How to Meet Investors Who Will Fund Your Startup IdeaJune 15, 2016 - 10 minutes read
You have a great startup or iPhone app idea. Maybe you’ve even assembled a small team or developed a prototype. The next step is ripe for the taking — but first you need funding to make hires, grow the product, and market it to relevant users.
The question is, where do you look? The answer isn’t always obvious for first-time iPhone app developers. Luckily, the mobile revolution currently sweeping the world has primed tens of thousands of potential investors eager to meet with promising startup founders. In other words, you.
In this post we’ll give you a quick overview of the types of investment capital typically available to seed-stage startups and which sources makes the most sense for different types of digital products. Then we’ll take a look at the most common places startup founders and investors meet and mingle to get you on the right track to contacting promising leads.
Raising capital isn’t easy — but if the product is as promising as your passion for it, investors will be thrilled to place their bets on your success.
Understand: angel investors vs. venture capital firms
Most seed-stage startups and iPhone app developers are looking at two types of investor: angel investors and venture capital firms.
In broad terms, angel investors are wealthy individuals who invest in startups as a method of growing their wealth, usually investing relatively small sums between $10,000–$500,000. Angel investors like Chris Sacca and Paul Graham have become millionaires on the returns from early-stage investments in unicorn startups like Twitter and Dropbox.
Venture capital firms, on the other hand, invest much larger sums of money and tend to have a heavier hand in startup management and growth. For larger companies in established industries, venture capital firms offer access to the sorts of resources needed to grow complex, long-term product builds. If you’re building a complex business that’ll need to hire 50-plus employees before even going to market, investment capital firms like Andreessen Horowitz are probably your best bet.
Prepare: know how much funding you need
It’s important to have a clear idea of how much funding you’ll need to get off the ground, as that will affect which type of investors you approach — as well as how much you ask for. App-centric business with a primarily digital product have much lower startup costs than a content-based company like, for example, a video content network.
Angel investors usually take a more hands-off approach, investing smaller amounts in riskier business models. Venture capital firms usually invest large amounts in more predictable products with large starting costs.
So, where do I go?
Particularly in investor-heavy cities like San Francisco and NYC, your personal network is the first place to start looking for funding. (This is why San Francisco iPhone app developers tolerate the high rents. It’s all about location.)
Seed rounds frequently include family, friends, former colleagues, and other people who’ve known you a long time and have good reason to believe in you and your ideas. If you can’t convince your friends that your app is going to take off like a rocket, chances are convincing cold-called investors will be even harder. So practice your pitch and start small before you start reaching out to the Saccas and Grahams of the world.
AngelList, LinkedIn, etc.
Once you’ve covered your personal network, it’s time to go the next obvious network: digital. AngelList exists specifically to connect startups and investors with no other way of meeting each other. LinkedIn may not be startup-focussed, but it can be a great place to find investors who might be connected by a mutual business contact.
Sites like Kickstarter tend to favor physical product startups like IoT devices, but has been known to work out well for games and mobile apps as well. Because so many campaigns on Kickstarter are half-baked, going the extra mile to pitch potential backers with the same level of detail you’d spend on an angel investor will take your startup far. Since backers are usually expecting some sort of return for their investment, it only really works for products that can offer different levels of “rewards” to backers (again, this gives physical products an edge).
It’s also an invitation to get creative — Kickstarter projects thrive on viral marketability, so it can be a great fit for limited-growth startup ideas that might not appeal to investors looking for the fabled “100X return.” Additionally, using Kickstarter for your seed round can help work around the issue of equity, preserving theoretical shares of your business for the next growth phase.
Incubators and accelerators
Incubators and accelerators are uber-competitive, but effective at weeding out the fluff and getting you and your app idea in the right community. Passing through the gauntlet with time-tested mentors isn’t guaranteed to make your app ideas succeed, but it is guaranteed to hone your team’s skills and push you to the limit.
When you’re part of an incubator or accelerator, some of the best investors come to you — and they have good reason to, when you consider that huge companies like Airbnb and Dropbox came from the Y Combinator community.
Meetups and hackathons
Meetups and hackathons are more about building a community of peers than building a network of investors. However, maintaining a strong community of peers may be the single most important tool in your toolbelt when it comes time for the ultimate hack for meeting investors: getting introduced.
The best path to funding: get introduced
Even if they came to you, investors have good reason to be skeptical of you, your startup, and your brilliant mobile app idea. After all, the vast majority of startups fail — to the tune of around 90% within the first three years after launch. Of those that survive, even fewer go on to be wildly successful on an Uber or TaskRabbit level.
While some angel investors pick their companies based on gut and social mission, most are looking for one thing: money. And lots of it — that’s why they’re betting on 100X returns from a super-risky tech startup (you) rather than investing in something boring and dependable. Therefore, getting introduced to an investor by someone they trust gives you a huge edge.
There’s no shortcut to getting introduced. Like all the best things in life, it only comes through dedication, hard work, and a fair share of luck. Staying involved with your local tech community, participating in conferences, and contributing to the tech and open-source scenes in whatever ways you can are great starting points for building out a presence that will make others want to help you.
Always remember your mission
The road from app idea to fully-funded tech company is a grueling one. Not everyone will be supportive — in fact, most family, friends, and potential investors will probably think you’re crazy at first.
For those who persevere, mobile app development offers huge rewards and the gratification of building a business that matters. It’s important to remember that, even when the bank account fills up and the team gets excited, everything depends on your belief that your app will make a difference.Tags: accelerators, angellist, business incubators, coding bootcamps, incubators, nyc tech, san francisco, seed funding, seed round, silicon valley, social media, social network, startup funding round, startups, tech, technology, twitter, VC, VC firms, venture capital