Finding investors

Gah. Busy. Too busy to blog at the usual pace. Things are going well – hiring the team, getting an office, doing the initial business development deals. I can’t complain.

Since launching Pinch Media and taking the wraps off the funding I’ve been asked by a few people who want to start businesses how to go about raising money. I don’t actually have much advice, and the advice I have you should take with a grain of salt – out of all the people trying to raise money, some are going to succeed just out of plain dumb luck, and I could very well be one of those people. That said, here’s what I’ve got:

a) You probably already know your investors. I knew most of mine from introductions I made from previous jobs – it helps when you’re already ‘in the family’ and a former employer can provide references. The ‘first-time CEO’ issue is going to come up no matter who you talk to, but if you’ve already got a personal relationship with your investors, it goes a long way to overcoming this. If you’re already looking to raise, it’s a little too late – but if you aspire to founding a company someday, I’d try to get into a funded startup at a very early stage, and then kick ass. And always always always network furiously. (I’m not the most social guy, so I have to force this.)

b) Social proof is very real – when you’ve got someone smart in your corner already, other people pay attention. The hardest thing is to just get that first investor in the door. I was fortunate to have a friend and former co-worker who believed in me, my co-founder, and our idea from the first day. That helped me get some verbal commitments from other angels, which – I suspect – helped us finally close the round. Without that, it would’ve been a lot harder. So if you’re starting from scratch, I’d recommend targeting angels – especially smart angels. I suspect it’s a lot easier to get a verbal from a smart angel than it is to get a term sheet from a smart VC — but they’re both great for opening doors and getting introductions.

c) Be realistic. If it’s your first time out, be smart, know as much as you can – the best resources out there I’ve found are Venture Hacks, Brad Feld’s Term Sheet series, and David S. Rose’s eye-opening posts on the nextny mailing list. But don’t forget that your primary goal is to build your company, not fuss about over financing paperwork. Especially when you’re in a new market and speed is an issue, the delays caused by lengthy negotiations might cost you more than the valuation you gain and the equity you keep. If you’re going to raise, raise it and get on with it.

No doubt my advice is colored by my own subjective experience – those coming from different backgrounds will have different advice. If anyone’s got any questions, fire away.