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Episode Date: April 17, 2014

https://youtu.be/aqRBN7qvyxs

Jason Calacanis | TWiST | Twitter | LinkedIn

In this episode of This Week in Startups, Jason Calacanis tackles how to raise money from angel investors, brought to you by WSGR. As a serial entrepreneur and angel investor, Jason has been on both sides of the table. Now he shares his insights with you.

Top Insights

• Two great indictors to look at before approaching angel investors:

  1. If you don’t have the guts to ask your family and friends to support your idea (with money), you have to question whether or not it is even a good idea.
  2. If you have enough money and you're not willing to put it into your own idea, why should anyone back you?

• On raising angel funding

  1. Ask your friends and family first.
  2. Spend your own money first.
  3. Do your research on the investor before you contact them.
  4. Use your network to get introduced.
  5. Set your target properly – you need to earn your intros.

  You don’t start a video game on the boss level…In other words take your time to level up. - Jason

Intro

• TWiST is constantly asked basic questions like:

  How do I raise money?

  How do I get a co-founder?

  How do I use Angel List?

  How do I hire my first couple of employees?

  So we partnered with WSGR, a top technology law firm, to do this series on startup basics.

• One of the most commonly asked questions is:

  How do I raise an angel round?

  The answer to this question changes over time and has changed quite a bit over the last 3, 5, 10, and 20 years. 20 years ago there were maybe 5 angels in Silicon Valley that might back your company. Back then, it was really just friends and family funding an angel round. - Jason

Friends & Family

• Raising money from friends and family is one of the best ways to prove you have skin in the game and you’re a serious entrepreneur.
• If you take 10-20k from them to build a prototype, professional investors will know you had the guts to ask people for money and deal with the consequence. After all, it may strain your relationship and you might lose their money.
• Ask your friends and family who are rich and can afford to lose their money. You can offer them 2-3%, or maybe even 5%.
• You need to put in whatever reasonable amount of money it takes to get to get things started, as a first-time entrepreneur.
• If you’re a serial entrepreneur and you don’t put in the first $10k-50k, yourself, it sends a negative signal to investors. They will assume you don’t really care about what you're working on, especially if you previously had a multi-million dollar exit — and can easily cover that initial amount.
• How much work have you put into this idea? There are talkers and there are walkers. Some people only start working when they get money from angel investors. Jason isn’t interested when it feels like the entrepreneur isn't really working on the idea. He wants to feel like it is inevitable to occur, with or without him as an angel investor.