“How did you get them to invest?”
Last week I was back in my hometown of Medford, OR. It’s one of the best kept secrets anywhere. After catching up with a friend, he asked, “How did you find your investors, and how did you get them to invest?” It’s a question that I get a lot.
Here’s my answer: be someone worth knowing. I don’t know all the secrets to this, but I can share a few things that I’ve done to make myself someone that other people want to know.
Do amazing things
If you want to be someone worth knowing, you have to do things above and beyond. I stay in touch with some people because we’re friends and I’m interested in their lives. I keep in touch with other people because they’re going places and I want to make sure we’re friends when they get there. If you’re doing Netflix marathons and partying it up regularly, it will be difficult to be someone worth knowing. Use your younger years to work your tail off.
No matter your job, be the best
My first job during college was as a quality assurance intern. I knew that I wanted to get into tech and this seemed to be my only option at the time. Most interns at this company were watching YouTube videos and Facebook while our boss wasn’t looking (which was most of the time).
At one point, the company was close to running out of money. Our company fired almost everyone in the quality assurance department because we had to downsize. At the last hour, the company received more funding, but they decided to keep only one person from the quality assurance department. I was fortunate to be that person.
As a freshman college student they made me the manager and asked me if I could handle it with my school schedule. I told them I could.
If you don’t know how to do something, do it. In today’s world, I believe you can learn just about anything if you work hard enough. The resources are everywhere. When asked if I could swing managing with school, I had no clue what to do, but I said I could and I worked like a crazy man during work and outside of work to get it done. Failure just wasn’t an option.
Ask for more
While working full time and going to school full time, I made it clear to my boss that I knew my future wasn’t in quality assurance. I needed to start developing other skill sets for my future career.
He agreed and put me on track to get into product management with the understanding that I’d initially have to do that work in addition to my role managing our quality assurance department. I jumped all over the opportunity and went into product management full-time within a few months.
Doing these things will help you be someone worth knowing. Successful people like knowing successful people.
When you approach investors, and your previous boss at a phenomenal tech company wants to invest in your company then you’ve done something right. It’s going to be difficult to have a serious conversation with a 50 year old investor when you, as a 25 year old just out of college, are talking about how you’ve got this great idea and are currently a barista at Starbucks with no track record of significant successes – Starbucks baristas, please prove me wrong!
Network, network, network
Once you are someone worth knowing, your network will pay off big time. Case and point: Last October, I was connected with an investor. We had a 30 minute conversation about my company.
He then said, “Jordan, to be honest, I was going to invest unless you turned out to be a complete idiot. Mike and I have made a lot of money together. If he sends me a deal and speaks highly of the entrepreneur, I do it.”
That same investor brought in another investor that put in money without me ever having to speak with him. That’s the power of great investors and a great network.
Great networks start with little ones
When I first moved to Austin in January of this year, I literally knew three people here, two were family and one was a friend from high school. Before I left Utah, I asked around in my network for connections in Austin. Only one had any connections. That person sent eight intro emails.
From those eight emails I met with over 25 people and secured funding from two of the best firms in Austin. You grow a network like you grow a business, one day at a time, but it has to be a priority.
An archaic but useful move
My last point on networking: Consider a handwritten note. This may sound archaic, but when it comes to these rich people that have everything, you’ll find that you have little to offer that they don’t already have. A handwritten note shows class. A handwritten thank you note expresses gratitude that a text message just can’t convey.
Put in the effort first
From what I’ve seen, investors want to see entrepreneurs that have already put a ton of effort into their business before approaching them for money – no, 20 hours on a slide presentation doesn’t count.
Investors will ask you hard questions. It’s okay to say “You know what, I’ve never considered that before. I’ll research it and get back to you.” Of course, you can’t say that to every question they ask.
You need to know your industry, competitors, revenue models, businesses that have failed in this space, differentiation, market size, marketing channels, sales channels, and more.
You better have your MVP
In addition, for most tech companies, you need to have at least a MVP (minimum viable product) with some traction when approaching investors. Investors today want to see traction. To be honest, if you can’t hack together a product that you claim to be passionate about, then I don’t think you should be starting a business, and I think you’ll struggle to raise the capital you’re looking for.
That’s my advice to young entrepreneurs on what you can start doing now that will win you the investment when the time is right. If you get started with these principles early, I believe you will find the fundraising process to be much easier.