A couple months ago I wrote an article titled Top 10 Website to Find Angel Investors. My research for that article revealed that there are virtually hundreds if not thousands of ways to find potential investors, but today I want to focus on the 3 worst ways to find a potential investor. According to the Angel Capital Education Foundation, only 1 to 4% of angel investor applicants successfully raise angel investment. I suspect that part of the reason that the success rate is so low is because entrepreneurs are using the following ill advised tactics to meet potential investors.
The Office Visit
So maybe you are located out in San Francisco, California and you hop on to California Venture Capital to locate a VC firm in your neighborhood. It turns out that there are dozens of VC firms nearby so you throw on your best suit, stuff a pile of business cards in your pocket and follow your GPS to the front door of Sequoia Capital. Obviously you will be stopped at the front desk unless you have an appointment. Maybe you are good enough to sweet talk your way past the receptionist and you simply push your way in to introduce yourself to Mr. VC. Venture capitalists might like ambitious entrepreneurs, but don’t fool yourself, this tactic is not ambitious, it is disrespectful and will certainly end in failure.
The Cold Call
Just the other night my phone started to ring from a number I did not recognize. I went ahead and answered. It was a salesperson trying to sell me health insurance. You know what I hate my current health insurance plan and have actually been meaning to talk to someone about other options, but I actually just hung up on this particular salesman. Similarly you might have an investment opportunity that a potential investor would love to take a look at, but an unsolicited phone call is going to be a major turn off. That salesman may have had a great health insurance plan to offer me, but I never gave him a chance. Don’t be that guy.
The Networking Event
So my first two points were pretty obvious – I hope. This last point might be a bit counter intuitive though. Yes that is right, I don’t think a networking event is a good way to meet a potential investor. A networking event might be a good place to meet a CPA or attorney who you could build a relationship with, and then earn the right to be referred to their investor friends. Serious investors do not need to go to networking events in order to find deals. Their staff, friends, and other investors will likely refer enough good deals to them that they would never want to waste their time at an open networking event. Networking can be great for many things, but don’t plan on meeting your next angel investor at an event any time soon.
Although raising capital is a 1 in 100 achievement, it is possible to find just the right investor. With the right tools, connections, and patience you can be successful. Just make sure to stay away from these 3 terrible capital raising strategies and good luck!
Adam Hoeksema is the Founder & CEO of ExecutivePlan. As you continue on your quest to raise capital ExecutivePlan can help you write a more powerful, effective, and memorable business plan executive summary.