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I've been working on my startup for about 3 months now. Currently we have two active team members: a backend developer and a frontend developer (myself). Now we're looking to get investments so that we can hire new team members.

The problem is, we have no connections to investors whatsover. We're currently working from Asia to minimize costs, but we want to reach out to investors overseas. I have no idea how we'd approach investors. Do we email them? I get the impression that investors must be so busy that any email sent to them would be overlooked. I read here that "it rarely works to cold call or just introduce yourself. So, find someone that knows them and get an intro." Which leads me to the same problem: no connections. How would I approach them in this case?

Next question is, at what point is it the right time to seek investments? We have a functional product, and we're beta testing at the moment (but not making any money yet).

I'm crazy, obsessive, and passionate about what I'm doing, but admittedly I feel a little lost when it comes to the question of funding. This is my first startup, so I know I still have a ton to learn. Any feedback from you would be incredible. Thank you!

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5 Answers

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If you have a beta version online and presentable and you have absolutely no connections, I think you should put together a profile on Angel List. That'll be a good way to at least have some investors open to looking at your company. But before that, I suggest you prepare a one-page executive summary that explains your business model and the investment opportunity, financial projections (since you're not forecasting any revenue you might only need a budget that shows how you plan to spend your capital), and practice explaining and pitching your business.

There are also some incubators that might be worth looking at; Startup Chile is just one of them but with Google you can find many others.

Here are some links to a few questions that might interest you:

Losing Controlling Interest in a company, can that be bad?

What if we got funded?

What are the elements of a one line pitch?

How do I make an angel investor move faster on a deal?

Business is an art so there's no pre-determined path; you'll need to find your own.

Good luck.

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up vote 1 down vote

First off, I think a congratulations are in order since this is your first startup and you have taken the plunge into this crazy world.

I would highly suggest signing up for AngelList (www.angel.co) and creating an account for yourself as well as a page for your startup. AngelList is a fantastic website that acts in some ways a social network to put your startup in the face of potential investors or advisors. It has had a fantastic success rate and would especially help you get your company out there and in the face of potential investors.

Good luck!

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up vote 1 down vote

Why do you need an investor? I think it's now considered one of the steps along the way but it really shouldn't.

Do you really need an influx of money right now or can you just get some customers to start paying and grow organically? Not all business need investment, and taking it when you don't need it could spell doom for your business. Not to mention trying to get investment takes a lot of time, time you could spend improving your product and getting customers.

Also if you go get investment, you lose a % of your company, you are forced to look for an out in a few years and you no longer have complete autonomy over your decision making.

Maybe an investment is right for your business, but I would seriously evaluate that before wasting any time looking for one.

Investment isn't "Free Money", it comes at a very real cost.

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I should mention, I know that doesn't directly answer your question but it might still be the most useful answer you get. – Joel Friedlaender Jan 27 at 2:46
Hi Joel, thank you for you response! Unfortunately at this stage, we do need investments. We'd really like to hire 1-2 more people. More importantly, we aren't selling a product or service. Everything we're offering is free for the user, so we need investments in the sense that Twitter and Pinterest did too (although it's not social media at all, I would go into detail but it might come off as self-promotion and against the community rules?) – Michelle Jan 27 at 4:34
Wanting to hire 1 or 2 more people doesn't sound like a compelling reason. Of course everyone wants to, but do you really need to before you can just afford to pay them out of your revenue? As for not charging the user, I am going to assume you have a revenue model (if not, no investor is going to invest anyway), so whether it's from users, advertising, whatever, then why not start making money? If nothing else, making money will impress investors later if you still need it. – Joel Friedlaender Jan 27 at 6:31
Thank you. These are very helpful points! We're certainly going to look into introducing advertising for the time being - it's a good source of revenue for what we're building. – Michelle Jan 28 at 10:41
.....and that price can be loss of control of your company. However. I'd take 40% of a company that'll be sold for $400M any day over being the 100% owner of a company that'll go belly up in a year. – ron M. Jan 28 at 15:46
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up vote 1 down vote

Well the first thing you cant have product if there is no ecosystem for it. To approach investor, I would do the following:

  1. Make sure, that the product is well optimized itself (it's intelligent in some way)
  2. Secondly, I would make sure you have proper website, with proper social networking. Good animated menu, with a search on the page inclding some litle blog (e.g. just about releases) will definitely make good impression.
  3. Another thing, is to get to linkedin properly, and go thru as many people profiles you can, be revelant to what business you are in
  4. Make sure that you have your infrastructure in place - automated build like with CI, your website is monitored, you have unit tests in place, you have proper documentation of your code, of your servers, the best available online in secure enviroment, you have good sturcured enviroment and infrastructure which is scalable
  5. Make sure that your infrastructure is secure, high performing and your APIs are OK
  6. Finally make sure that your code is re-usable, you have bug tracking system, you take feedback from customers.
  7. dont obsess about the product. It's less than 30% of the success. You need to service product for your customers, you need to promote it and so on.

When you have everything like this, you should have investment already.

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up vote 1 down vote

Michelle, if you're seeking investment to hire 1 or 2 more people (from your response to Joel Friedlander), I'd advise against allocating too much time or expecting to attract good angel investors (angels terms are unlikely to be attractive to you, and VCs aren't likely to be interested at this stage).

Generally, it's difficult to attract investors at this early stage if

  • you're a first timer (entrepreneur) with no track record unless you know other entrepreneurs (who have been funded before) who will make an introduction
  • your product or service hasn't launched and isn't growing at a very aggressive sustained pace over at least a quarter. Time for a pivot, perhaps?

May I suggest

  • Revise your business plan to pay for support the "free for user" service, then spend time trying to attract the right talent with equity in return for their help.
  • Pivot to ad model or (guessing without knowing more of what you're building) try to monetize the other parties in the supply chain you're disrupting. An (over)simplified example, if your service can bring targeted potential customers to retailers, then perhaps aim to get referral bonus from retailers.

Hope this helps and good luck.

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Thank you - great points! I was actually reading a book by the guys at VentureHacks last night and they pointed out similar things.You are spot on when you mention: "your service can bring targeted potential customers to retailers", so this is definitely a direction I'll now focus on more. – Michelle Jan 28 at 10:36
One additional point. I'll highly recommend bringing an experienced advisor or mentor (with experience on online retailing or B2C eBusiness) on board. Saves you from repeated others mistakes. – Global nomad Jan 28 at 10:38

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