I had a great time at bizcamp Dublin this Saturday (many thank to the team for organizing it). It was fantastic being around so many enthusiastic people intent on building new and exciting businesses. It is only through the persistence of people like this that we are going to build our way out of this recession.
During the day I talked to about a dozen aspiring young entrepreneurs about how to get funding.
This was obviously a popular theme as I was also on the funding panel (Niall Harbison, Campbell Scott, Ciaran Crean, Keith Bohana and EI) which had a great attendance.
Given the nature of the panel we didn’t have a lot of time to present so I thought I would write up my thoughts.
If you are looking for any type of sizable investment from an Angel it has to be from somebody that trusts you. The reason is that while Angels are perfectly willing to invest in a risky idea or business they don’t want to invest in somebody that might just piss their money away. They need to have the confidence that at a minimum you will use heir money sensibly. After all a good angel is investing in you rather than the idea, this is because ideas are cheap and the value is in the implementation.
In my experience this trust can be achieved in four ways:
- You know the person.
- You have a proven track record.
- You have something tangible to demonstrate that proves you can actually implement your ideas.
- Somebody that trusts you and knows the angel introduces and vouches for you.
Many of the people I met just want me to introduce them to my angels, hoping that they will be able to convert a imply introduction into an investment. The problem with the line of thinking is that I can’t vouch for them. The conversation would go something like this:
Me: I met this guy, John, and he has a great idea - I think you should meet with him
Angel: What is he like to work with?
Me: I don’t know I just met him down the pub, but he seems like a good guy
Angel: What’s his track record?
Me: Well he’s a young guy, not long enough in the tooth for much of a track record
Angel: Can I see his product
Me: He needs funding before he can build a product
— End of conversation —
When I went out looking for funding for RevaHealth.com I went to the person who knew my abilities best … my boss. I had been working for him for the previous 7 years and he knew exactly what I could and couldn’t do. I also knew that if I could get him on board I could get him to introduce me to other angels that he knew.
The problem for most young entrepreneurs is that they are too young to have much of a track record. They are also too young for their network to include the kind of person likely to be in a position to be an angel investor. This undamentally means that they have to have something tangible to show that they can get an implementation up and running.
A couple of years ago this used to mean a prototype. With the worsening economic climate, however, it isn’t enough simply to show that you can get a technical implementation up and running. You also have to be able to show that you can execute at sales and/or marketing. What this normally means is that you can get some paying customers and deliver value to those customers.
This is a tough ask, but bear in mind that when you are out looking for investment that you are asking someone to trust you with their money. It is not unreasonable for them to demand evidence that you will use their money wisely.
So if you’ve a great idea and you don’t have the track record or network to get angel funding then build your product and get some customers. If you can’t do the development find some developer at the next bizcamp who can build it and give them enough equity to get them bought in that they will live on beans and toast. Get every bit of help you can from EI and the various programs that are out there such as CORD.
When you develop your application, remember that you are not trying to build a finished, polished application. Do the absolute minimum you need to sign up a few customers. Once you’ve got a few people paying you everything becomes much easier.
Any questions then follow me on twitter @revahealth
