How to Use Investing Sites Effectively for Venture Capital
When you want to attract venture capitalist attention, getting a profile set up on an investing site is a good start, but don’t just post your profile on these sites and sit back waiting for a response. Setting up a profile is just the beginning of your campaign, and you need to work to drive investors to your profile so that they can learn about your company and actively invest.
Preparing to launch on an investing site
Many of the same rules apply in preparing to pitch to investors in person and preparing to launch on an investing site. Immediately after you launch your profile, investors will begin to contact you. You can leverage that initial attention by making sure you’re ready to have conversations with investors.
Gust and AngelList vastly increase the number of people that are exposed to your company and your deal. In some ways, you can think about posting on an investment site as instant publicity. So don’t make your deal public until you are really ready for it to be publicized.
Make sure you’ve done all the necessary work to prepare your investment deal for primetime. Know how much you’re raising, what milestones those funds will help you achieve, how much money you will ultimately need to raise, and how big your company can ultimately become.
You will likely be contacted by three groups of people: investors in the general public who are seeking basic information, people who are actively interested in investing in your deal, and well-known investors whom you actively want to pursue.
It’s easy to lose track of conversations you’ve had over the phone. After 10 or 15 inquiries, you’ll forget whom you spoke with if you don’t write it down. Plan to keep investor information (name, contact info, type of investor, expertise, amount committed) in a spreadsheet or contact database, along with dates of correspondence.
Gaining endorsements on an investing site
Find champions who are willing to endorse you and your deal. Champions are people who will cheer for you even if they can’t invest in your company. Here are a couple of options:
Ask advisors, investors, and mentors to comment on your online profile and share their support.
If you have one or two committed investors (an ideal situation at this point), you can share that information with the new potential investors who make contact.
Depending on your desire to engage an individual investor, you can disclose the name and contact information of your committed investors (get permission first!). AngelList and Gust will provide information about who has invested and how much they have invested if the investors decide to post it.
Getting commitments for a round is much like building a snowball: Even if you start with something small, you can grow it quickly. By collecting one or two committed investors early, you’re seeding the pot, and you’ll find that other investors are easier to gain. Investors are like herd animals, so encouraging your investors to make their actions public really helps to build momentum!
Seeing who is investing
The power behind start-up investing websites is that you can track investors and investments. Investors have profiles, too. You can see who invests in drug development, clean tech, entertainment apps, marketing apps, and more.
You can learn a lot about the way investors think by reading their profiles. Look at the types of companies they invest in. Study their preferred markets and locations. Study how their desired investment industries overlap with their own business experiences.
You can also learn a lot about an investor’s reputation by reading the reviews that other people have written. Often you’ll find patterns there, too:
Three independent reviewers claimed Nicole Glaros of TechStars was “very bright,” “smart,” and “brilliant.” These separate but similar reviews indicate that she is known to have excellent insight and the brainpower to handle a lot of complexity.
George Zachary of Charles River Ventures has extensive reviews on his profile. Many reviewers echo a good guy quality and all-in approach to the start-up community and to his investing activities.
Andy Palmer of Vertica has a reputation for being exceptionally supportive of the folks he works with. Two reviewers used the word “friend.”
Investors on AngelList are only the tip of the iceberg; many other investors prefer to remain less-than-famous and don’t post profiles.
You can extrapolate what you learn from the angels with profiles and find trends such as, for example, a predisposition toward high growth, high profit SaaS (software as a service) software companies, and a general disinterest in less scalable service or manufacturing firms. Be careful, though, and stereotype only to a point. Remember, people are all unique.
Following the progress of other companies
As a Gust or AngelList participant, you can read profiles from other companies, both in your industry and outside your markets. Doing so gives you a bounty of information.
Think like an investor as you read other companies’ profiles: Try to identify the things in the profile that you are attracted to and that put you off. What information do you wish you saw in the profiles? Which teasers make you want to contact the founders? Be critical and use your opinions to make your company profile stand out by conveying the message and calls to action that lead to investment results.
The bar is set high with lots of competition to attract the attention of investors. Try to gauge company stages and put the companies in order from least to most developed in terms of product development, fundraising, and market size. Some of these factors will be hard to judge, but see if you can guess.
Don’t compete against an unknown quantity; do the homework to make sure that your company is attractive in comparison to everything else that is out there. The best way to work with investors is to understand how they think.