A colleague/friend and I are building a test automation SaaS platform. We live in the Netherlands. We work at a scale-up as lead full-stack developer and head of architecture, but the one thing we want most in life is to work on our product full-time.
How do we find investors to help build our company?
As far as identifying relevant investors, AngelList is a good place to start if you don't know anyone: https://angel.co/europe/investors
Alternatively, there are plenty of lists of early stage VCs such as this one recently posted on HN: https://news.ycombinator.com/item?id=22042111
Good luck! :)
1. build something worth investing in
2. make sure people know about it (tell your friends, don't work in a silo, etc.)
3. have the right friends (i.e. be plugged into the community, be friends with other founders, be in a place like San Francisco, etc.) and loop them in to what you're doing
4. if all of the above happens, I will likely hear about you from someone I trust
Almost all of my investments come from a trusted referral.
Also helps: join YC or something similar (few are as good, though)
It implies you only should do number one if you have bullet point number three.
Can’t speak for op, but if you decide to invest at any level it’s like a firehose with dozens, or hundreds of pitches coming at you. You may not have time to read them all let alone apply any reasonable diligence.
AI photo recognition drones that there are dozens of but we do it with a solar blockchain! Um... maybe? What are the sales? Who do you sell to? (Note: almost always pre sales)
Now imagine the smartest person you know recommends a company. They give you a 7 second hook: yes, photo sharing has been done before but these guys have a contact with the CIA because the pictures cannot be modified without giving it away etc. suddenly you’re interested because they did the work.
The things that come in from trusted recommendation are usually of a much higher quality bar, which makes it worth the effort to spend serious time investigating.
I still read (or at least skim) every pitch that comes in, even the cold email stuff. But the quality in general is just so much lower, and the pitches just not that compelling, so I rarely follow up on it.
Context and timing of the first contact is important and can make a huge difference to the level of consideration.
One option is "be in the local pool" (a Netherlands investor is probably more interested in companies she can simply visit and where she speaks the same language of the people there). Be talked about in the local startup & tech community. Talk about the actual results you're getting ("we're getting 10s of organic signups and Twilio recommends us to their customers -- without them even talking to us").
The other option is "be in the nerd community pool": if your SAAS is aimed at "metering microservices to manage service cost" (have no idea if that example is really a "thing") then make sure the founders are usefully active on the important microservices blogs, write some authoritative articles for the sites, contribute non-trivial code (even if it's something you need have have in place anyway for your solution to be useful) to some relevant GitHub repos in the area.
For all those founders out there, just keep grinding and ignore self serving VC nonsense: good businesses are a heck of a lot rarer than people with money and if you've got one they'll swarm to you like rats to a sewer and then you can pick whichever one you like or none.
If you don't want to be disappointed by the wizard, don't look behind the curtain.
VCs want you to believe this narrative because it means you start from a much weaker negotiating position and it restricts deal flow to entrenched firms.
I would imagine something like that would happen if some other prestigious firm invested previously and it shows up on crunchbase
We do have a bit of previous so it's possible people know about us from things we've done before (though to be clear it's nothing super crazy). And while we don't spend much time with VCs, if we can possibly help it, we do spend a bunch of time with other founders, many of whom are VC funded.
If you want to improve things (and there is much to improve), seeing things as they are is the best first step.
The rest is just a candid description of how the world works.
There are way more people wanting VC funding that there is VC funding.
That makes VCs need a filter. Points 2-4 describe how filtering works in real world.
We met the people who are our angels by excelling in our careers. Eg founders of companies damn sure remember their top 3 sales reps.
(And sure, being already rich or connected or going to the right school gives you a head start, but it is in no way a prerequisite. Life isn't fair, some have it easier than others.)
2 skilled devs, should be able to build a functional MVP and get some traction/paying customers. If you cant, its a signal to rethink your product?
The hassler/MBA answer - everything has a price.
You should be making 10-100 cold calls/emails to any potential seed leads. If you are not, its a signal to rethink your team?
Painful but realistic...
Is there some list somewhere of things that people might want? I can build stuff, I just have no ideas.
Also, while I would love to build a SpaceX competitor that mines asteroids, I don't have the capital to chase that. :/
And generally people don't build SpaceX competitors, unless they're already millionaires or have a MBA from Harvard and such. There's a reason Elon started with fintech.
Doing it in the wrong order (selling something, getting customers, then building a product around it) usually results in a bad thing, where you end up giving out $1 of value for $0.80.
There's a lot more details here: https://startupclass.samaltman.com/
The goal is product-market fit. Hustlers get market fit, hackers get product fit.
You should have market fit before you build the product. You need to make the calls here, but it's not brute force. Every rejection, gather some data and get it closer to what people want.
Once you figure it out, build the product. No point spending 3 months on a prototype that nobody wants to buy.
It's iterative, hustlers gather data, hackers build it, hustler gathers more data by demo-ing it.
We have been very deliberate about not courting investors yet because we want to ensure we have something people would want to actually invest in before we start the whole fundraising process.
We have gone down the route of trying to pitch the vision to investors while trying to find customers and found the whole experience to be distracting and a bit of a fools errand for first time founders.
My biggest takeaway from the experience was the growth trumps all. Investors want to invest in companies that have a very clear path to growth ($x in = $10x out) in markets that will grow into the future. They are also more enticed if it seems like their personal interactions will be the key differentiator in the success or failure of a business.
If your goal is go full-time on your product, I would recommend trying to close as many customers as you would need to ensure both you and your cofounder can cover your monthly expenses. Once you get to this point, thinking about how to raise money (and more importantly WHAT you will do with it after you have it) becomes more relevant.
First step is figuring out how much you need to raise and who the appropriate investors are. If it's tens of thousands or low hundreds of thousands of dollars, that can be from angel investors. If it's closer to a million or more, that's typically seed funds.
Once you figure out whether to target angel investors or seed funds, you can find prospective investors on AngelList, NFX Signal, etc. This selection is based on what sectors investors say they invest in, or if they've invested in companies that are similar to yours but not competitive, etc.
Once you find specific people you want to reach out to, warm intros are the most effective if you happen to know people in common. If you don't, cold emails work if you can write a good email -- but that's a numbers game. You might have to send out 30 or 40 emails to get 5 or 10 replies, but it's a start.
The main thing to keep in mind as you're fundraising is that the further along you are and the more compelling your pitch, the easier it is to get investors. And once you get commitments from the first few angel or fund investors, they will introduce you to many more prospective investors.
Longer answer is that we typically invest $1m-$1.5m when companies are raising $2m-$5m. Usually that size of round happens after a product is live in the market, but occasionally because of the founders or idea it happens earlier.
Why is everyone looking for investors? Seems to me like you are already planning to sell that thing. Don't start it then, because it will be a shitty product, built to cash in some VC money and get out of it.
Why do so little people build something fundamental from the ground up? Why not make it a side project and watch it grow?
This is the opposite of what investors want -- one of the reasons I'm a serial bootstrapper. Your attitude will either repel VCs, or they'll invest anyway and force you to make short-term decisions to maximize revenue.
I don't think the VC route would be easy for you, nor would it make you happy. Good for you! Look for info on how to bootstrap instead.
Investors are a painful crowd to deal with, very sneaky leagalease and make it easy to lose your product/company, esp if it gets any traction.
The investor third party doesn't want what you or your clients want.
You want to build a good product that people like and use.
Clients want a good product.
Investors want to increase capital.
So, while you and clients walk a path, together. The investor is there for a different reason.
And that reason can create uncomfortable situations.
You and the clients can solve problems together.
How does the investor solve their issue? Where does their increase in capital come from? Your time and your clients money.
Generally the idea is that investors accelerate growth. In most businesses, you don't even want investors. But startups are high capital and exponential profitability. Exponential means it's very slow and doesn't cover living costs for a while.
If you want half a million dollars, the fastest way to do it is to open a restaurant, do dropshipping, maybe even consulting. Many bootstrappers do so. There's a hidden cost - it sucks away all your focus. Investors are a hack around this.
You go to an investor because you don't want to spend a year consulting, and you want to take risks that don't cost you a couple years savings. The investor goes to you because you're a better deal than crypto or S&P 500.
EDIT: To clarify the point about "investment making it easier", it makes marketing easier because you can buy adverts, pay devrel people, etc. It has almost no impact on how difficult the technical work is, and it actually makes the business side harder.
How do you "earn" points? Is your project voted by the experts (ok, great) or by "other players" (well..) ?
It seems you need to reach 10,000 points which a lot.
Projects are voted on by experts and other players.
Instead, I spent that time on a building a mastermind group with people working on similar businesses and doing weekly skype chats. That has helped me a great deal. I also started doing some podcast interviews, to grow my network and put me in touch with more like-minded people.
It seemed like once again, when faced by gatekeepers, the best option forward was to try to recreate what I could of what they offered.
Out of curiosity, what % of pioneer winner community were over 35? Were you? Was I maybe over-estimating how youth-focused it was due to a few things the founder said early on?
I believe there's two people over 35, including my cofounder who happens to be the oldest Pioneer.
Looks very interesting, I would submit a project or two :D
> the one thing we want most in life is to work on our product full-time
Can you cut expenses and live off of savings for a few months? If not, can you self-fund it as a side project until it can cover your living expenses?
We are definitely considering this.
The primary reason Alchemist Camp exists is so I can later self-fund the much more ambitious startup I couldn't raise money for previously.
i.e. I live in Atlanta and here's just one random event I found at Atlanta Tech village.
https://atlantatechvillage.com/events/upcoming/golden-seeds-...
You'll need to network. Even if you don't need the money because you're bootstrapping, having advisors who have experience in your space is helpful.
https://www.codingvc.com/how-to-de-risk-a-startup
Also, talk to a lawyer immediately and make sure you have clear ownership given your employment elsewhere in the same industry.
What worked for me: build a savings account so I could take a year off work and a significantly reduced salary for years afterwards. Accept the required lifestyle compromises.
Also, you should be super clear about who your buyer is, pricing, and if you do sales or not. None of these have a wrong answer, but they all lead to different companies.
This has been sorted with HR, and I have written consent for any secondary ventures.
Sure, you probably won't grow as big as fast, but you'll remain totally in control and enjoy the freedom of working for yourselves.
Do you need investors for this? Can you bootstrap? How much revenue do you need and how quickly can you get there?
Investors, especially VCs, will want to see how you can become a billion dollar company. If that isn't what you want, then this might be the wrong path to do down.
However, there might be angel investors who agree with your vision and want to help you succeed. I don't know what the scene looks like in the Netherlands but try to go to networking events, reach out to people you find online, etc.
- Option A. Bootstrap and get to the point where you can pitch VCs by yourself
- Option B. Build a reasonable MVP, collect some metrics and join an accelerator with a good track record (obvious example is YC, but others exist); some metrics to judge them: average money raised after the program, average pre money valuation after program
- Option C. Family and friends!
- Option D. Good old social networks: you cannot imagine how many angels write "Angel investor" in their bio on Twitter / LinkedIn / etc
The startups I know who did it outside of San Francisco did it this way. They self funded or developed about a 1000hr MVP. They then took this MVP to friends and family to raise an additional 100-200k which kept them going long enough to get to a level of self sufficiency.
At this point some took capital to scale and others just continued to bootstrap.
2. Have founders who raised capital as friends. Good luck with that too!
3. Now if you have a decent looking product and a plausible story you’ll raise seed
Or, you know, getting into YC kinda takes care of all 3 points.
Also, getting insane traction on your own, like WhatsApp did, takes care of all 3 points.
From the Netherlands, it's pretty easy -- https://en.wikipedia.org/wiki/DAFT (how I currently live in the Netherlands)
...do you think there is space and/or interest for a WhatsApp clone?
At your stage, they will look at team, traction, and social proof. Generally being exceptional in 1/3 of the above criteria will give you a pass on any of the other 2.
My best advice is hustle your way to 10 users and if they're happy go raise a seed round.
..though unfortunately we run batches, which may not fit your timeline currently. Working on it..
You can spend your time building a great product while being in employment. You don't need all the features and all the bells whistling at launch. You need to do what you do, the best you can do it. Once you get the product out, learn how to market it or pay someone to do it. Get some traction, get users. Learn your users, learn from your users. Improve your product. If your product is great, you will have users and they will pay you money. One morning you'll wake up to a reality where your day job is no longer necessary. Then quit, and work full time in your OWN company, answering to no one but yourselves.
OR,
You can spend your time chasing angels, VCs, people with money in NY or people with money in SF, pay lots of cash to lawyers to get you Visas, travel, shmooze, present, become a master of Powerpoint and Excel, a lord of small talk, a craftsman of due diligence interviews. Everything except building a great product. And yes, you might get some money, but you'll wake up one morning realising your "business" is not really yours and you you are just working for a different boss now.
We're talking about Silicon Valley right?
Now at the surface this is sort of absurd. The trick is to balance your approach between the extremes. Plan to make a business that works, not one that appeals to investors so you can cash out quick. If the latter happens, that may be ok, but I believe it's really important to build something you believe in that is grounded in reality.
1. Build bridges with investors before you may need to cross them, ie. Don’t go to them when you need the money. There are a multitude of angles to use, but each angle has to come from a core place of self-less and selfish interest. Know what they want and need, know what you want and need. Each angle will also dictate how early you can / should get on their radar.
2. If you are introducing your startup to them, then around 6 months. If your angle is to aid startups in their portfolio, introduce startups to them (filter them, don’t send them any and all), or introduce family offices looking to put funds into a pool; then you can contact them a lot earlier.
3. There is another way that you can connect with investors, “get an intro to us via someone in our network”. With some investors this will be the only way.
4. Note the investor landscape, find out their investment thesis. See if their portfolio has any that could be competitors, any synergies, etc.
5. Find out the required milestones (for your current stage and the next one). This can be a difficult one to find out, for it can pin some of them down a bit too much, especially when they take so many other things into consideration. If they don’t mention it on their site, and there is nothing in Crunchbase et al, you’ll have to ask them down the line.
6. Find out more about the appropriate partner at the VC firm whom is involved in your niche. If you can’t find the appropriate partner, aim for the top, and have them point you in the right direction.
7. Acquire information about the partner and use it to formulate an email that is about them. I will typically provide a few of my thoughts on something they said in an article. They will be genuine thoughts. No brown-nosing, no compliments for the sake of it, etc, etc.
8. Find out the firms current position in the fund life-cycle: are they open to new investments, only open to portfolio synergies, only follow-on funds left, etc.
9. If the investor’s portfolio has competitors and/or synergies find out where they stand on this. Some will be open to funding competitors, some won’t. If so, find out how things are kept ethical and above board.
10. Find out what their investment approval process is; stages, duration, etc.
11. Ask them for their due diligence (DD) checklist, and work on that organically. Until then, use this one: https://seraf-investor.com/compass/article/seraf-toolbox-due...
12. DD goes both ways, so find out what you can about them, what they are like after investment.
13. Prepare a presentation deck, not a pitch deck, and present it to your team. Let your team know beforehand, and to attempt to trap and flummox you as you walk them through it.
14. Update the deck and send it to a few of the investors, and use them as data points. The reason it’s not a pitch deck is because the deck should explicitly state that you’re not looking for funding at this moment in time.
15. Send it to ones you either have good relations with, and ones that do not fund in your geographical area. There are some gems out there who will go out of their way to aid you and to give you feedback. Granted they may not know the launch country market, but they will know the startup niche. Basically work your way inwards to the set of investors you are targeting, using the feedback to hone and refine startup / deck.
16. If you don’t want to slice by geography, or want to start closer to home, slice the investors into tiers. Can be based on many things, niche relevancy, track record, connections, dumb or smart money, etc. Work your inwards from the ones you least want.
17. Once you get to the set of investors you are interested in, same thing, not looking for funding yet. If it’s a decent startup / deck you could be asked to come in for a chat, or to keep them updated as to your progress.
18. If you are going to go down the path of external funding, then investor pre-validation is vital.
19. Keep them informed as to your progress, monthly update is fine. Keep it short and to the point. Be brutally honest, so good and bad, hits and misses.
20. Even if your angle of approach is for your own startup, keep an eye out for any startups that you think they would be interested in. Same thing with investors and family offices, some of them go solo (or dedicated fund manager), some want to put their funds into a pool.
21. When you are ready, send the pitch deck.
One last thing, no one ever got funded off a pitch deck. Napkin maybe. but not a deck. It’s a foot in the door at best. Besides, founder(s) of an early stage startup, they’re investing in you.
Copied from a place I do not want to promote at the moment.
Cheers, Ace.