The Seven Deadly Sins of Early-Stage Funding Requests

In The Art of Bootstrapping Guy Kawasaki said, “The probability of an entrepreneur getting venture capital is the same as getting struck by lightning while standing at the bottom of a swimming pool on a sunny day.” And bootstrapping is a viable funding mechanism only if you have boots to strap, i.e., you have the ability to fund your venture with your own money.

For those of you in need of external funding, Kawasaki’s math is daunting. There is a rule of thumb that for every 500 bona fide business plans submitted to sophisticated investors, about 50 will get some consideration, five will become pitch decks seen by investors, and one will get funded.

So, what can you do to increase your chances of getting funded?

Other than being able to convince investors that you have the passion, persistence, and plan to be a successful entrepreneur, you should also avoid the following all-too-common mistakes:

1.     Not Being Coachable

Miles Kington said, “Knowledge is knowing a tomato is a fruit. Wisdom is knowing never to put one in a fruit salad.” Investors want to believe that you are smarter than they are; it is a big reason they will listen to your pitch. But wisdom only comes with the experiences learned over a lifetime. Good investors can help you in many ways beyond just financially, but only if you are willing to listen and learn. Have an open mind to the opinions of those who have done it before. Be the expert in the product or service you are creating, but defer to those who know the many other critical pitfalls you must avoid in order to be successful. 

I recently reviewed a pitch deck that had many grammatical mistakes. I told the entrepreneur that some investors might take that as a sign he lacks attention to detail. His email reply was dismissive and ungrateful. Investors are generally betting on the jockey not the horse, so being a horse’s ass won’t help you get funded.

And it doesn’t stop when you cash the check. Continue to develop a relationship with your investors even after they invest. Everyone needs a boss, even the CEO. Employ an effective Board of Directors that questions your assumptions. Every top golfer has a swing coach because they are always trying to get better. Follow that example.

2.     Not a Scalable Business

Your neighborhood may desperately need a new salad restaurant on Main Street and it might be profitable some day with solid execution. But borrow the money from a bank or raise it from the Three Fs of early-stage investing: friends, family, and fools. Early-stage capital is a high-risk investment and the best investors in the business are wrong more than 50 percent of the time. So the wins need to be big wins or the model doesn’t work. You must demonstrate that investors can make a substantial return and that is only possible if your business scales and scales quickly.

3.     No or Low Barriers to Entry

In the must-read book Do More Faster, Tim Ferriss said, “Trust me, your idea is worthless.” An idea is not a business. A company’s success is much more dependent on management’s ability to execute than on the original idea. That said, if six high school students in Bangalore can replicate your app over a weekend, your business is in trouble. Patents are a barrier to entry, but they cost money, take a long time, and don’t protect what you’ve done – they just give you the right to sue someone who has infringed on your patent. In my view, the best barriers to entry are revenue-generating customers, robust sales and distribution channels, a management team with deep domain experience, and the ability to continue to innovate rapidly. As Will Rogers said, “Even if you're on the right track, you'll get run over if you just sit there.”

 

4.     Weak Sales / Marketing / Distribution Channels

This is number four on my list, but number one in my heart. The single biggest weakness I see over and over again is a failure to understand how to build an awareness of your product, then an interest in it, and ultimately consumers willing to pay for it. “Social media” is not enough of an answer to the awareness challenge. “If you build it, they will come” only works in the movies to get folks interested. And the “App Store” similarly is not enough of an answer as your distribution channel since yours will be among the million or so already free or for sale there.

One way to jump start this process is with Eric Reis’ Lean Startup approach to a minimally viable product (MVP). Find a client to demo your MVP product or service. You won’t get paid, but you will get great feedback and, more importantly, a reference on which to attract distributors and resellers (and investors). If you are not ready for 10,000 customers then don’t sell direct – find a channel where you have 10 customers and each of them have thousands of customers.

5.     Failing to Understand Resource Requirements

In engineering circles there is the Stanforth Rule that states, “There are only two kinds of problems in the world: those that violate the laws of physics and those that time and money can solve.” President Kennedy knew in 1961 that with enough money and enough time, the United States could land a man to the moon and return him safely back to earth. But he didn’t advocate landing a man on the sun. You shouldn’t either. If your idea doesn’t violate the laws of physics, don’t be afraid to explain how much money you are going to need to raise to achieve escape velocity. The ability to articulate that you understand that $500,000 in seed capital will not be your last raise is actually a huge positive. Remember the Rule of Twos: It will likely take you twice as long to raise half as much as you are looking for – budget accordingly.

6.     Inappropriate Use of Funds

Certainly you are not going to tell an investor that the first thing you plan to do with his money is buy $6,000 office chairs for everyone in your company. But knowing specifically how the money will be spent is an absolute must. A plan to spend that scales the business faster and/or increases the team responsible for sales / marketing / managing distribution channels will help your cause. Remember it is their money even after they invest it in your company. If you want to raise more from them, or raise money from others who will ask them if you spent the last round responsibly, treat it like you are bootstrapping. Resource efficiency is the trademark of a true entrepreneur.

7.     A Revenue Model, but No Profit Model

I’ve got a great idea for a business that will generate explosive revenue from day one: I’m going to stand on a busy street corner and sell hundred dollar bills for $90. My forecast has me grossing $9 million the first quarter and all I need is $10 million to get it launched.

 

Again, an idea is not a business. Don’t tell us how much money you are going to bring in; explain to us how much profit you are going to be able to retain, reinvest, and distribute.

Although not one of the Seven Sins, Not Doing Something Useful probably should be. Marcus Wohlsen of Wired magazine said, “The history of technology is littered with solutions to non-existent problems.” Investors want and need to make money and that fact drives most of their decisions. But, speaking only for myself, building something more than just a cool new restaurant finder or the like would sure help you capture my interest.

One final piece of advice to increase your chances of raising money: Be so good you can’t be ignored.

 

Allen H. Kupetz is the COO of venVelo, a Winter Park early-stage investment fund, and the Executive-in-Residence at the Crummer Graduate School of Business at Rollins College. venVelo has recently invested in three central Florida companies: flexReceipts, Row Sham Bow, and Zentila.

 

Looking to learn more about how to be a successful entrepreneur? The author recommends these books:

Blank, Seven. (2005). The Four Steps to the Epiphany: Successful Strategies for Products that Win.

Blank, Steven and Dorf, Bob. (2012). The Startup Owner's Manual: The Step-By-Step Guide for Building a Great Company.

Cohen, David and Feld, Brad. (2010). Do More Faster: TechStars Lessons to Accelerate Your Startup.

Duhigg, Charles. (2012). The Power of Habit: Why We Do What We Do in Life and Business.

Dyer, Jeff and Christensen, Clayton. (2011). The Innovator's DNA: Mastering the Five Skills of Disruptive Innovators.

Freid, Jason and Hansson, David. (2010). Rework.

Guillebeau, Chris. (2012). The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future.

Johansson, Frans. (2012). The Click Moment: Seizing Opportunity in an Unpredictable World.

Kidder, David. (2013). The Startup Playbook: Secrets of the Fastest-Growing Startups from 42 Founders.

Lacy, Sarah. (2011). Brilliant, Crazy, Cocky: How the Top 1% of Entrepreneurs Profit from Global Chaos.

Moore, Geoffrey. (2002). Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers.

Ries, Eric. (2011). The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.

Tatum, Doug. (2008). No Man's Land: Where Growing Companies Fail.

Tjan, Anthony and Harrington, Richard. (2012). Heart, Smarts, Guts, and Luck: What It Takes to Be an Entrepreneur and Build a Great Business.

Wasserman, Noam. (2012). The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup.

10 startup fundraising tips from North Bridge VC Michael Skok

by Kyle Alspach

Boston Business Journal

http://m.bizjournals.com/boston/blog/startups/2013/03/startup-fundraising-michael-skok.html

Michael Skok, partner at North Bridge Venture Partners, on Tuesday evening continued the third edition of his popular "Startup Secrets" workshops with a session on "Raising Money from Seed to Exit."

After introducing the topic by saying that "raising money is like sex" — "everyone wants to know about it, but few people want to talk about it openly" — Skok and several guest speakers offered insights on how to think about raising funding for your startup.

Here are 10 takeaways from the event, held at the Harvard Innovation Lab in Allston:

1. In some cases you should not raise money. Great entrepreneurs, in many cases, don't even think about raising money until they've exhausted all of their own resources.

2. One great time to raise money is when you are brand new and have lots of potential. Startups are attractive at this stage if the opportunity seems exciting enough. Plus, there is nothing that can be disproved at this point. The key here is having the perfect pitch.

3. Another great time for fundraising is when you have proof. When investors do their due diligence on your company, and there is plenty of proof that the business is working, investment will be a no-brainer. Investors will often create their own theory about how your business will evolve at this point.

4. Validate the opportunity before raising seed. The worst thing you can do is spend months building a product, only to find that you haven't validated whether it meets a need or solves a problem — that is not a seed investment that's going to succeed.

5. Time intensity is more important than capital intensity up front. Entrepreneurs must be willing to put in the time early on to build a business before even thinking about raising money.

6. Decide how committed you really are before raising a Series A. Even if someone writes you a Series A check, you may not want to spend years of your life building that business. Typically it takes six to seven years to create real value in a company. Are you ready to go the distance?

7. Before working with a VC, decide what sort of attributes you want in them. Are you looking for somebody who has operating experience, or someone who's a pure investment professional? Do you want someone who is hands-on, or not? Will you be looking to them to help with team building or with removing roadblocks to your business?

8. Don't try to fit too much into the first meeting with an investor. Tell your story, but don't spew out your entire business plan in one mouthful — that can be tough for an investor to digest. Just tell the investor enough to get them interested and get to the next step.

9. Be wary of the term sheet that arrives before due diligence is done. This doesn't represent much of a commitment, because an investor's feelings can change after due diligence. A term sheet that arrives after due diligence, however, strongly suggests a deal is going to close.

10. Do a quick wrap-up with the investor at the end of each meeting. Ask them, was this a good meeting? And do you want to move forward? If you don't get a good sense that the investor wants to continue, it might be time to move on to someone else. Your biggest cost is your opportunity cost.

Read more: North Bridge VC Michael Skok on Boston's startup mentor gap (and how to close it)

Sh*t you should never say to a VC in a pitch

http://venturebeat.com/2013/03/20/sht-you-should-never-say-to-a-vc-in-a-pitch/

This is a guest post by Mucker Lab’s Will Hsu.

Raising money from venture capitalists can be a lot like dating. Certain topics are simply off-limits — like talking about why your ex left you. Venture capitalists are also expert pattern-matchers. They need to know a little about a lot of things. And because they see so many potential investment opportunities, it’s almost impossible for them to have the time and energy to conduct detailed market and customer due diligence to determine the viability of an idea.

Instead, they rely on how you explain your idea and match that to their past experiences to create a complete picture of the potential investment potential. As a result, an innocent sentence you throw in at the end of your presentation could trigger either great memories of their last successful investment or nightmares of their last $10 million down the drain. So sometimes, it’s the things you don’t say that are the most important.

While you might understand the basic topic points, such as revenue potential, market opportunity, and so on, it’s important to know what not to say on the periphery as well. Here are some of the things you definitely should not mention to a venture capitalist if you don’t want to trigger bad nightmares.

10. “Daily deals”: It may seem unfair given that consumers are still lapping up deals and businesses are issuing coupons like never before. But VCs have all moved on. The reality is that it just takes too much effort, time, and tongue-twisting for a VC to tell his buddies how his latest investment is better than all the other daily deal companies that came before. And it will take too much effort for you too.

9. “Big shots like A,B,C,D,E,F,G are advisers”: Simple rule. Being able to say “adviser and investor” is 10 times better than just having an adviser. It doesn’t mean you don’t want lots of advisers and mentors, because you obviously do. You want lots of helpful and passionate advisers, but just be careful thinking that all VCs will give a damn. As a VC, I care about your ability to convince important and influential people to help you build your business (and invest); I don’t really care who they are and how many there are. It’s not about who, it’s about you.

8. “… Uncapped Note … ”: If you’re a YC company, go for it. For the rest of us mortals, let’s get real and understand the point of investors is to have smart people with money on your side.

7. “I’m pretty sure my product will sell itself, and I’m not worried about customer acquisition”: Saying that you’re not worried about customer acquisition is like saying you’re not worried about driving a thousand miles and not running out of gas. If you are not concerned now, you will be eventually. Either have a really detailed customer acquisition plan or show some metrics that allay the fears that acquisition would be too expensive or will never scale. Even product purists care about acquisition.

6. “… SoLoMo … ”: Pick two out of three. Any two. And if you must, at least jumble up the sequence (“MoLoSo?” or “LoMoSo?”). Just don’t say “SoLoMo.” Every time I hear it, a tingle goes up my spine (not in a good way), and I’m pretty sure I’m not the only one.

5. “I don’t need to do market research because consumers are incapable of envisioning the future, you just have to give it to them”:An experienced VC could only respond, “I served with Steve Jobs. I knew Steve Jobs. Steve Jobs was a friend of mine. You, sir, are no Steve Jobs.”

4. “My product is naturally viral”: Every entrepreneur claims to have a “naturally viral” product. It’s like everyone believing they are an above-average driver. The fact remains that average CTR on Facebook news feed links are around 0.2 percent, which are about the same as banner ads, and certainly no one has ever claimed that banner ads are viral. Until a product has gone viral, it’s not viral.

3. “I’m Pinterest for X”: I cannot figure this one out. Apparently it is perfectly fine to be “AirBnB for X,” “ShoeDazzle for Z,” and “Dropbox for Y” … but the moment someone utters the word “Pinterest for … ,” everyone’s eyes just glaze over.

2. “I want to build a great user experience, I don’t care about monetization and revenue”: Only a handful of guys can say this: Zuckerberg, Dorsey, Page, Brin. The only reason they can say it is because they have proven abilities to build a large audience and eventually figure out a way to make lots of money. Unless your last name happens to be one of those, you need a plausible business model.

1. “My addressable market is $XXX billion”: Any market sizing higher than $100 billion (actually, I would really be careful starting around $50 billion) is simply not credible. It either means the entrepreneur has no idea how to analyze the market to find the initial target customer segment (and thus a smaller addressable market), or the entrepreneur has no idea how to tie his business model to a market-sizing calculation. For instance, if you are selling food trucks, you can’t say your addressable market is the total dollars for food sold by food trucks. Neither one builds confidence.

Will Hsu is a cofounder and managing partner of MuckerLab, a mentorship-driven startup accelerator focused on serving Internet software, services and media entrepreneurs in Los Angeles and broader Southern California.

The Silicon Valley Survival School

http://www.businessweek.com/articles/2013-02-21/the-university-of-heroes-trains-aspiring-entrepreneurs

By Ari Levy

Even by Silicon Valley standards, venture capitalist Tim Draper is an oddball. He co-owns a luxury resort in Tanzania, helped produce a Nickelodeon mockumentary series about his sister’s kids, and ends speeches by singing a five-minute ode to entrepreneurs called The Riskmaster. His latest passion is Draper University of Heroes, where students aged 18 to 26 discuss the future instead of history, play volleyball with two balls, and learn survival skills that include suturing and weapons training. Set to open in April, the program is a $7,500, eight-week crash course in entrepreneurship. “Other schools out there are focused on getting an A, which means don’t make any mistakes,” Draper says. “Our school was created to fail and fail big and succeed and succeed big.”

A typical University of Heroes morning will begin with a lecture from a well-known speaker. Zappos (AMZN) Chief Executive Officer Tony Hsieh and Elon Musk, co-founder of Tesla Motors and CEO of SpaceX, spoke during a pilot class Draper ran last year. The rest of the day will mix courses on urban survival training, finance, and sales as well as viral marketing and idea generation. There will be yoga, go-karting, and riflery. The Heroes version of baseball more closely resembles Calvinball from Calvin and Hobbes—players may run the wrong way around the bases or change positions after every pitch. And, yes, there will be karaoke.

Draper, 54, whose father and grandfather were also venture capitalists, has spent the past 28 years backing startups as founder and managing director of Draper Fisher Jurvetson, whose funds have raised more than $7 billion since 1985. He bet early on Hotmail, Skype (MSFT), Tesla, and Baidu (BIDU), but his once top-echelon firm has missed many of the big social media winners in recent years.

Now he’s bet $20 million of his personal wealth on his school. Some of that went toward acquiring a campus—the vacant 90-room Benjamin Franklin Hotel in downtown San Mateo, Calif., and a former antiques store across the street. Draper plans to host quarterly sessions with up to 180 attendees each. He’s working with universities to help students get class credit, similar to a study-abroad program.

Students who can’t afford the $7,500 tuition can promise Draper 2 percent of their income over the next 10 years, or they can propose another arrangement. For the term starting in April, he’s accepted two such proposals: A race-car driver will put the school’s logo, a shield, on her car during competitions, and two Egyptian students say they’ll write a book about the school in Arabic. “We’ve had some other offers that weren’t quite as good,” says Draper.

Christine Guibara, 27, a jewelry designer in Burlingame, Calif., took part in Draper’s 40-student pilot program last June. She says that though her business was already doing well, Heroes made her think bigger. She says she was inspired by a lecture by Ron Johnson, the J.C. Penney (JCP) CEO who previously led Apple’s retail operation, and has begun talking to possible partners about starting what she calls a retail incubator, a common sales space for up-and-coming jewelry designers. Like every Heroes student, she finished her program with a two-minute pitch to a panel of real investors. By that time, she says, she’d overcome her fear of public speaking through extensive pitch practice and other work. Camaraderie with her classmates also helped, she says: “Being uncomfortable almost every day and still looking forward to it makes you comfortable with the unknown.”

Draper expects Heroes to at least break even, and hopes alumni give Draper Fisher Jurvetson an early chance to invest in their projects. Draper says he expects to invest between $300,000 and $500,000 of his own money into a $4 million round of financing for nVision Medical, a devices company founded by Surbhi Sarna, 27, who attended the Heroes pilot program last year. Sarna says Heroes inspired her to broaden the company’s focus from female infertility to early detection of ovarian cancer as well.

Within about two years, she hopes to have an early detection device on the path to approval from the Food and Drug Administration. That’s the kind of risk Draper sings about on stage. As he says in his song: The riskmaster “skates on the edge of disaster.”

The bottom line: Third-generation VC Tim Draper has invested $20 million of his own money in a $7,500-a-pop boot camp for young entrepreneurs.

An entrepreneur’s quick guide to working with angel investors

http://medcitynews.com/2013/02/an-entrepreneurs-quick-guide-to-working-with-angel-investors/

by Deanna Pogorelc

The number of angel investors in the U.S. has jumped 60 percent since 2002, and the number of dollars they’ve invested in companies has gone up even faster. Not to mention that a few new angel groups have sprouted just within the last year to invest especially in life science companies.
Given all of this activity, Cleveland non-profit entrepreneurship group JumpStart Inc. (disclosure: JumpStart is an investor in MedCity Media) gathered a panel comprising two local technology entrepreneurs who have raised angel funding and the manager of an angel fund to talk about how entrepreneurs should prepare for this kind of investing and what they should expect when a deal goes through.

 

There’s no one “kind” of angel. Some investors will want to know lots of details about the progress of the company; others will want to be involved in only the big-picture things. Iron out all of those expectations in the beginning. “We’ve created an internal blog where we’re posting everything and we give access to them, so they’re able to figure out on their own whether they want to come in and see what we’re doing,” said Bryan Chaikin, a co-founder of eFuneral.

Take their advice as just that – advice. A good angel will give you more than just money. Soak that up. If you follow every suggestion or critique an investor offers with, “yes, but…,” they will eventually stop offering suggestions, noted Adam Roth, president of StreamLink Software. But at the same time, you shouldn’t try to follow every piece of advice given by every angel you pitch to. “They have a lot of good knowledge but probably don’t know your business as well as you do.”

They want to hear about who you’ve hired. For companies that are on an otherwise even playing field, it’s the management team that makes the different. “We know that the business plan you present to us will be different than 12 months from now,” said Clay Rankin, manager of North Coast Angel Fund, which invests in early-stage healthcare, advanced materials, information technology and energy companies. “It will be different because they have run into obstacles trying to get the product to the market or trying to develop their product in the first place, but it’s the successful management team that can figure out how to overcome those obstacles that’s most important.”

No matter how early stage you are, have some intelligent thoughts on funding down the road and an exit. “We try to not only look at the environment right after the money is put in, but also where is that company going? What kind of financing is going to be needed down the road, and who is likely to provide that financing?” Rankin said.
And if you take angel or VC money, make sure you’re on the same page about how you might exit and who the potential exit partners could be. “They’re looking for their return; they’re not in it for a lifestyle kind of situation. It’s just not the way those kinds of investors are thinking.”

Make the most of your friends and family money. “If you have money, but you know you don’t have enough money and you’re wanting to valuate your business, don’t burn all your capital before you go get that investment,” Roth said. “Get a lead investor, get the terms so that you have preferred shares and then invest in preferred shares, because it doesn’t matter how much money you put into the company before the investment. You’re better off taking that dollar and putting it in after there’s already a value set so you can actually buy real shares with that money, as opposed to buying sweat equity.”

If your company is very early stage, consider convertible debt. That was the best option for eFuneral when the company was first ready for funding, because there was no way to put a valuation on the company just yet. “One of the benefits of doing it that way is you’re giving the company the opportunity to move its business far enough along that there is clear value in it, and it’s that value that allows you to attract outside investors,” Rankin said.
“I wouldn’t diminish those frilly things that add some value to it — the warrants or stock options. The reality is that a 7 or 7.5 percent interest rate is not commensurate with the risk you’re taking as an investor. This is huge risk at this very early stage, so what you’re doing about getting the warrant or getting an option for additional stock is to recognize the fact that you came in early, you took that early risk, and you’re entitled to get a little extra kicker when others come into the picture with equity.”

But, again, all angels are different. Some angels may not favor convertible debt because they want to know what their ownership in the company will be up front. “If we wait and wait and wait (for a valuation), the limited amount of money we’re able to put in as an angel fund becomes smaller and smaller as a percent of the value of the company, so your ownership ends up being tiny,” Rankin said. “Then if there are future rounds, your ownership is more diluted after that, so we do like to get the oar in the water.”

Plan on the process of getting an investment being at least six to eight months long. For North Coast Angel Fund, Rankin and his associate screen all of the opportunities and send one or two per month to a screening committee. If that committee likes what it sees, the company is invited to present to the full membership about a week later. If the membership approves, around three months of due diligence will follow. “Once the due diligence process is complete and the team comes back and recommends an investment in the company, it is not uncommon for it to take another month to negotiate the final deal documents between lawyers on both sides,” Rankin said. Of course, there are always exceptions that could speed up or slow down the process.

Break up your fundraising, if applicable. “If you’re worried about the perception of how long it’s taking you to raise capital, I think you could set goals for yourself – short-term goals, mid-term goals, long-term goals – and define how much capital you need to get to each stage and break your raise down into those buckets,” Roth said. “If you do that ahead of time, when you’re talking to your investors and you’ve got that laid out, I think they’ll be impressed with your thinking about how you’re trying to be capital efficient as opposed to how you can’t just get a bunch of capital in the door.”

Start Here if You are Looking for Angel Investors

http://www.businessinsider.com/start-here-if-you-are-looking-for-angel-investors-2013-1

If your startup is looking for an Angel investor, it makes sense to present your plan to flocks of Angels, and assume that at least one will swoop down and scoop you up. Or does it? Actually numbers and locations are just the beginning. The challenge is to find the right Angel for you, and for your situation. Here are some basic principles:

• Angels invest in people, more often than they invest in ideas. That means they need to know you, or someone they trust who does know you (warm introduction). For credibility, they need to know you BEFORE you are asking for money.
• Angel investors are people too. Investors expect you to understand their motivation, respect their time, and show your integrity in all actions. They probably won’t respond well to high pressure sales tactics, information overload, or bribes.
• Angels like to “touch and feel” their investments, so they are generally only interested in local opportunities. It won’t help your case or your workload to do an email blast and follow-up with 250,000 members around the world.

But now to answer one of the most common questions I get “How do I find Angel investors?” With today’s access to the Internet, and Google searches, it really isn’t that hard. Here are the largest flocks:

1. Gust (formerly AngelSoft). This is perhaps the most widely-used source of information on Angel investor groups across the world, run by the “Father of Angel Investing in New York,” David Rose. This software platform is used by most local Angel organizations for managing deal flow.
   It boasts more than 1,000 member-managed groups and VCs, with 40,000 investors, and over 1,800 startups funded in the last 12 months. As an entrepreneur, you simply use their investor search engine to find appropriate investors for your business according to location, industry interest and other relevant criteria.
2. AngelList. This is another very popular website for raising equity or debt investments for startups. It was founded back in 2010 by Naval Ravikant and Babak Nivi of Venture Hacks, which is also a great place to visit for startup advice. Although relatively new, they announced early last year that their community had already grown to more than 500 startups, and 2,500 investors. The format is more social networking in nature, and they also will soon provide a recruiting portal for crowdfunding with unaccredited investors, now that the US JOBS Act has been passed.
   
3. Keiretsu Forum. This one claims to be the world’s largest single Angel investor network, with 1,000 accredited investor members throughout twenty one chapters on three continents. Since its founding in 2000, its members have invested over $400 million in companies in technology, consumer products, healthcare/life sciences, real estate and other segments with high growth potential.
   The Founding Chapter is in Silicon Valley, California, (naturally). A caveat is that this is a for-profit organization, so fees to present may be significant.
4. New England Investment Network. This is an online platform connecting entrepreneurs based in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont, with Angel investors worldwide. The caveat here is that this network doesn’t have a personal touch, as it only facilitates the exchange of contact information, so the matchmaking is left up to you.
   The reach is very broad, however, with 30 branches worldwide covering over 80 countries in Europe, North America, South America, Africa, Asia and Australasia, and over 200,000 members worldwide.
5. Angel Capital Association (ACA). ACA membership includes more than 160 angel groups and 20 affiliate organizations across North America. ACA member angel groups represent more than 7,000 accredited investors and are funding approximately 800 new companies each year and managing an ongoing portfolio of more than 5,000 companies throughout North America.

Of course, there are many Angel investors, often called “super Angels,” that have a large following and large reach, so they don’t need any of these organizations to be found. Examples of some leaders in this space include Ron Conway, Mike Maples, Jr., and Dave McClure. Connecting with one of these would be a real coup for your startup.

My real message is that the best Angel you can find is a local high net-worth individual, with whom you or your advisors have an established prior relationship. So get out there and network today, and you can be one of the lucky ones who is touched by an Angel without having to go through hell first.

Marty Zwilling

Video: Where Good Ideas Come From (by Steven Johnson)