ESYB2 073 - Raising Money From Investors
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[00:00:00] Now let's talk about raising money from investors and investors. They're very different. If you are trying to raise money for a traditional company, like a restaurant versus a tech startup, like a new kind of a Uber app or something like that, the environment is extremely different, obviously, and the investors are extremely different too.

So of course you have to watch this video. Keeping in mind what you are raising money for, but generally professional startup investors, and generally when we talk about investors, we mostly talk about. Tech companies, technology, startups, new, cool, high growth and big opportunities. That's what you want.

And big opportunities means like billion dollar markets because usually most companies fail. So the ones that do succeed have to succeed big for them in order to recoup their losses and make it worthwhile. So if you have a niche idea, it might not be too investable. Not because it's bad, but just the market might not be big enough.

Niche ideas usually [00:01:00] do have to generate money from their revenue or other sources. There are plenty of other ways to get money, it doesn't have to be all investors. Or, if you do have a niche idea, you have to have a clear path to how you can start niche. Okay, that's fine, but what's the clear path to becoming big and targeting a billion dollar market later on?

There has to be a clear path for that. So for tech companies, let's go over what the investment opportunities are like. First of all, everyone has friends and family to ask. A lot of tech companies these days, you don't need a lot of money. 20, 50, 100, 000. Okay, that's a lot of money, but not by traditional standard.

So that's something that your friends and family can give you. If you don't want to deal with your friends and family or you can't get money from them, no problem. It's just a part of this conversation. After friends and family, you have the option of applying to incubators. There are many, many incubators and you can just see which ones fit your business and apply there.

And if you have a [00:02:00] specific type of business, let's say you're doing something in the sciences, Well, just go to Google and search for like science startup incubator or something specific to what you're doing. But you can find a lot of incubators to apply to. Usually incubators, they give you some seed money, like 25, 000 or 100, 000.

A lot of advice, some resources like software, working space, networking opportunities. And they basically just help you have a fair shot at succeeding with your business. If incubators are not for you, Next option is seed investors. You can also find them on angel list. com or again, by Googling around for your specific topic of your business.

And they usually invest from 25, 000 to a few hundred thousand dollars. It's a big range. They're professional investors. And you can pitch them, but they do look for professional, innovative and interesting opportunities. After that are angel investors and VCs, which are often very much [00:03:00] intertwined. And also some angel investors also invest seed and seed investors are also angel.

And some investors who work for VC firms, they also do seed investment. So there's a lot of overlap in this. The general idea is that if you're just getting started, it's really, really hard to get money from these guys because they have a lot of people bitching them and they only invest in a few companies a year, typically.

Some invest in more, but this is typical. And they basically get to choose the best of the best of the best. And generally speaking, VCs, real venture capital money, not people who work at veteran capital firms but invest on their own, but actual venture capital firms, sometimes they might do A second round or a third round of venture capital, which that's in the range of like 20 million, 30 million sometimes, which means that your company has to have not only grown a lot, millions of users or millions of dollars in revenue, but also is continuing to grow at a very rapid pace.

So [00:04:00] VC is for almost nobody. It's extremely rare that people have a company that's investable by. I'm going to talk a little bit about how to tell if your business is investable. A lot of investors, they look for an experienced, proven team and an interesting, unique idea. Or an interesting industry differentiation, so they can have a chance to take over a segment of some big market.

And of course, like I mentioned, they look for billion dollar markets typically. And they look for situations that are naturally exitable, like orders natural buyers. For example, like I have a business that's a self branded business. I make content like books, courses. That's really hard to sell because my face is on it.

So that's not really exitable, and for that reason, it might not be investable, and it's too small, so it's not investable. But if you have some next Uber kind of app or something like [00:05:00] that, that's investable. Now, let's talk about how to approach investors. First, you do need to do your research and find the perfect ones for you.

You can't just hope that you're gonna reach out to investor Joe and even though he doesn't really invest in your business or you don't even know, he'll make an exception for you. No, it doesn't work like that. It's a very strict field. They look for you to do all the research. And reach out to them. Cold outreach and cold applications are okay.

It's not great because they get so many of those. So what you want to do is look to get recommended. How do you do that? Look at the companies they invested in before. Reach out to those founders. Start some relationship with those founders because those founders probably, of course they're busy, but not as busy.

And they don't have as many people coming and bugging them. So they're easier. And of course you can learn a lot from those entrepreneurs and get tips on how to approach their investors. And maybe even, maybe even over time get recommended to the investors. So you do want to reach out to the founders of [00:06:00] companies that investors who you want to approach have invested in before and sometimes they might even tell you like don't do it, it's not a good investor because investors, it can't just be some cash like that they give you, they have to give you cash and expertise and help, they have to actively be helping you with your business.

Now, there are some interesting investors that I follow, and I'm going to share some with you. Of course, you probably know this without me, all the sharks from Shark Tank, they're interesting. Sometimes they're biased because they have a show to run, but they are interesting. I like Mark Suster, he's a VC, and he's very outspoken on social media, he writes a lot, I've learned a lot from him over time.

Paul Graham, founder of Y Combinator, the most successful It's called Startup Combinator Ever. And generally, I think one of the smartest guys in the whole investment world, just purely as an intellectual guy. So for me, he's probably the number one, most interesting, well rounded person. And Jason Calacanis, he has a regular podcast and I think it's a YouTube show as well.

And I've learned a [00:07:00] lot from him. And of course, everybody knows Gary Vee, Gary Vaynerchuk, this list just wouldn't be complete without him. So. So that's the investor spiel, how to apply to them, which, how to know which ones are right for you and which ones are right to follow.

