Startup Creation Guide, Part 3: “But I Don't Have Familiar Investors!”

Original author: Marc Andreessen
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Startup Creation Guide, Part 3: “But I Don't Have Familiar Investors!”

Part 2

In the previous article, we discussed what to do when an investor rejects you. However, this means that you have found it. What if you have a startup requiring investment, but you don’t know any investors?

I can share your feelings - when I was working on Mosaic at the University of Illinois, the words "venture investment" meant no more to me than "klaatu barada nikto". I never met an investor, an investor never talked to me, and I would not have recognized an investor, even if I had stumbled on his checkbook lying on the sidewalk. I’m not sure that without the help of Jim Clark, I could have found financing to launch a company like Netscape, even if it occurred to me to found a company.

First you need to understand that investors work mainly through communications - they can hear about a promising startup or entrepreneur from someone they worked with before, for example, from another entrepreneur, leader or engineer of one of the startups that they financed, or a business angel previously worked with.

The reason for this is purely mathematical - one investor can finance several companies a year, and for each funded startup there are 15-20 other teams, and hundreds more teams want to meet with the investor. He has to rely on connections that will filter hundreds of projects, reducing their number to 15-20. Therefore, simply throwing presentations at investment firms will have the same effect as throwing scripts at movie studios. Nothing. Therefore, the trick is to get into the very 15-20 teams that the investor meets with on the recommendation, and not stay among those hundreds that he will not meet with. But before you do this, you need to make sure that you have everything prepared. Plan, presentation, supporting materials - in general, bring a whole idea to a person who invests in a business and knows

I recommend that you read the materials about what you need to draw up an effective business plan and presentation, then imagine that you have been kicked off once, then read the previous article and analyze in detail everything that you have and correct any errors before how to go to a living investor for an appointment.

One of the reasons investors work on the recommendation is that most startups come to the presentation unprepared . Therefore, your advantage should be to make a good first impression with the readiness of your project. And for this, you need to think everything over very well and do a lot of work to get a masterpiece presentation as a result.

Based on this, the best you can show isworking product . If the product is not possible without funding - beta, or prototype. A website that works, but is not advertised, or a prototype software with partial functionality, or a demo version, or something else. Even better if you come with a “trailer” of customers, or some evidence of interest from Internet users - depending on what is suitable for your startup.

With a working product that can serve as the foundation for a funded startup, you have a much better chance of getting funds. As I wrote in a previous article: if in doubt, modify the product. If you do not have a product and customers, then make as rich a presentation as possible: sketches, prototypes, market analysis, customer research (interviews with real people), etc.

A long detailed business plan is not needed . Either the investor will be interested in a startup with a good presentation of 20 pages in Powerpoint, or he will not be interested at all. Conclusion: if an investor needs a long detailed business plan, it is most likely the wrong investor.

Get ready, get ready and get ready again . Explore the investor market, find those who work in your category. It is completely useless to offer an online startup to an investor in the healthcare sector, and vice versa. Single investors usually engage in specific startups, and the key is to find them.

How to make contacts? In my opinion, the best way is to work in a startup that has received investments, show yourself on the good side, get a promotion, and all this time make friends. If you are not accepted into a startup - work for a large, reputable company, such as Google or Apple, gain experience, then go to a working startup, show yourself on the good side, get a promotion, and all the while make acquaintances. If you are not hired by a large reputable company, get a higher education at some decent university, where big reputable companies are constantly looking for employees — well, then you understand.

It sounds like a joke, but I'm absolutely serious - many entrepreneurs I know have taken this path. But there are other ways.

If you are still in school, try to get to a large institute / university with good connections like Stanford or MIT. Stanford alumni are known for companies like Sun, Cisco, Yahoo, and Google, so Silicon Valley recruiters constantly scour Stanford for new Jerry Yangs or Larry Page. At the University of Illinois, where I studied, only cows constantly scour.

You can try to participate in the Y Combinator program . This program, created by Paul Graham, finances startups at the dawn of their development (the program runs in Silicon Valley and Boston), and then presents the best of them to investors. Great idea and great opportunity.

Read investor blogs- everything, and very carefully. The investor, a leading blog, provides excellent services to startups, giving them a lot of valuable information, and providing themselves for contacts through emails, comments and even podcasts with presentations. Each investor loves to communicate in his own way, but you read as many blogs as possible, and establish contacts with as many of them as possible. Look for a list of such bloggers on my site , and on their sites too. At the very least, you can get a good idea of ​​exactly what and what companies the investor is interested in. And at best, an investor can encourage readers to send him messages.

Fred wilsonfrom Union Square Ventures even encouraged entrepreneurs to record podcasts and transfer them to him so that he could listen to them through his iPod. I don’t know if he is doing this now, but you should read his blog and find out.

Some investors enjoy using modern means of communication, such as Facebook and Twitter. And it often turns out that when an investor tries a new way of communication, he is more open to communication. Therefore, as soon as some kind of new thing appears for communication, immediately look for investors there and communicate with them. In the framework of decency, of course.

It's also a good idea to blog.- about your project, about interesting things that happen to them, about their worldviews on this topic. This helps you develop communication skills, and when an investor finds out about you, he will be able to read your blog and get an idea about you and your project. This is another way to leave a good first impression.

For programmers, I recommend participating in an open source project. This is a great opportunity not only to participate in the creation of the necessary software, but also to build your reputation, which is not related to your current work. It’s very cool to be able to write to the investor, “I’m the creator of the open-source program X, which is used by 50,000 people, and I want to tell you about my startup.”

By doing this for a long time, you will get the opportunity to chat with several investors, and this can lead to discussions about financing or meeting other investors. Personally, I hope that the next Google will appear after the email with the presentation that the entrepreneur sent to the investor after reading his blog. Then all the investors on the planet will immediately start blogging.

If all this does not fit, then in order of decreasing preference, the following options are possible:

- business angels;
- self-financing for funds received from first clients or consultations;
- work on a startup in his spare time from the main work;
- loans.

Business angels are those who invest small amounts at the start of a startup, often before large investors appear. This can be a great way to start because good angels are familiar with good investors, and they can introduce you because good investments are good for you and the angels. Here, of course, the question arises of how to get investments from angels - but this is a completely different story.

Three other options I would not advise you. They have serious problems. But there were successful startups that took advantage of them, so you can’t mention them.

Also read this article on the Sequoia Capital website. This is one of the best venture capital firms in the world, they funded, among others, Oracle, Apple, Yahoo, and Google.

In the following articles, we will leave the issue of financing and concentrate on how to make a startup successful.

Part 4

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