Raising Money On AngelList: 21 Tips From Two Active Angels

About This Blog

This site is for  entrepreneurs.  A full RSS feed to the articles is available.  Please subscribe so we know you're out there.  If you need more convincing, learn more about the site.

Community

Google+

And, you can find me on Google+

Connect on Twitter

Get Articles By Email

Your email:

Google

Blog Navigator

Navigate By : 
[Article Index]

Questions about startups?

If you have questions about startups, you can find me and a bunch of other startup fanatics on the free Q&A website:

Answers.OnStartups.com

Subscribe to Updates

 

30,000+ subscribers can't all be wrong.  Subscribe to the OnStartups.com RSS feed.

Follow me on LinkedIn

OnStartups

Current Articles | RSS Feed RSS Feed

Raising Money On AngelList: 21 Tips From Two Active Angels

 

The following is the result of a collaboration between Ty Danco and Dharmesh Shah. Ty is an angel investor and startup mentor (you should be reading his blog). Dharmesh is founder and CTO of HubSpot, runs OnStartups.com and is an advisor to AngelList. [Note: All the smart useful stuff in the article is Ty, all the feeble attempts at humor are Dharmesh]

AngelList (AL) connects promising startups to a sterling network of early stage investors. AL has been getting a blizzard of well-deserved press of late after Venture Hacks released the networks 18 month statistics. But not a lot has been written for startups on how to best use the service. Here's our take in small, bite-sized pieces.good egg

1. The Fundamentals Still Apply As Time Goes By

AngelList may be a game-changer, but most of the same rules are still in place. Angels still look for the same elements in a startup as always: a strong team; meaningful milestones; a differentiated product in a big potential market; capital efficiency and so on. Therefore, the excellent advice listed in OnStartups, Venture Hacks, AVC, Ask the VC, Both Sides of the Table, and the like still applies. What for now is unique to AngelList is the speed and efficiency with which they can harness an all-star network of active investors in front of a breathtakingly large, qualified stream of startups. Whereas B.A.L. (Before AngelList) you could mess up a presentation in front of an investor group and not worry too much (there's always another potential investor around the corner if you look,) putting in a half-baked effort on AngelList is a cardinal sin. First impressions count, so make sure you crush it!

2. There's a great primer already

"How to Hustle with AngelList", by Brendan Baker is the definitive how-to guide discussing how to make it onto AngelList, how to set up profiles, etc. It covers all the basic mechanics and throws in a few proven tactics. If you have time to read only one article on AngeList, that's the one.

3. Talk to People Who Have Had Success

With over 400 companies having raised money on AngelList in its first 18 months, this is easy. As Alex Cook of Rentabilities mentioned in this Boston Globe article, there's a learning curve involved, so make a point of talking to entrepreneurs who have previously used the site before you list. Who has been successful? Here are a few notable companies.

Quora has many dozens of questions on AngelList, as does OnStartups Answers and of course Venture Hacks, whose founders run AL. By the way, there is a high overlap between people who are active on Quora and the community of investors you want to attract.

4. Get a champion first

The first anchor investor is the hardest. Always has been, always will be. And for Angel List, it is important enough to be ranked #1 in Nathan Beckfords excellent post entitled Hacking Angel List. For instance, Rentabilities already was a winner of the 2010 MassChallenge, but they waited until they had won over Dharmesh as an investor/endorser before tackling Angel List. Nivi of AngelList will argue that it is not necessary to have a champion if one has a great team and traction, and he has several examples of this. But we respectfully disagree: just as your odds of success drop dramatically if you pitch to an angel group without already having a champion in the room, the same applies here. So don't launch prematurely. And, even if Nivi is right that you don't absolutely need a champion if you have enough traction and an awesome team, it can't hurt.

5. Don't wait too late in your rounds fund raise before you apply

Localmind is a company I invested in which had no trouble raising money, but they wanted to attract a few more angels with domain expertise and geographical diversity. Within days of listing on AngelList, they had identified 8 strong, deep-pocketed angels, all of whom could have strengthened the company. With only limited $dollars left in the round space left, they could only squeeze in 2. When I asked Lenny Rachitsky, the CEO about what he learned from the experience, he said he had wished he had started working with AngelList earlier.

Whens the best time? Others may disagree, but Id suggest getting your application in when your round is anywhere from 20% to 40% subscribed. With that head start, it should attract interest pretty quickly. If you get oversubscribed, thats a good problem to have.

6. Before launching on AL, mentally assemble your dream team of investors

If you cant dream it, you cant build it. Your ideal team may be 100% angels, you may wish to have some local micro-VC or it might be as simple as a pair of massive VCs and an industry insider. But rRegardless, the majority of investors should already have complementary holdings in your sector.

More importantly, assess what elements you need besides money, because the AL membership has their tentacles everywhere. Knowing what you need but dont yet have not only helps you get it, but it also sends a strong positive signal to angels that you understand your needs. Approaching investors who clearly dont invest in your sector is the telltale sign of a rookie.

7. Research the network, and target your angels

You can use filters to look for angels who have invested in your sector or in complementary companies. I invested in HealthRally because its CEO did just that and found me. While I don't always monitor the AngelList feed (just as you might not stay current with Facebook traffic or a Twitter stream), I got a very targeted letter from Zach Lynch, the CEO of HealthRally. He noted my investment in GreenGoose and other health tech firms, and then made the connection that one of the other GreenGoose co-investors, Esther Dyson, also had committed to HealthRally. Besides showing excellent progress to date on a shoestring budget, Zach demonstrated to me the type of targeted, "rifle not shotgun" marketing discipline that his company will need to land a few strategic partners and megaclients.

8. Get Personalized Intros

Ask all of the angels who are backing you to endorse you to their own followers. If they are not already on AngelList, ask them to sign on and do so. Helping syndicate a round is what angels do, and AL has found that personalized intros from an AL investor get opened far more than a generic profile. This is the original angel skill, (after all, Howard Lindzon calls his fund "Social Leverage" for a reason,) but now it's so simple it can be done to all of an investors AL followers with one mouse click. Using the Rentabilities example, Dharmesh has many people watching his recommendations, and when he gave the company a thumbs up, more than 100 people followed the company, and over 30 asked for introductions. Clout (and Klout) matters.

9. Spend a few calories (and maybe dollars) a good name.

For many of you, AngelList might be one of the biggest initial exposures your startup will have. And, theyre some very powerful people. Its worth spending a little bit of time and energy getting it right (it gets harder to change it later). This is particularly true if you have a consumer (B2C) startup. I guarantee you that folks like Jason Calacanis care a lot about your brand and domain name. I do too. Here are some quick tips on naming a startup. Dont obsess over the name, but its worth investing a little time on this.

10. A video is worth 1,000 slides

No one can tell your story better than you. Make a short killer, video and include it in your profile. I made my first AngelList investment in UpNext after I saw the link to the companys interview on Untethered.tv. If you can, include one. Especially if it can showcase a quick demo.

11. Get your website right first

This should be obvious. Even if you just have a well-done landing page with a good design and a good URL name, it's a plus. Every angel is going to click through, and most won't go further if your website sucks.

12. Remember Inbound Marketing, baby!

Yeah, I know that going through AngelList qualifies as traditional outbound marketing, but sophisticated angels will check on their own to assess your knowledge of the basics. Do you show up in Google search results at all? Do you have mentions in social media? Do you own the company name on twitter and have you tweeted recently? Do you have followers? Do you have an engaging blog that tells your story and has a point of view? Have you checked out your traffic graph on Compete.com and made sure its pointing in the right direction? Face it: AngelList exists because of the Net. You may be able to get away with a sloppy web presence and strategy at a traditional angel group presentation, but that won't fly with the AngelList crowd.

13. Advisors are huge.

Social proof is hugely important in Angel List. I invested through AngelList in Saygent. Why? Not only did I like the schtick, I really liked that they had sought out and won Sid Viswanathan (co-founder of CardMunch and a master at using Mechanical Turk) as an advisor. Currently Im doing due diligence on a company which landed Jason Calacanis as an advisor. Having an advisor like Jason, who is an indefatigable promoter of his portfolio companies (via his interests in the Launch Conference, Open Angel Forum, and This Week in Startups, he sees a TON of companies), shows instant credibility and is a harbinger of future success.

14. Clearly list your price

If you haven't figured out what you want to raise at what valuation, do so now. If you're going to raise convertible debt (although I'm personally not a fan,) say what your cap is going to be. There's no upside in wasting both your time and that of the investor if you're asking a price where the investor is unwilling to go. If you're unsure and you haven't already figured this out with the anchor investor, the AL team can help point to some comparables. Speaking of comparables, if this is your first startup and you're a rookie, try not to over-reach with respect to terms. Just because everyone you talked to so far thinks you are brilliant and your idea is spectacular, don't push for a really high cap on your convertible note. Going from a $4 million cap to a $8 million cap might seem like a 100% increase in valuation, but the math doesn't work that way. Such a move might decrease the number of investors interested in your deal.

15. Use a standard termsheet

Resist the temptation to introduce clever, non-standard terms into the termsheet — even if you think you can get away with them. Two reasons for this: 1) You'll come off as naive or greedy. 2) Even if you somehow manage to sneak these in now, you'll have issues when you need to do your next round. Save your creativity for your product and keep your termsheet clean. If you need an example, you could do worse than the standard financing docs that Y Combinator provides. But, there are others. Ask around.

16. Be ready to pitch on short notice via videoconferencing

This could be via Skype, Gmail video chat, Go2meeting, etc. But you should have perfected all of the logistics and have accounts and slide share materials ready on quick notice. With investors no longer being local, you need to find ways to let them see you and your pitch. Insider secret: Some investors have found a strong pattern that suggests entrepreneurs that respond to late night emails quickly have an edge over those that don't. Lets save the “but work-life balance is important” debate for another article. Meanwhile, you better be working your butt off.

16. Think one round ahead.

Listing on AL now will give you a giant head-start on your next round, as investors who aren't ready for this round may step up for next round. As Mark Suster says, VCs invest in lines, not in dots. Establish the connection for the next round now, and rethink if there are others you may wish to add to your initial target list.

17. Use the AngelList team

Who is more wired in than Nivi and Naval? Who's seen more pitches and knows what works? Once they accept you, get their advice and give it great weight.

18. Know how investors will use AngelList

Here's a similar list of techniques investors use that work especially well via AngelList.

19. Get your backers to register on AL

You want them to comment on you and endorse you. Any angel should volunteer to do this for the good of the company, and they get to build their brand too.

20. Don't game the system

You're smart and love to hustle. We get that. You should do all manner of hustling to make sure your startup gets the visibility it needs. But, don't abuse the community or take advantage of it. It's a shared resource. Just like you, there are many other entrepreneurs looking to connect with great investors on AngelList. Many of them are just as deserving. It's fine to stand-out, but make sure you are adding value to the group, not taking away from it.

21. The best thing you can do is get traction

You should invest time in your fundraising process — it's important. The basics don't take that long. But, don't get too obsessed. Your primary goal is to build a business not build this phenomenal profile and network on Angel List. The most helpful thing you can do to get the right angels on board is to make measurable, meaningful progress with your business.

I'm sure a few of you that are already in the Angel List process are likely reading this.  What other tips would you like to share with the community?  What questions do you have that haven't quite been answered yet?  

Posted by Dharmesh Shah on Wed, Aug 10, 2011

COMMENTS

Great post Ty and Dharmesh! 
 
AngelList is one of the most powerful tools available to early stage entrepreneurs. We can't thank their team enough for what they have built.  
 
Entrepreneurs: I plan to put together a post on how to hack AngelList effectively. If you want some quick advice, feel free to reach out to me in the meantime. 
 
--Alex

posted on Wednesday, August 10, 2011 at 12:06 PM by Alex Cook


Does anyone know where a list of VC's can be found? I own ExecutiveGolfClubs.com which is simply an undeveloped domain name however I feel it represents significant opportunity in it's market. I just need someone to get behind it. I have it penciled for Brick and Mortar but am open to simple internet. The downside is that large golf suppliers like Calloway require Brick and Mortar. Anyway,,,if anyone knows of VC's who are open to 'Golf' therein lies opportunity.

posted on Wednesday, August 10, 2011 at 12:19 PM by Michael Curtis


 
Dharmesh,  
 
This post continues your tradition of excellent posts!  
 
Title for #1 "The Fundamentals Still Apply As Time Goes By" does not bring out the main takeaway "putting in a half-baked effort on AngelList is a cardinal sin" as a key difference 
 
Binu www.whittleidea.com)

posted on Wednesday, August 10, 2011 at 12:34 PM by Binu Johnson


In #1 you said that B.A.L. you could find second chances, but now you have to crush it. Wish I knew this before I listed TellMyCircle, or I'd have waited. Think it's "too late" if you listed a little too early??

posted on Wednesday, August 10, 2011 at 12:38 PM by Peter Alberti


Thanks for great post. This should help us present well on AL.

posted on Wednesday, August 10, 2011 at 12:40 PM by Sumu


Ty, Dharmesh, thank you for a great article. I was really well written and hit on all the important points. 
 
@Alex - PLEASE if you get the time it would be great if you could put a post together with your experience. It will illuminate a reach out from me later if you do ;)

posted on Wednesday, August 10, 2011 at 12:42 PM by Mogens Nielsen


22. You must diligence your investors. AngelList takes no responsibility if your investors end up destroying your company, your life, and your family. 
 
23. AngelList is always changing, so keep in mind that any advice, including ours, gets stale. 
 
P.S. This is awesome.

posted on Wednesday, August 10, 2011 at 12:46 PM by Nivi


Great article. Personally not even near looking for outside investors however rings quite true from what the universities are teaching on financing.  
 
On the subject of mentors, any suggestions on where to get those stepping stones for mentors for the c list folk that are still developing their ideas?

posted on Wednesday, August 10, 2011 at 12:56 PM by John Bogrand


This is a *great* addition to the growing body of support info around AngelList.  
 
Nivi's right above - AngelList is a bit of a moving target, so beware of taking specific info too literally (including mine). However, the above examples are definitely directionally right. 
 
Thanks again, 
B

posted on Wednesday, August 10, 2011 at 1:17 PM by Brendan


Hi, I just wrote an article about how the Internet is changing the game for start-up funding, including AngelList AND Kickstarter.... a company that pairs donors with artists - in what I call "ultra-modern art patronage". Great article here too!

posted on Wednesday, August 10, 2011 at 1:33 PM by Mary Smucker-Priest


whoops...just had an enormous lunch and my brain isn't working as fast as it should be. Here's the link: 
Internet Drives Start Up Capital Connections. Thanks!  

posted on Wednesday, August 10, 2011 at 1:36 PM by Mary Smucker-Priest


Thanks Dharmesh, great stuff as always.

posted on Wednesday, August 10, 2011 at 1:43 PM by John Best


This was a very helpful articel. I really appreciate the advice as my partner and i will be looking for another round of investment within a few months, so this is a big help. Thank you!

posted on Wednesday, August 10, 2011 at 2:01 PM by Don Tarinelli


This is awesome stuff, guys! And 1000x thanks for the shout out in point #4 about my "Hacking AngelList" blog post.  
 
But I'm surprised you put "Traction" last on the list-- in my view, traction (and it's corollary, momentum) are what is used by the vast majority of angels on AL to filter through many high-quality, but similarly-themed startups.  
 
There is a lot of noise on AL and startups with traction are the ones that are able to rise above the noise. Plus, traction cures (almost) all ills...a sub-par pitch, a gap on the team, etc.  
 
Anyway awesome stuff! Going to tweet the hell out of it now. :) Nathan

posted on Wednesday, August 10, 2011 at 2:02 PM by Nathan Beckord


Thanks for the enlightenment and info

posted on Wednesday, August 10, 2011 at 3:19 PM by chris


its always great reading on of your post,I learn something everytime.

posted on Wednesday, August 10, 2011 at 5:58 PM by jose@iblogsowhat.com


File for future ref.

posted on Wednesday, August 10, 2011 at 6:27 PM by Luke


Awesome article! Ty Danco.... I think you should blog atwww.disruptiveangel.com because you are disruptive. 
 
Probably the hardest working Angel I know of. 
 
Thanks for being Present and Giving. 
 
-Marsh

posted on Wednesday, August 10, 2011 at 10:35 PM by Marsh Sutherland


Hi, my company is the full package, Hi-tech, futuristic, marketing, advertising, sales, celebrities, and progress. You can get an idea by going to my website, I'm the number one pick for confidence in R.O.I. :) Look forward to hearing from all qualified investors.  
 
Good Day

posted on Thursday, August 11, 2011 at 1:21 AM by Nathan Hill


Marvelous tricks you’ve provided on this site. It has been really

posted on Thursday, August 11, 2011 at 4:23 AM by North Face Sale


Thanks Dharmesh and Ty for the great article. Very illuminating. 
 
Caroline

posted on Thursday, August 11, 2011 at 4:44 AM by Caroline Purdon


I appreciate a lot your spirit of sharing. I want to share as well and ready to do. I am appealing to all to help us in a win-win situation of setting up social entrepreneurial businesses in Ghana including microcredit. I can assure all you would never regret it. 
Thanks , Christoph 

posted on Thursday, August 11, 2011 at 4:46 AM by Christoph Damalie


this is a really sweet list. My favorite point was #1 - you can't replace the basics.

posted on Thursday, August 11, 2011 at 4:39 PM by Rishi


This is one of the most wonderful straight to the point articles on raising fund.  
 
You have said it all. Keep it coming.

posted on Thursday, August 11, 2011 at 8:35 PM by Henry


Loved the article. Excellent advice with a simple touch

posted on Friday, August 12, 2011 at 5:41 AM by Steve Dantas


I am looking for an angel investor for my current project and one on the pipeline. Will require Rs 5 crore to 10 crore as investment. Can discuss further. 
 
 
 
Kalyan 
 
Delhi

posted on Friday, August 12, 2011 at 8:28 AM by Kalyan


Great post Dharmesh ! 
 

posted on Friday, August 12, 2011 at 3:28 PM by Himanshu


Great articles in this site and this blog of the same name...I used his tips and the stuff I learned from this free ebook http://mrzip.biz/ed and am pretty excited about the results. If you want to quit your day job and bridge that gap from middle class to upper class or you just want some side money for toys then this site and the tips from this free ebook are right up your alley.

posted on Friday, August 12, 2011 at 9:02 PM by Steve


Hey - thanks for the mention of UNTETHER.tv in step 10 Ty! Glad you connected with Danny and UpNext.

posted on Saturday, August 13, 2011 at 7:33 AM by Rob Woodbridge


This is great infomration. I can't wait to get started. Now that my trademark has been confirmed, I feel good about moving forward.

posted on Sunday, August 14, 2011 at 4:40 PM by Roland


I think that a starup should never focus on raising money.Startups should focus on making their product better.They should raise money only for scaling.

posted on Monday, August 15, 2011 at 1:59 AM by komal yadav


Angels are the answer for startups today. However, let's remember that good ideas are plentiful, it's all about execution.

posted on Monday, August 15, 2011 at 7:22 AM by Kip Marlow


i have worked for 20 years doing special events and leading money to small businesses now i need a loan what can i do? income was $1,200.00 banks credit limit was $300k with credit card limits at $50,000. now none need to resture  
 
and capital to restart,can you help me.lawrence  
 

posted on Wednesday, August 17, 2011 at 7:22 PM by lawrence Hayes


Great article Dharmesh.. as with like every social network and most sites; you only get out what you put into it. 
 
Folks want things just handed to them..

posted on Wednesday, August 17, 2011 at 11:34 PM by Tiffany


This really is this kind of a actual resource that you are providing and also you exude it away seeking absolutely free.

posted on Friday, September 02, 2011 at 9:16 PM by Canada Goose Coats


It seems that you've put a good amount of effort into your article and I want a lot more of these on the World Wide Web these days. I truly got a kick out of your post. I do not have a bunch to to say in reply, I only wanted to register to say fantastic work. 

posted on Wednesday, October 05, 2011 at 9:21 PM by Pandora Jewelry Sale


Comments have been closed for this article.