How to raise money from angel investors Video Lecture | How to Start-Up your own Company (Video Course) - Entrepreneurship

hey everybody its Jason Calacanis the
host of this week in startups and we
constantly get asked very basic
questions here at this week in startups
how do I raise money how do I get a
co-founder how do I use angel list how
do I hire my first couple of employees
very basic questions so I talked to my
friends at WS gr and said hey Wilson
Sonsini the top law firm in the
technology space would you like to
partner with us on doing a series about
start-up basics they were like Jason
that is a brilliant idea I was like
thank you very much and so here we go
this is a brand new series from this
week in startups
brought to you by Wilson Sonsini called
startup basics and one of the most basic
questions I get constantly is how do I
raise an angel round right how do I
raise money from an angel investor and
it changes over time so the answer that
I give today could change over time and
let me tell you something boy has the
answer changed in the last 3 5 10 and 20
years 20 years ago if you wanted to
raise angel money what that meant was
there were five angels in all of Silicon
Valley who might back your company you
really were talking about friends and
family friends and family is one of the
best ways to prove that you have skin in
the game and that you're a serious
entrepreneur if you go to your rich
uncle or your dad's got money or your
cousin and you actually take the first
ten or twenty thousand dollars from them
to build your prototype when you go talk
to a professional angel investor they
know that you had the guts the gumption
the gall to ask the people who you go to
Thanksgiving or Passover or Christmas or
whatever holiday you celebrate and
potentially have a very awkward moment
with them the next time the holidays
roll around because you might lose their
money oh my god is this a great signal
for you to send so first and foremost
ask your family and friends who are rich
and can afford to lose the money lose a
little bit of money they say hey I've
got a killer idea will you give me ten
thousand dollars for I don't know two or
three percent of the company a
ridiculous deal maybe
five percent of company whatever it is
whatever you need to get done at that
time as an entrepreneur now if you're a
serial entrepreneur and you don't put
the first 10 20 30 50 thousand dollars
in yourself you're going to negatively
signal the angels that you don't
actually really care right so if you're
like some guy who's or gal sold your
company for twenty five million dollars
or 20 50 million dollars why are you
coming to me for your first 25 or 250 K
and Angel funding isn't that your job as
somebody who has made some money so
those are two really great early
indicators one take money from friends
and family and risk those relationships
and if you don't have the guts to ask
your parents or cousins or uncles for
money and your friends is it really that
good of an idea ask yourself that is a
very important test for you now second
if you've got $100,000 in your bank
account or 50 or 250 and you're not
willing to put it on your own idea then
why should anybody else back you you
fail to test if you're not willing to do
either of those things
so that's table stakes that's how we're
going to start this discussion and
that's how a lot of these discussions
will happen and how much work have you
put into this idea there are people who
are stalkers and people who are walkers
there are people who say I will start
working once I get money from an angel
investor when I get that sense from
somebody that they're not really working
on the idea that it doesn't have a sense
of inevitability that this is going to
occur with or without me as an angel
investor boy I am just not interested
what were you waiting for me
to give you a ten thousand or twenty
five thousand or fifteen thousand dollar
check for you to start working it's not
that for the way I did it okay
now cold emails to an angel this can
work
cold angels cold emails do work you find
the angel investors email address which
isn't that difficult and if you can't
find an angel investors email address
well maybe you shouldn't be in the
business because not the hardest thing
in the world and you can also find these
people on angel list now and Twitter and
Facebook and LinkedIn so the angel
investors are out there you just have to
do the research so contacting them by
email it's delicate because they get a
lot of emails what will they respond to
well I'll give you a couple of hints if
you start out with a compliment and
or recognition that you know the history
of that angel investor you are going to
start off on second base literally so if
you're emailing navall from AngelList
who is an angel investor as well and you
say I knew your first company or I saw
your interview with Jason on this week
in startups and you said this and it
inspired me to become an entrepreneur or
dear Jason I am a huge fan of episode
number 206 with Chris Sacca he was
hilarious but I really loved Gary
Vaynerchuk Chuck's episode best right
you're starting with some indication
that you've done your research on the
angel which makes us as the Angels know
I'm not just one out of 200 emails you
send the cookie cutter and send it in a
regular normal font like I got an email
the other day from somebody had a really
interesting idea for some reason they
decided to like HTML their email and
also if it's too long if it's really
long it doesn't look like a sane person
doesn't write a thousand words in a
first email so here's what your first
email should say dear ex angel investor
I really am interested in what you said
in this article and/or podcast I agree
with a book that's like one sentence
sentence - I am a 27 year old graduate
of Stanford who is working on an idea
one sentence description of the idea
that's it just a little taste of who you
are we don't need your goddamn life
biography because nobody cares who cares
what school you went to but a little bit
okay I'm a 26 year old from Manhattan
I'm 22 I'm in Chicago just an idea of
what I'm dealing with here people do
want to know it could be I'm at 30 I
don't need to be ages here but it could
be I'm a 30-year vet of the television
industry and have left to start an
advertising network for youtubers here's
how it works
one sentence right just here's what I'm
doing one sentence then here's the magic
a link a screenshot just something that
indicates that you are a build
a talker not a walker nobody is
interested in your ideas we're
interested in your execution for the
love of God nobody cares about your
ideas I don't know how to say that more
plainly if you are an angel investor a
professional investor do you know what
you hear all day long
ideas do you know what you realize after
a very short period of time everybody
has the same goddamn ideas oh you want
to make a social network that's better
than MySpace mr. Zuckerberg
Wow I have gotten that exit I have
gotten that idea literally 500 times in
the last six months I'm putting us back
in that time period when Zuck was you
know coming out and raising capital and
leaving Harvard to come to Palo Alto
but what differentiated somebody like
mr. Zuckerberg is that mrs. Zuckerberg
was a talk was not a talker but a walker
he was a doer okay he could show
something here it is here is the basic
version here is how it works right he
had started building and there was a
sense of inevitability
you either got on the Facebook train or
you didn't and trust me that train was
moving fast there was a sense of urgency
to it so that is how you contact
somebody cold email and then at the
bottom so we got the first paragraph
about the angel investor second
paragraph who you are in your idea and
then three an image a mock-up a URL that
takes them to a deck whatever it is and
then number four I would love to meet
with you anytime anywhere for 15 minutes
if you are interested in what I'm doing
so you've basically now you've sent
another signal I will go anywhere at any
time to get ten minutes with you that's
how important you are mr. Duval okay mr.
Chris Dixon miss mrs. Esther Dyson
whoever it is that you're trying to get
as an angel investor you want to make
them feel like this is the most you are
the most important angel investor for
them to land even if it is not true you
need to make them feel special and now
they will not respond to your first one
but they may click on the link they may
look at the images you know why screens
like to
move people like to see things moving on
their screen when you send somebody a
screenshot or a wireframe I mean and you
don't don't send everything right you
don't send the whole goddamn sitemap and
a huge 50 page document that's absurd
but if you just send if you just send us
a beautiful image we are going to look
at it we cannot help but not look at it
now you say to me well I don't have a
design or well why are you coming to
angel investors if you're not even
capable in the year of 2014 of getting a
world-class designer to build you a
couple of screens for the love of God a
world-class designer on dribble or
Behance net cost 25 50 75 or $100 an
hour if you're not willing to spend a
thousand dollars with a designer you
should not be writing that email and
this is a whole nother thing that I'm
gonna get into firing off emails is easy
that's why I get so many goddamn hemo
small-time that's why all of us angel
doesn't get so many emails but making
something beautiful and crafting it and
thinking it through is hard so if you
send an email you put yourself in the
bucket of people bouquet pible who are
capable of sending an email guess what
that's 100 percent of the population can
send an email but if you make something
crafted and brilliant small but
brilliant and beautiful
you've now self selected yourself into
the top 10% of the class by spending
five hundred thousand dollars but you
know what 95% of people email me don't
even take that basic step and I can tell
you 95% of 100 don't take the basic step
to understand who they're emailing and
if you sense a little bit of frustration
in my voice it's because as an angel
investor and an entrepreneur I've been
on both sides of the table and I thought
this for myself I made these mistakes
early in my career where I was just like
if I could just go to lunch with you if
I could just get time with you you would
understand that I'm brilliant it might
be true but we need to have a filtering
mechanism on the other side of the table
and the filtering mechanism depending on
who you are is going to be execution
maybe their network okay and it's and
it's a variable maybe how good your idea
is maybe but I doubt it it's really
going to be did you come from a trusted
source
or did you make something brilliant and
that and that leads me the next point
the best way to get in touch with me is
not to email me it's to find somebody I
trust and to get them to introduce you
and to send your email to me so I just
got the co-founder of YouTube who I one
of the cofounders is three actually in
the third little-known co-founder email
me about a project and he said hey Jason
we've you know you may not remember we
may have meant of course I remembered
him and he said I'm investing in this
these individuals who have this idea
that's in the video space would love to
meet with you and I said well if they
know the co-founder of YouTube and
they're in the video business and they
got him to email me you know what I'm
like halfway there to investing forget
about taking the meeting I instantly
replied with my assistant get a meeting
let's talk and I didn't even really I
mean I did click on the idea I had a
link there they did explain their idea
so simply but it was just a perfect
perfect interaction for me as an
entrepreneur so those are enough to get
you started remember just to recap if
you're not willing to take money from
your friends and your family then your
idea probably sucks and/or you don't
have what it takes to be a great
entrepreneur which is guts ok are we
clear I hope so number two if you're not
willing to save your own money and
invest it in making something that looks
beautiful and deserves to exist in the
world then you suck and you should not
be an entrepreneur could we be any more
clear number three if you're not willing
to do basic research on the people
you're targeting for the love of God you
do not deserve to be an entrepreneur and
finally finally you need to be smart
enough to figure out who is in that
angel investors orbit who is in their
orbit it could be a lawyer it could be
the people they invested in before 10
years ago 5 years ago and you go have
coffee first with them get their counsel
and then ask them for the intro but you
got to be able to work your way
backwards right one of the things I have
so often in my career is people asking
me to introduce them to David sacks from
yeah more
musk or Paul Graham who I barely know or
Mark Cuban who I sort of know for a
while like they just assumed that I am
going to you know email them and for
their idea to these very important
people in the world you know what you
have to earn those intros so that's
another just sort of final thing I'll
throw in here is say if target properly
if you really and I don't mean this to
dissuade people but you're not going to
get the time of the most important
people in the world for your little
dorky idea respectfully start with the
people who you can get access to and
build up build up build up until you get
to access to that person and that's what
I did my whole career this is like a
huge video game but you don't start the
video game on the boss level you start
the video game with the little tiny
mushrooms and you're banging things
around and getting coins and it's super
easy and then after you play the video
game for a while you get to the boss
level you get to the finale all that
kind of nonsense in other words take
your time to level up alright listen
thank you to my friends at Wilson
Sonsini it's a tremendous tremendous law
firm and partner for any startup I have
been partners with them for decades and
they're super super supportive I hope
this has been helpful people and we will
be doing a couple of dozen of the
startup basics if you have ideas or you
want to contact me at any time
I'm just Jason on Twitter and you can
follow me there or you can follow the
show at Twi startups and you can always
email me Jason at launch CEO or Jason at
Calacanis comm any of those they all go
to the right place or angel Co slash
Jason is my AngelList profile angel co
slash Jason there's plenty of ways to
get in touch with me and now you know
the secrets of how to raise that first
angel round I hope this has been helpful
we'll see you next time