to get to know each other and what they bring to the table. Being adamant about an unrealistic valuation number (usually mistakenly rooted in the belief of not wanting to give up more than 51% of the company as to retain control) will quickly cause people to loose interest.

5) Don’t have people walk away from your pitch presentation without having a clear idea on what your company does and how it makes money

Even if your product is a very technical product, you need to be able to clearly articulate what it does, what pain point it is solving, and how your company makes money. You would be surprised how many pitches I have sat through and left without having a clear idea on what the company did. If you cannot cross this basic hurdle, your chances of getting investment are going to be very slim.

Seems pretty basic – right? You would be surprised how many pitches get passed over as a result of tripping up over one of the above points. The ability to secure funding will play an important role in your company?s strategy and growth. Make sure you put your best foot forward!

  1. I find the best way to do this is to pitch your idea to as many people as possible: your friends, family, lawyer, accountant, and just practice refining it down to 4 or 5 sentences that go from market need to what you do to how you make money.

    The purpose of the pitch is to get people excited and too many people try to explain everything when you should be trying to get people to ask question about the product.

    I had the toughest time with this, but after pitching my idea to everyone I know, it became easier to articulate when I finally got to the investors (read: old people :) who really mattered.

  2. I find the best way to do this is to pitch your idea to as many people as possible: your friends, family, lawyer, accountant, and just practice refining it down to 4 or 5 sentences that go from market need to what you do to how you make money.

    The purpose of the pitch is to get people excited and too many people try to explain everything when you should be trying to get people to ask question about the product.

    I had the toughest time with this, but after pitching my idea to everyone I know, it became easier to articulate when I finally got to the investors (read: old people :) who really mattered.

  3. I agree. You have to learn not to be shy and really just start pitching. This is a big lesson, especially when you spend a lot of time reading “how to”‘s, etc. after a while you forget you are actually supposed to be pitching.

  4. I agree. You have to learn not to be shy and really just start pitching. This is a big lesson, especially when you spend a lot of time reading “how to”‘s, etc. after a while you forget you are actually supposed to be pitching.

  5. I agree. You have to learn not to be shy and really just start pitching. This is a big lesson, especially when you spend a lot of time reading “how to”'s, etc. after a while you forget you are actually supposed to be pitching.

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