Lessons Learned From Raising a $400K Angel Round

Written on February 13th, 2013 by Alex Lowe

I was interviewed by Tom Taulli of Forbes to share some lessons learned when raising an angel round from Bay Area and Norcal investors. The article is reproduced below:

Forbes Logo By Tom Taulli

Angel financing has been critical for most great companies, such as Facebook (NASDAQ:FB) or Google (NASDAQ:GOOG). It’s amazing that small amounts, like $50,000 to $100,000, can help to create empires.

So what are some ways to improve the odds of getting the interest of angels?

Well, I recently interviewed Alex Lowe, who just raised $400,000 in angel funding. And yes, he has some important lessons for entrepreneurs:

  1. Plan to be patient. Angels are people, not investment firms, so there is a lot competing for their attention and their checkbooks. Timing has to be right for both the company and the angel if you want to get a check. Kids get accepted to expensive colleges, families decide they want to travel, or the stock market goes down. There are lots of reasons why “no” is really “not right now” with angels. We were fortunate enough to start raising angel money early before we needed it, because there were many angels that said “Yes” but couldn’t write a check for several months just because of timing of life’s events.

  2. Build some history in your community. People invest more in teams during the angel phase than any other phase in the fundraising process. So if you have had a chance to build a reputation in the community to show your skills, determination and unique world view, you’ll be ahead of the game. And if you can put together a team that has a proven track record of success, even better. The angels aren’t just investing in you, they’re also investing in your team’s ability to execute your vision. I was fortunate to have a history in the Sacramento startup community to show that I wasn’t just a guy with an idea. I was a guy who loved startups, who could manufacture success and was in it for the long haul. It goes a long way to showing the angels there is a reduced risk by investing in you and your team.

  3. Leverage angels’ expertise and build rapport. Angels can not only provide financial capital but also great intellectual capital to help establish or grow your business. Plus, everyone likes to be asked for advice. Angels invest in startups because they enjoy the journey - there are far less risky ways to invest money. Nurture the relationship and include your angels in the process of building the business, even before they have invested. As an entrepreneur with an engineering background, I have certain biases and strengths. By engaging with the local angels as informal advisors it allowed me to strengthen my weak areas, have sounding boards and build rapport ahead of raising the angel round. By engaging angels as part of the company building process they’ll have a sense of ownership and will also have a chance to see how you operate. Both of which will make writing checks easier.

Tom Taulli is the author of How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO. Follow him on Twitter at @ttaulli.

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