Tag Archives: Angel investor

Fundraising and Feedback

by in My Experience, My Startup, , , 3 Comments

Dave McClure’s recent post on investing before product/market fit inspired me to address a few observations I’ve made as an entrepreneur when pitching to investors (angels and VCs), crafting my product proposal, and explaining the vision of my current startup.

Risk and Rejection

As a first time entrepreneur I understand that I’m seen as a huge risk, even though I was on the founding team of a startup that successfully exited recently.  I’ve pitched at several events and met with angels and VCs.  I don’t know if a lot of other entrepreneurs feel this way, but from what I’ve observed and read I’ve developed some empathy.  I understand that all investors are just as concerned about their portfolio companies, and delivering value to their shareholders as I as an entrepreneur am to my employees and customers.  Investors have have to raise funds, and maintain a certain return/revenue stream to stay in business.  Given the current market conditions, their past experiences, and the overly zealous and optimistic nature of entrepreneurs investors have to be cautious.

I’m a big girl, I can take rejection, and I welcome it as a challenge to the way I think and present my product.  If I wanted someone to tell me I’m awesome I would just call my mom up everyday…

Following up with Feedback

I’ve found it immensely valuable to hear from an investor right on the spot: “I understand the first part of your pitch when you explained how you were trying to solve problem A.  But I don’t understand how problem B fits into it.  Perhaps you should focus on A first.  Or make it clearer to me.”  Or the investor who tells me on the first meeting that they wanted to meet with me, but are averse to space that I’m in, or just don’t feel like they know enough to add value.  Being clear and forthright makes the process not only easier for me, but then I start to learn and understand how investors think and what they are looking for.  I also have other founder friends who are fundraising and farther along that I am that I can then refer the investor to.

Followup calls and emails are really helpful too.  I’ve received a few of these where the investor will tell me that they aren’t sure about my distribution model, think that there maybe a conflict with one of their existing portfolio companies, or want to see how customers will react to make sure that I’m solving the right problem.
I’m not saying its mandatory to give feedback.  Its just useful, and I’m the type of person who wants someone to lay it on thick.  How else am I going to improve as an entrepreneur, and build a product and company if I don’t get beat up once in a while?  I think its important for investors to do this to test the strength of entrepreneurs.
What I’ve found hard to dissect is vague feedback.  The investors who take a meeting with me and state they are early stage, but early stage doesn’t include before Product/Market fit.  Or are very excited and like the concept of my product, but want to wait and see traction.  Whats hard to pin down is their criteria of traction.  And maybe that’s just an exercise for me as an entrepreneur to discover.

Before Product/Market Fit Push Back

I’ve been bootstrapping my startup and have taken in a small amount of angel investment.  For the last 7 months I’ve devoted myself to my startup: building the product, the team, acquiring customers, fundraising, and creating a vision.  As an entrepreneur I think its important to show a vested interest and belief in your own product, vision, and risk taking abilities.  And while these are all positives I know they aren’t enough to compel investors to invest.  When faced with push back the onus of proof is still on the entrepreneur to prove they are worthy of a large round.  Go home, get more customers, refine the problem, product and pitch.  Competition and market conditions will always be against you, but those are natural forces that you have to work against, its just part of the fun of fundraising.

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Startup Founder: Prepping, Prototyping, and Pitching

by in My Experience, My Startup, , 3 Comments

In 2 days I’ll be celebrating my 6 month anniversary of leaving my last startup and working on my current one (cue Jay-Z).  Having been a startup engineer I knew I had to prepare myself for the transition to founder.

The long hours of a startup engineer are drastically different from the long hours of a founder.  At least for myself, I spend the entire day context switching instead of coding.  In any given day I meet to pitch to investors, do usability testing, then its onto prototyping and coding, and ending the day thinking about business strategy.

So how does one handle all of this?  Preparation.

Prepping

I spent the first two months brainstorming ideas, reading, and networking.  I spoke to anyone and everyone who would meet with me: investors, users, and founders (even some who were potential competitors).  The reason I did this is because I wanted to understand the problems users were having, how investors evaluated the market I was in, and the approach other founders had taken to address the needs of the first two.

Once I thought I handle on the problem I was trying to solve I transitioned to creating a solution, through paper prototyping.  I ran usability tests with paper prototypes, because I wanted to make sure that what I wanted to build would be a value to them.  I did several iteration of this on a wide audience.

I stuck a fork in the process and decided it was time to build.  Realizing that I couldn’t build everything and also trying to plan for future hires, I broke down the prototype and created a product roadmap.  During the course of this process I thought about what the most compelling feature would be and to me that translated to what was the most pressing user pain point.

Prototyping

Before I wrote a single line of code, I first wrote a formal spec on the first feature that would be released.  This may seem counterintuitive to running fast, but I wanted everyone on my team to be on the same page about what we were building, why we were building it, and then work together on the how.  I included mock ups for the designer, system interactions for developers, and finally suggestions for usability testing.  Then I sat down with each group.  My designer and I talked about simplifying the design – taking away components and streamlining a user’s workflow.  The engineering team and I talked about data modeling, error handling, and how to architect our code base.

Once we released the first iteration of the prototype I had everyone on the team play with it for a couple days and send me feedback on what they saw as show-stopper bugs and any functionality that wasn’t intuitive or user-friendly.

The standard to determine the first iteration’s success was for users to tell us that they wanted to use the product immediately as is.

Pitching

Before I even thought about pitching, I spent sometime understanding the investment market and conditions.  Since my last startup the investor market has changed a lot, and not just because of the recession.  There has been an increased presence of incubators, Angel Investors, and seed funds.  And they are all competing against each other.  There are also a wider variety of investment vehicles to choose from these days: bootstrapping, convertible notes, and seed funding.

The key for me has been to find the right investment vehicle and investor relationship that will get me to my next milestone.  Putting together a business plan helped me evaluate what it is I needed.

The next phase was to pitch.  I’m not going to delve too much more into this:  know your audience and know your business.

The past 6 months have been awesome, while the process has been time consuming its been incredibly engaging!  It’s been a series of coming up with experiments and executing them.  What has been extremely valuable for me has been taking the time in the first couple months to explore, learn, and understand in three market segments: product (existing and tried solutions), user (pain points), and investment.

I’ve seen a lot of startups that just start executing and maybe that works for them, but I guess I’m more of a girl scout 🙂

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Perspective on Pitching

by in My Startup, , 7 Comments

Having been at the ground floor of a startup before I’ve experienced writing the first lines of code, shipping a product, and then getting acquired, but I never had the experience of pitching or seeing someone else do.  Last Wednesday I did my first pitch for my startup, BizeeBee, in front of about 75 people, a panel of 4 angel investors, and alongside 7 other founders.  While this might seem nerve-wrecking to most, it was an experience I had been looking forward to for months.  I finally felt like a founder!  The event was sponsored by DukeGEN and limited to founders from Duke.

The reason I really liked this format was that before the founders presented the Angels took the time to tell us what they were looking for.  Each pitch last 6 minutes and there was a 3 minute Q&A period following each founders pitch.  Before announcing the winners,  the Angels spent time giving each business feedback, which I found to be extremely valuable because I got to experience first hand how they evaluate and think about business ideas.

Here’s what the angel’s were looking for:

  1. Getting to the heart of the product and what problem it is solving
  2. Large market
  3. Explanation of Customer Acquisition strategy
  4. Team: strong technical and business members
  5. Polished presentation and understanding of each component of your business

Here’s what the Angels focused on during the QA and it making their final decisions:

  1. Many of them questioned the actual market size, and drilled into the numbers presented.
  2. How robust the technology was compared to competitors, and if it was enough of a differentiator.
  3. How much of the product had already been built out.  Having an actual prototype versus a PowerPoint presentation was more powerful.
  4. How capable the founding team was of executing on the business and technical side.
  5. Traction and having customers that were using the product.
  6. The methods used for attracting customers.  Angels really care about your distribution model.

I came in third place.  Here’s the feedback I personally received (yes I’m still leaving my readers in the dark about my product):

  1. Great team, brand, UI, and simple product proposal.
  2. Given that I’m targeting the SMB space, they were concerned about how scalable my business model is given how fragmented of a space I’m operating in.
  3. They did emphasize the need for a couple more key hires such as a VP of Engineering and VP of Sales.
  4. Traction – they’d like to see the customer feedback, how the product and brand awareness will spread, and if I’ll be able to start making money off of customers.

One final note, I want to thank my teammates Liz and John for all their support and hard work that went into helping me prepare the prototype and the pitch!  I couldn’t have done it without either of them 🙂

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