I attended the Seattle Interactive Conference (SIC) last week and attended more than a few weak sessions, but a couple of really good ones including a session entitled “Fundraising – Lessons Learned”. Andy has been through the trenches of start up fundraising, growth and sale several times including investing as an angel himself. Learn more about Andy here. 

Here is an outline of the notes I took from the presentation and really appreciate the effort Andy put into the session!

• VC’s > do 1 deal out of 100
• 5-6 months between deciding and closing on dollars
• 1st H 2012 – 130,000 investors put in dollars > avg deal was $330k

• The 1% who close are only doing a few pitches but with a very high conversion rate

• Andy – invested in 44 deals – some did well and some did poorly

• Books
  • Keith Ferazi – “never eat alone”
  • Write a relationship plan
    • Write a list of top 100 people who can impact your business
    • Stack rank them in terms of impacting your business
    • Action plan to meet them and find networks around them

• Let Investors Invest
  • NetConversions > pitched 100 people, got 11 investors put in total $1.2 million
  • Burned through all but $200 > tried to raise money when needed it and was desperate – bad situation
  • Easier to raise early on with no historical data
  • BuddyTV > could only get 1,000 people on at time
    • Took one year to get the model wrong
    • Made a transcript of the 1,000 people and posted
    • Passed some milestones, started taking inbound calls once seeing traction in marketplace
  • How can we break down the barriers
    • The more that you can show, the more skin you have in the game, the more thought, the higher the probability

• Market Terms and Price Slightly Lower
  • Terms you use have to be reasonable so you don’t turn off investors
  • Talk to an attorney > what is market rate?
  • Startup is not going to “sell” – like a house – what is market rate?
  • Spend time focusing on business or on raising money?
  • What is ideal price and then price lower to get it done

• Set up the Raise Before You Need it
  • An emotional sell
  • What is the connector? Who is the connector?
  • Create a spreadsheet – every month I send them an update on how Buddy TV is going (good stuff!) > business development & potential money people
  • Some sort of though leadership  piece
• If you are tired of getting this email > hop off

• Lead Investor
  • They need to feel like they can bring value to the deal

• Be a Connector
  • How do I add value to the eco-system?
  • Meet with entrepreneurs once per week
  • Works for biz dev, raise capital and

• Build a Financing Strategy
  • Be very deliberate about your financing strategy
  • Create a spreadsheet just like an enterprise software sell stages
    • Most desirable investors > how can I get them to buy into my vision
    • Talk to his/her friends around the investor. Who do you know who is linked to them? CEO’s who have taken money, connections that you know
  • Stay at the top of their inbox to get to a decision
    • Be unique, be persistent
    • Don’t get put off by their lack of response
  • Read the book “Influence”
    • Quid Pro Quo – Andy sends the potential investor a book on their interest

• Be Thoughtful of Who Your Angels Are
  • More like a marriage > why do you want that angel in their deal?
  • Andy had one angel who cost him more in legal fees than actual dollars
  • Is it someone you want to work with?
  • What sort of things can they bring to the deal (besides money)

• Develop a Rhythm of Communication
  • With investment team > don’t make the next call “hey, we’re not going to make payroll”
  • Over communicate to investors: here is what is going on, here is what I’m struggling with, here is what is going well
  • Pre and post raise communication plan (monthly)
  • No surprises, what are the risks of the business – here are the three ways I’m going to mitigate that
  • Better if you can get them One on One

• Leave Something on the Table
  • Things often go sour if one side wants too much
  • If you leave something on the table, it will feel better to the investor
  • Some sort of give at the end to make it feel like it’s a friendly deal

• Advisors
  • 2 year vesting > .25 – 1%
  • More functional support – specific skill set

• Know why you want to raise money
  • VC’s want 100x return or something crazy
  • Angels might want participation or cash flow

• Angels
  • Stay away from friends, family and fools
  • Look for people who can understand the risk

• Investing- 44 deals invested in
  • Why did I invest?
    • I liked the entrepreneur – I could bet on him
    • High variance in deals – either a 0 or huge
    • I can add value to the business
    • I got peer pressured into it – in the deal with friends
  • First meeting gut
    • Is the person thoughtful? Customer acquisition costs, development cycle, etc.
    • One of best predictors of success > pushed into it by peer pressure
  • Follow the Best
    • Invested with friends who are really thoughtful and know what they are doing
• More deals is better than less
  • Better strategy than investing in less
• People are more important than ideas
  • 5 exits so far. All have had near death experiences and all have had positive exits
  • The entrepreneurs have to be able to walk through walls and push through