How to get an all-star angel investor group for your ventureMrigank Tripathi
Raising investment is hard for any startup. You need to really convince people about the business, yourself and the potential that only you can see. We raised $390,000 from some angel investors for Qustn Technologies recently, and I learnt a lot during this fund raise. Here are a few things that I did along the way that helped me get the awesome cap table that I was gunning for, and also some learnings from the exercise.
- Get ready: Get the basics right. No investor likes to waste his/her time on the fringe things. Get the company incorporated, get solid projections in place (this is really relevant only to show how far this will get you at an angel stage, not much else, as you don’t have historical data), figure out how much you need (on the higher side,and factor in mainly outflows, not inflows at this stage), understand the valuation you are gunning for (and be ready to back that up with an explanation), have your pre-investment cap table ready (and it should be a favourable one to the team)and get your thoughts about ESOP pool ready (even if you don’t implement it).
- Get your early believers in: Now that the basics are ready, get the people who will bet on you without a blink. My first believer was a very dear friend from Singapore – Salman Niaz, who is an Executive Director with Goldman Sachs and was with me at INSEAD. He was the first to commit, and that gave me a leg up to go forward.Renjith Cherickel – an entrepreneur as well as an angel investor in in FreeKall (and also a fellow INSEADer) also committed.
- Get your champion in: He will be instrumental in you getting across to many others that you want to. I have known Rajan Anandan for over six years, and share a good rapport. I believe he is the best guide in the cusp of technology and business. In October 2014, I sat him down and explained the business. He simply said “I am in for X”, and moved onto other important things like, “How do you describe your business in a line so that it is very clear to anyone”, “What space are you in – education, training, HR, assessments?”.
- Rebuild credibility during the process: The reason why anyone has agreed till this stage was because of me and the team’s credibility. At this stage, we were mainly a paper plan, and I realised that Rajan’s commitment should not be taken lightly,and that I should 're-earn' it. Once he committed, I went back and didn’t reach out to him for another three months, during which time, we actually started delivering numbers and projections that we had stated. Three months later, I went back to him and said that we were ready to get the others on. I believe that by investing time and taking on hardships to demonstrate our credibility and seriousness towards the business once again went a long way in getting the others onboard. It’s a big responsibility to take other people's money,so be serious about it.
- Get your list ready: Who do you want to get to? Make out a list. Sometimes,the people you want may seem far away, but really aren’t. It’s all limited by the effort you make and your own insecurity. Make that list, and make it in a manner that you not only get the investors and cap table to be proud of, but also a bunch of advisers who can guide you along the tough path of entrepreneurship. I made that list, and I daresay that I got to 95per cent of them!
- Use your champion for introductions: Rajan himself offered to introduce me to folks I wanted along for the ride. Ravi Gururaj and Girish Matrubootham were his introductions. I wanted Ravi by my side because I believe he has the ability to not only look at the 30,000-foot view, but also dive into gory details. His network in India and understanding of the Indian startup ecosystem is unparalleled, and his professional experience makes him a connoisseur of SaaS and global businesses. Girish, on the other hand, is one of the most successful SaaS entrepreneurs from India. He built Freshdesk from scratch and his understanding of how to sell to the global market is unparalleled. I had a couple of phone discussions with both of them, and managed to get them on board. Needless to say,a strong recommendation from other serious investors opens the door a bit wider.
- Use your key investor pool to propagate: Once Ravi committed, he introduced me to a few folks who I wanted on the cap table. Arihant Patni for the ecosystem he has created for data businesses and his exposure to the VC world. Ravi also introduced me to Suhas Bhide of IBM and a few others. Alok Mittal has been a friend for over 10 years and he committed. They all added weight to the cap table. Alok also helped me with Sharad Sharma, but finally Sharad didn’t come onboard. It is my loss as he is a great person and what he is doing with iSPIRIT is truly commendable.
- Find connections and be shameless: I reached out to Kunal Bahl and Rohit Bansal through a friend, and setup a meeting. I think Qustn is one of their first B2B investments, and it took me a couple of email exchanges post the discussions to get them onboard. Their thoughts on scale and operational excellence are great learning for me. Krishna Mehra of Capillary was also introduced to me through a friend and he also agreed to invest. Krishna is one of those guys who will pro-actively setup update calls and who genuinely wants to help. His US experience holds us in good stead.
- Reach out to people, yourself: I reached out to Pankaj Jain of 500Startups whom I knew and rekindled a discussion. It again took me a couple of phone calls to close that out. 500 Startups is our US connection,and they are our first institutional investors. They helped immensely later on, – as they really understand the ‘investment process’, and play the game really well.
So there we were. We now had a cap table to be proud of. Four very well-known entrepreneurs who could help with scale and the SaaS businesses, two of the top angel investors and very well-connected industry leaders, two people with some serious VC investment background, an institutional VC, a few great friends, some very high profile industry folks and everyone a great adviser to me. All because of four key reasons:
- I believed that what we have is worth it and was able to clearly and emphatically present our value proposition
- I decided to be selective about the people who will come on with us
- I was organised in my fund raise
- I said no to capital from just ‘capital providers’ (we had quite a few of them)
It’s a tough process, but I can tell you that there is no better feeling than being trusted by friends and industry stalwarts alike. The reward of entrepreneurship is the journey and the relationships you build. Build them well!