Want Seed Money for your Startup? Well, as you might have figured out, you can’t just walk up to a potential private investor, tell him or her about your “Great Idea” or your Company, and expect them to write a check. No way!

Want Seed Money for your Startup?

Well, as you might have figured out, you can’t just walk up to a potential private investor, tell him or her about your “Great Idea” or your Company, and expect them to write a check.  No way!

If you want to be successful in getting startup funding for your early stage business, you have to learn how to “attract” private or Angel investors to you.

So what’s the secret? Or to paraphrase a famous movie title: “What do Angel Investors Want?”

The short answer is: put yourself in the private equity investor’s shoes, and think about what you would want before you invested your children’s inheritance is some startup company.

Now, what I’m about to tell you may shock you.  It’s not the “easy-no effort” seminar version that gets you all excited, but won’t put a nickel in your pocket. 

These are answers based on the experience of raising “real money” from “real private investors”.

First, know this – Angel investors are walking around with an invisible antenna over their heads that is tuned to only 1 station: WIIFM or “What’s In It For Me?”  Unless you can explain that clearly, quickly and concisely, you’re out.

Angel Investors and Venture Capitalists have no patience for people who beat around the bush and waste their time.

Second, as a sophisticated private investor, I know that not all ideas are good ideas, and not all good ideas (e.g. good for you) are good for me.

For example “lifestyle” companies (companies that will create an income for you but never build huge equity for the investor) are not investment candidates.  So, don’t give me a canned elevator speech, and expect me to be excited and whip out my checkbook.  First, “show me the money.”

Next, anybody who has become wealthy enough to have capital to invest, did not get there by taking excessive risk with their money.  The reason why lottery winners generally end up poor again is because they never learned this principle.

Or as Will Rogers once said: “When it comes to investing, I’ve always been more concerned with the return of my money than the return on my money.”

If you want private money, you need to explain to the Angel investor, how he is protected from losing his principal and how he is going to get his money back (ROI = Return OF Investment). In other words you need a realistic exit strategy—preferably more than one.

And you must address the question of risk. 

Unlike most people, sophisticated investors have fairly low risk tolerance.  If the risk level in your business plan exceeds their idea of an acceptable and calculated risk, no offer of a return is going to convince them to place their capital with you.

And the Final and probably the most important consideration for the Private Investor is: “YOU”.
Angel investors have a saying, “Bet on the Jockey, not the horse”.

Think about it. Would you invest your money with someone you didn’t know or respect, regardless of how great the idea was?  I don’t think so.

Are you a person of high integrity, and do you do what you say you’ll do? Do you have the experience, knowledge and expertise and the team to see this business idea through to a successful conclusion? 

Trust me: No Angel investor is going to entrust you with their capital, unless these questions are answered and demonstrated to their satisfaction.