A 5 Step Guide to Raising Angel Investment During The Crisis
I raised £250k from previously unknown angel investors during the crisis.Here’s a step by step guide
LET’S START ON THE WRONG FOOT
Lockdown has been unimaginably tough for startups. Fact. And although there has been some solid efforts by various governments to try and provide support, and lots of VC’s are ‘open for business’.
But in reality, the government support is for established, revenue generating businesses and VCs are principally concerned with trying to prevent their existing portfolio from turning to dust.
The stories of deals being withdrawn are a plenty, and the angel market has largely been drier than an evening reading Tolstoy.
But it’s not all tears and alcohol abuse, things are still happening. And (humble brag) my company has been one of them.
We’ve raised a little over £250k since lockdown was announced. And I’m exclusively counting people who we had zero contact with until the crisis hit.
Here’s a guide to walk you through how we did it.
As always, you need to know the position we were in when we started;
Product — MVP just launched
Team — Established and have a good track record.
Traction — Early days, but encouraging
Market — Big, and growing nicely
Preparing for war
Step 1. Emotional Prep
Prepare yourself for rejection. The stats suggest that a 25% of the UK population are on furlough, the US has the highest ever unemployment and many think we’re going to hit the biggest recession in history.
This means the availability of money and subsequently your ability to raise it are going to be lower than usual. Be ready, accept you will be eating a lot of shit sandwiches, people will say no, when previously they would have said yes, and decisions will take longer.
However, don’t give up hope. Money hasn’t completely disappeared, its still there, people will still want somewhere to put it and provided you can make a solid case for why it should be in your business, you’ll be OK.
Some people will tell you that you can’t reach out to an investor without a referral. And yes, it’s absolutely true that a referral will exponentially improve your conversion. However, if someone does tell you this is the only route, please politely say…
‘Do one! And stop perpetuating a closed community elitist agenda’.
If we don’t let new blood in, we’ll never see change. Right now, we need a little change.
Step 2. List Build
The typical list building model for investment hungry startups to find investors is to go to Angel.co and shamelessly email everyone, filtering by ‘Angel’ or ‘Early Stage’ on LinkedIn, or the samfranciscian model of hammering connections in Signal. And although I’m sounding a little blasé, this is actually a reasonably solid method during boom times.
However, we need to be more focused. Not everyone is struggling right now. In fact, some people are thriving and will subsequently have available funds. Target people who are in these sectors. Here’s a couple that is up
Gifts — Mother’s Day spend this year in the US was up 122% on 2019
Home and Garden — Up 88%
Health and Fitness (excluding gyms) — Up 15%
Beauty — Up 37%
Home Entertainment — Up 12.4%
Additionally, some counties are going to be hit worse than others. So it makes sense to look for investors in these countries.
Making this list will be v.time consuming. Subsequently, I fully advocate outsourcing the list building. There is no shortage of freelancers on Upwork and Fiverr that will do this for you. On the whole, they are pretty good too.
A few tips I’ve learned from using this method;
- The more time you put in writing the brief, describing the ideal candidate, picking search terms and providing some LinkedIn/Angel.co profiles, the better results you will get.
- Vet the list thoroughly before you send anything. I emailed my old boss. We are not friends. It wasn’t a great moment.
- Appreciate that the list isn’t going to perfect. If up to 10% of them bounce, that’s fair game.
Step 3. Email pitch
Email pitching is an art. It really is. You have to catch people straight off the bat or you’re getting nowhere.
To find the best practice, I ask investors on my show what they want to see, and I ask funded founders what they said. As you can imagine there are some variations, but there are some consistencies;
- WHAT — What do you do and why are you awesome. This needs to be tight. Whatever you’re saying right now, it’s not tight enough, make it better.
- WHO — Smash them in the face with the quality of your team and why they’re going to smash this better than all those losers before you. Every investor you speak to will say ‘It’s all about the people’. That’s because…it’s all about the people.
- STATS — Traction, market research, partnerships, opportunity size. Whatever the sexiest numbers you have are, add them.
- WHY — Why are you raising and what for — General rule of thumb, if it’s not product development or growth, people get grumpy.
- DECK — Don’t make them email you for the deck. Make this as simple as possible. And you don’t have time to respond to everyone when they come back and say ‘Please can I see the deck?’ It is long and dull and repetitive and long and dull and repetitive. (Yes, I made this mistake)
- ASK — What are you asking for? Do you want them to invest? Then say so.
- KEEP IT SHORT — The shorter the better. Make it punchy. Nobody reads long emails, apart from people who work in HR. Need some inspiration, the movie pitch for Talladega Nights was six words — “Will Ferrell as a NASCAR driver.” Vroom, vroom.
- DON’T EXAGGERATE — Be clear and honest, words like ‘awesome’ and ‘amazing’ are great for live pitches as they get the audience excited. On email, they feel salesy. Which isn’t what you want. You are proposing a valid investment opportunity in a time of uncertainty.
I’ve turned the email I used into a template below -
I’ll be brief, I’m the founder of XXX and we enable XXX to XXX, and we’re seeing solid early traction.
I previously worked in/for XXX and my co-founder was XXX for XXX.
We have partnerships with XXX who are XX in XXX and XXX who are XX in XXX
We launched our product last month and already have nearly XXX sales/downloads and are ahead of plan.
We have raised XXX of a XXX target and I’m reaching out to you as a potential investor. **
The funds are being used to further develop the product and for customer acquisition.
I’ve attached our deck for your review.
It would be great to have a Hangout/Zoom to discuss further if of interest,
All the best,
**Depending on time and scale of the outreach, I strongly recommend adding a personalisation here. Say why them and why they are a good fit. It doesn’t have to be much, as little as ‘I think you would be a great investor because of your background in XX would be of significant value’. Having this will greatly increase your conversion. However, if your list is 100+ long, this may not be feasible.
People spend a lot of time thinking about this. Which is fair, it’s prime real estate. If you are looking to be clever, here’s a great article from Mailchimp.
But in truth, I think it’s best to just put the name of your company.
Step 4. Outreach and Follow-up
Sending these works of art takes a long time. Fortunately, there are some tools that can help. I recommend Gmass as it’s a good old fashioned mail merge that sends individual emails so doesn’t look like a mass mailout.
Pick your time carefully. I cannot stress this enough. If you send in the middle of the day, people are working, they aren’t going to read your email.
Ask yourself what time of day you would be most likely to read a whole email and look at the pitch deck of some random startup. Send it at that time.
If you don’t get a response, there’s no harm in sending a follow-up.
I’m a big fan of the 2–1–1 rule. Send a follow-up email 2 days after, 1 week after that and 1 month after that.
This time around for me, 100% of my investment came from the follow-up.
Here’s what I used -
Checking in on the previous note.
Things are going well with the round and it would be great to have a conversation if you’d like to be involved.
Hope to speak soon,
What you include doesn’t need to be much, it’s purpose is simply to bring their attention back to you. However, if you have something cool to add that didn’t fit in the first email, like a partnership, a big name team member or a cool new feature, include that.
Step 5. Pitch O’Clock
If all is going to plan, people will now be emailing in asking for a meeting. Which is very exciting. And at this point, your conversion should be high because people don’t like wasting time on things they aren’t going to invest in. So go into your pitch feeling confident.
However, things are slightly different right now so you need a slightly different narrative.
Prior to my first pitch, this time around I asked four previous guests on my show who have made investments during the lockdown, what the strategy should be, and what should be avoided. Here’s what they said -
DON’T say your funding for extra runway…this means you’re in trouble.
DON’T say your funding a major pivot…this means your launching another business.
DO say why now is a good time for your business…this means your a true entrepreneur and solid bet.
The last three months and the next six to twelve are going to suck for a lot of people. HOWEVER, there is still money to be invested and people will be looking for opportunities.
Provided you have a strong narrative and are ready to each some punches on the way, you can flourish.
You will hear the phrase ‘Uber was born out of the last recession’ 4 squillion times in the next six months. Be that Uber.