Since it is out in the open, I thought I’d share my thoughts on raising angel financing. First, I’d like to thank those that stepped up and believed in us. Making an angel investment takes balls because in most cases angels aren’t prepared to fund the company through subsequent rounds. This means that the company needs to take that money far enough to be self sustaining (read: profitable) or raise institutional capital. Neither is easy and angels are more likely to lose their entire investment, as opposed to VCs who typically see a wider distribution of returns. There is a reason angel rounds are sometimes called “friends, family and fools”. There is a lot of chatter about angel collusion and I’m interested to see the outcome of the FBI investigation but angels have always moved in herds. They want to see social validation before they invest because they need to be confident the company can find more money either from customers or investors. That being said having revenue also skews the valuation calculation. A big idea gets a much higher valuation than a little revenue. Revenue is important but can distract investors from the bigger vision. Lesson: sell the bigger vision! Our deck talked a lot about the customers we have and our pipeline, but didn’t contain any details on revenue. What got them excited was our vision to be the google of data; we had to convince our investors we were venture backable. We also had some angels send us to VCs to screen us before investing in us. This was great because it got us in front of folks who might be involved in future fundraising rounds. Raising money in any environment is tough, but if you can convey your passion and make a compelling case for how you take over the world, the money is out there. Go get it.
