Strategic Connections Can Help a Startup More than Big Checks
As an early stage founder, you're likely already thinking about the next big milestone: a Series A investment, which will provide the capital you need to scale, as well as institutional validation for you, your idea and your team. Getting there won't be easy. In fact, only 20 percent of companies that raise a seed round ever go on to raise a Series A, according to an analysis of more than 35,000 startups by Radicle Labs.
"Strategic help from an angel is ... the most valuable asset any early stage company can get"
In fact, strategic help from an angel is, in my opinion, the most valuable asset any early stage company can get. And it's worth accepting a smaller check or less generous terms from someone who can introduce you to potential customers, suggest ways to improve your product or provide access to a network of future investors.
These contacts likely will have the biggest impact on your success and, eventually, your ability to pitch VCs successfully. Focusing your fundraising on well-connected angels now not only will give your business a head start, but also will save you from having to look for these connections later—perhaps after you've already given away some of your company to investors who aren't as helpful.
A strategy for raising
Figure that you're going to burn through at least $500,000 before you raise a Series A. And, yes, getting to that amount will be daunting enough without the added challenge of limiting your potential investor pool to people whose experience aligns with your business plan. But that's startup life. Hopefully, this isn't the first time you've heard it's going to be a lot of work.
Luckily, there's a strategy. It's no guarantee of success, but it's a way we think maximizes your chances of getting the support you'll need.
1. Master your LinkedIn-Fu
2. Start with friendlies
3. Focus on feedback
Everyone knows you need money. But few investors will ever cut a check based on an initial meeting alone.
4. Plan on drinking a lot of coffee
5. Get plugged in
You'll want fellow founders in your network. Don't obsess over someone stealing your idea, as there's so much more that goes into building a successful startup. The advice, connections and ability to commiserate that can come from a close relationship with another founder at a similar stage more than outweigh any risks.
We often talk about the difference between smart money and dumb money. In both cases, you're getting someone who is banking on your success. But only the smart-money investor has the experience and connections to help you get there.
You're going to want a partner who will put in time on your behalf, going over product specs, arranging meetings with potential customers and helping you find more investors. In short, you want value. It'll be a lot of work. But from what we've seen, it's the best investment you can make.
For more helpful tips for early stage companies, check out Startup Insights, full of stories from the front lines of entrepreneurship.