How to get funding from VCs and angels

Last week, I talked with a young first time entrepreneur looking for funding. He didn’t know where to start. I pointed him to Microsoft StartupZone where there is LOTS of great information from Guy Kawasaki, Brad Feld, Paul Graham, Ann Winblad, Ron Conway, and others about how to get funded.

There are over 50 fact filled articles covering topics like;

• What to consider when raising money
• How to raise money from VCs
• Term sheet terms – what they mean
• How to find Angel Investors
• Business models that work
• The Pitch – How to write an effective presentation
• Writing a Business Plan
• Creating a Financial Model

Getting a meeting – Once you have learned everything about how to put together a great pitch, business plan, and understand how much you need, the next step is getting a meeting with an investor. The best way to get the first meeting is to get referred by someone the VC knows. Someone like a former entrepreneur, board member, another VC, one of your advisors, etc. The chances of a first time entrepreneur getting a meeting without an introduction from a trusted advisor are very small.

How to handle the first meeting

1. Send a PowerPoint presentation of about 10 slides that describes the problem you solve,  who your potential customers are, who your competitors are, the business model, the team, potential market size, how much money you need, and a plan with major milestones.
2. Be flexible and responsive, and don't expect the same from the VC. VCs are very busy people and are easily distracted. Be flexible about the meeting agenda. Respond to questions immediately. Do not make them wait until later in the presentation.
3. Research what kinds of companies the VC has funded in the past. Connect with any people you know at those companies. Get insight into how the VC works, and get a referral to the VC.

Here are some things to avoid when meeting with VCs

1. Don't use the latest buzzwords. This drives VCs crazy. Focus on the problem you solve for customers. Use real scenarios, not hypothetical web2.0 dreams.
2. Don't spend lots of time explaining "how" you do it. They don't care about the technical details. Explain what problem you solve for customers.
3. Don't avoid the competitor question. If you don't have competitors then you don't have a big market, or the problem you are trying to solve doesn't exist. If the problem does exist than customers have figured out some way to deal with it. Show that you understand how they are dealing with it today.
4. Don't be arrogant, and don't bluff answers. If you don't know, don't guess. Tell them you will get back to them.
5. Don't diss the competition. Respect the competition and anticipate what their reaction will be to your entry into the market.
6. Don't ask for an NDA. Don't think you are the only person to ever have this idea. Don't worry about VCs stealing your idea. They throw away hundreds of good ideas every year because the timing isn't right, the team isn't right, or the business model isn't right