You wake up in the middle of the night with an idea that you’re sure is going to make you a Brink’s truck full of money. Pictures of being on the cover of Inc., Forbes and Fast Company flash through your mind. You can imagine the regional managing partner of Ernst & Young presenting you with the Inc. Entrepreneur of the Year Award and everyone is taking pictures.
Unfortunately, your no-risk high-reward idea needs some fairy dust in the form of money. Maybe a few hundred thousand, but no more than $1 million. You’ll put together that hockey stick spread sheet and checkbooks will come at you from all angles.
Before you start ordering the company jet and Uber black cars to drive you around, you’re going to need some angels to provide the pixie dust to make your dream a reality. The odds aren’t good, 1 out of 72, according to Southern California’s Tech Coast Angels.
But if you want to succeed, follow these 9 tips:
- No Government and No Schools: Investors, unless they worked in this field, hate government deals because the margins are small, and the wait times to get paid are huge.
- Recruit Smart: No one wants to invest in someone who can’t attract the best and brightest. I’ve worked with entrepreneurs who needed to have their egos stroked and feel like they’re the smartest people in the room. That doesn’t help anything. Instead, an entrepreneur needs to be confident enough to seek out the smartest people and get them on their team.
- Startup Sales Pros: Investors want to know that you’ve hired quality, experienced startup sales professionals — people with experience in selling startups with no reputation. All too often CEO’s of startups think that hiring sales people from name-brand companies will comfort investors. Any investor who has run a startup knows that Bloomberg, SAP, Johnson & Johnson products sell themselves. The key is finding a salesperson who’s sold something that no one has ever heard of. That’s the experience investors are looking for.
- Marketing on the Cheap: If you don’t have to run ads in magazines and buy television spots that reduces the cost, your cash will last longer. At the end of the day, every successful product sells itself through word of mouth. Think about your favorite restaurants, movies you watch, apps you use, hotels you stay at and service providers you hire. You may not realize it, but word of mouth is probably the biggest determiner for whether customers engage with a product.
- Go With a Big Growing Market: Investors love growing markets with lots of buyers. If you were starting a private military contracting term firm after Sept. 11, you were printing money because the market was vast and the need was enormous. Conversely today, no one is raising money for a military contracting firm because the market has shrunk and continues to shrink.
- Easily Executable: The more moving parts, the easier it is for something to go wrong. If you come up with an electronic product and each part has to be customized by a different manufacturer, then assembled by another group, then channel partners need to be convinced to buy the product — that’s a lot of work. I’m already exhausted.
- Why Your Product/Service Stands Out: Investors want to know you’ve surveyed and talked to potential buyers to find out if they are interested in your product/service. Is what you do unique enough, better value for money, lower cost or make a difference in their own sales, operations or life? If you’re just another crowdfunding platform with nothing unique — as a member of the Soprano’s crew would say, “forget about it.”
- How Big Is Your Moat?: Having a patentable product or strategic connections that are defensible are critical to gaining traction and holding off the opposition. Not having something that puts space between you and the competition won’t give confidence to investors that their money is well spent.
- Where’s Your Money? If you’re raising money outside of Silicon Valley, you are going to be expected to put in your own money. It’s rare that investors will accept that you don’t have money to invest, unless you’re just out of college.
Marc Kramer, president of Kramer Communications and executive director of the Private Investors, is a Philadelphia-based serial entrepreneur, author of six books and an adjunct college professor.