Do More Faster India, 2nd Edition

Chapter 68Focus on the First One-Third

Brad Feld

Brad is a partner at Foundry Group and one of the cofounders of Techstars.

Raising money from angel investors can be a daunting task. One useful trick that we teach founders at Techstars is to focus on getting the first one-third of the money committed. If you’ve gotten a third of the round committed, you’ll often find that the rest of the financing will come together quickly. The reason is that angel investing is best understood as a social sport. If you’ve got one-third, you have a lead investor, or at least a lead group of investors.

Generally speaking, you are going to encounter three types of angel investors. The first type is the potential leads. They’re not going to play wait and see. They’ll lead the round if they get excited about it. This is generally the same class of angel investor who will also say no quickly. Recognize that this is great in either case. At least you’ll know where you stand with this type of angel investor. Generally, focusing on the first one-third means focusing on this first type of angel investor.

The second type of investor (and they’re very common) is the kind who will not commit early on but will want you to keep them in the loop. These are the maybes. The maybes are great to collect, but I’ve seen too many entrepreneurs spend all their time trying to convert maybes into lead investors. My advice is to collect the maybes, ask them if you can tell others that they’re interested, keep them posted ...