We now have several great angel investors on board at Unified Inbox. During this fundraising process, my Co-Founder and I have met with hundreds of investors, presenting them our idea, strategy, product and team. From this experience, there is one key learning I’d like to share with other startups and entrepreneurs.
I believe that investors invest mostly because they fascinated by and can believe in one of these three things:
- Great personal/professional history of the entrepreneur(s) / founder(s)
- Great and convincing product
- Stunning traction
Investor type #1 is impressed by the people building the business, such as the track record they have from other companies they’ve built and sold before. They may not understand the product or even the problem yet, but they do believe that whatever the person touches will turn into gold. If you have that kind of personal/professional story to show, your valuation and the ease of raising money is very different from everybody else. You still have to do your homework, but you’re starting from a different place than the rest.
Investor type #2 wants to play around with the product. They must have a personal affinity to whatever problem it is your product or service is solving. If this matches with their personal perception of how the world is or will be evolving (and your product doesn’t totally suck of course), you’ve got a good chance for investment. They’ll do a due diligence of the people involved in the business, but they’re less focused on traction at an early stage as they can see the value in the product themselves.
Investor type #3 probably represents 90% of all investors we’ve spoken to. They’ve discovered that investing into startups is something far more exhilarating and rewarding than simply investing into publicly traded shares. However, they often approach it with the same herd mentality as if they’d be investing on Wall St. – so have an opportunistic approach to investing in general – which sometimes works and sometimes doesn’t.
It’s well known that when raising angel investment, you need a great idea, a cool product, an excellent team, metrics and what not. Of course, ideally, all at once.
To me, the reality looks different. If you’re early stage and try to complete all aspects with equal priorities, you may end up raising more questions to an investor than actually giving them comfort for investing instead.
A better approach is to first find out what investor type is sitting in front of you and understand their personality as quickly as possible. Then hit your message home, either through your story, your product, or your traction.
But despite the importance of all aspects and even if you’re strong at all three, don’t confuse investors with all of them at once. Keep them complementary after making one the main focus and making sure that this one (for example “the love of the product”) matches their personality.