- Use AngelList to scout the market. You’ve probably already looked around to see who’s invested in your competitors but you should consider looking into which other startups are raising money in your space. One tactical suggestion is to drill down into the tags on your startup profile and look for the startups that have the most followers in those categories. Pay particular attention to the contents of their profiles and the investors that are following them.
- Your Solution Is Not My Problem. Know your customer. Please.
- Come to the table with the right founding team: you need some combination of the hacker, hustler and designer on the team. Noob mistake: avoid outsourcing any of your early work unless you have solid experience with that model. Chances are that you’re going to pay too much anyways.
- Don’t approach without a prototype (or previous success). I’m sure we all know “idea guys” – people that have been talking about an idea for a long time but haven’t ever built it. Don’t be that person. At the very least, hack together a “ghetto, but useful” prototype and get it in front of users. That shows me that you can execute.
- You should have small, but measurable usage. You don’t need hundreds or thousands of customers (though, that won’t hurt), but showing me that someone is actively using the product often and/or paying for it shows me that you’re building something that people want.
- Try to be as capital efficient as possible. The less cash you need to launch/iterate/learn, the easier it will be to raise. I generally prefer to fund companies that can operationalize the business with less than $1M investment. (To be clear, it’s OK if you need more money than that to scale… for the sake of this post, I’m just focused on early stage companies.)
- Exploit the shit out of online distribution channels. You’ve got access to 700M+ people via Facebook ads. You’ve got even more access to people via Adwords. And don’t forget about LinkedIn ads, Quora, Pinterest, Twitter, Android, iOS and other networks. Show me that you’re testing distribution models on those channels.
- Keep your revenue models simple. I have a particular affection for transactional, subscription based and affiliate models. As a general rule of thumb, stay away from ad-based models unless you think you know how to drive a lot of traffic. And, by a lot, I mean nine-figure+ uniques per month.
- In general, stop chasing investor money. 80% of your time should be spent making your startup awesome. 20% of remaining time will be spent fighting off investors.
Above all else, be CRISP about what you want. If you’re looking for advice, be ready to ask the one question you really want me to answer. If you’re looking for funding, be ready to tell me what exactly you want. You may not get the answer you’re looking for but I guarantee you that we’ll both be happier that we got it out of the way quickly.