Ask HN: How to find investors? | Hacker News Reader

Ask HN: How to find investors?

10 pointsZera10 comments

I'm currently a third year Computer Science student, along with my two other founders. All three of us are programmers with little to no business experience. In the past year, we've put together a little startup and have created our first product, a mobile app. We would currently like investors, but we're very unsure of how to go about this. Our first thought was to try AngelList, and while shooting for a low goal, we have yet to see any activity. Granted, our app is currently in the beta testing phase at the moment. My question is, how do we find investors? Should we contact people directly? What are some tips?

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There's only one path to investment that doesn't involve being born on 3rd base or getting unbelievably lucky. It's 3 things:

1. Grow. Grow convincingly on your own, without investment. Be confident in your product, know where users come from, in fact know everything about your product and your market (everything), and have a graph that is up and to the right.

2. Network. Go to meetups, clubs, professors, friends, family friends, etc and leverage the fact that you have a "growing" app to make those people EXCITED to introduce you to people with money.

3. When you meet investors, don't go for the hard sell just let them ask questions. Keep updating them as growth milestones (even if it's just every 2 weeks how much you grew) are achieved. Tell them you're raising money early on but that you're not sure when - pick the right moment to say "we're raising" when growth AND # of investors you've met is at peak.

If you're like me when I first started out, you're hearing this and thinking "ok, anybody got any easier ideas? That sounds basically impossible I'm kind of looking for a silver bullet here - I think I deserve it I mean everyone is getting seed money and we're pretty good!".

There's no silver bullet. I'm telling you straight up it doesn't exist, especially if you haven't built something successful before. You have to grind, you have to grow, and you have to network. And it takes time. If you're not ready for that, consider your app a side project and move on.

It sounds like it's far too early and you would blow your chances with investors, and probably even angels. If you could manage to take on experienced business co-founder, that might signal some validation that the venture might have legs. But you're not going to get very far in the jungle of business on a wing and a prayer alone, you need someone and/or advisors with experience. If you could convince someone that has exited before, that would add to overall perception and validation. If investment were absolutely required for a venture to survive, it often comes across as desperation and a red flag to investors that makes them wary of the founders' ability to manage money and contain costs... ignorance is no excuse when it comes to money. That said, it is imperative for founders to track and minimize costs to demonstrate penny- and pound-wisdom to potential investors. Demonstrating religious accounting hygiene may mean the difference between investment and non-investment (see also: Felix Dennis).

I hope your venture is successful and be sure to keep the team together and pivot into something else if the current thing doesn't work out... good teams are hard to come by. (The more valuable thing than success is learning what mistakes were made and what move/s would have been better.)

It doesn't matter if you would like investors. You need to make investors want to own a chunk of your business so much that they'll give you a good amount of cash despite the dismal odds of failure for very early stage startups, such as yours that you say is in beta. To do that you have to paint a picture of how big this concept could get and how roughly you intend to get there. Assuming you have your pitch well formulated, then as for actual logistics of how to contact investors, typically having trusted people vouch for you is a good first step. You can contact people directly too. Do so succinctly and with an eye to why you think they in particular would be interested. Friends and family are also a typical source of very initial capital. Since at the earliest stage all anyone has to go on is how competent you are, and to some extent how compelling the concept is. People who know you are much better judges of how competent you are than are total strangers. Other startup founders you may know may also be able to provide introductions to angel investors. Prepare for it bang your head against the wall. Raising seed capital is hard and frustrating, but as they say, it's still one of the simplest things you'll do in the life of your startup.

Why do you want investors should be your first question. Raising money means dilution and being put on a vesting schedule along with having to deal with liquidation preferences or headaches of convertible debt (see this book[1] to understand some of these terms). Second, finding investors usually takes connections. For young CS grads, easiest way would be through the university's tech commercialization office. Another would be an accelerator or incubator. Then you could reach out to mutual connections in your network to find angel investors or seed funds. Hope that helps. If you need more help feel free to contact me (my email is in my profile). Good luck!

1) http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

In our case, it was all about network. One of our co-founders is part of the fellowship program, Venture for America. Through VFA he made contacts, and those contacts have put us in touch with investors (those investors then help put you in touch with other investors).

I would start reaching out to people in your network (professors, entrepreneurs at your school, executives you may know, anyone who you may have credibility, etc). Set meetings with them, and ask who if they know anyone who many be interested in investing. It's not an easy road, but if they connect you with enough people you may land some investors.

Also, your first investor definitely plays a big role in determining your terms. Don't jump at the first person who offers you money.

The first thing you need to do is get traction. If you have traction, you will start getting inbound interest from investors.

Connect with other experienced founders relevant to your industry. Build trust, and they will introduce you to their investors.

Most investors don't respond to cold emails. Introductions from trusted people is the primary source for most investors.

I would recommend you to apply to incubators like Y Combinator and TechStars. They don't require an introduction, they will help you groom and connect you with other investors. Their alumni network is also very helpful, which can open a lot of doors for you.

I think this assumption is one of the problems that many hackers face. The media likes to present (and we like to believe) that having business experience is NOT very necessary. That's right as long as you don't have to raise money.

Even google's terms of financing required a season businessman as a CEO (Eric Schmidt).

Bootstrap or get a founder with business experience. Three CS co-founders makes it even more difficult to raise investor capital, but much easier for finding additional hires.

As an aside, you're going to want to find someone that has that business experience, and probably before you start poking your head around asking for money.

You probably need users before you can get investors.

Look at it from their perspective -- why would they take college students seriously until you can lead with "we have X000 users"?

That said, there's no harm approaching them -- try to get a sense of what would need to change before they'd be sold on investing. Even better if you can get it in writing.

You aren't asking the right question.

Why do you need investors?

Yes, it's true that many startups get handouts from investors _just because_. That's just nepotism at work. If you have to ask, then you aren't part of that, so you have to make a real case for what you would need money for. It's supposed to be an "investment", after all.

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