Today I'm heading back to Techstars to talk to the new class of startups, and it seems like a good time to reflect on what I learned going through the program. Since the three months were focused on raising angel financing and Mailana never did get any investment, it's worth looking at what I did wrong. Here's how to kill your chances of raising angel money.
Be ambivalent about investment
I still don't truly believe planes can fly. I've flown hundreds of thousands of miles, but when I stare at that big hunk of metal sitting on the asphalt, it seems completely implausible that it can climb through the air. Rationally I know it works, but my gut still tells me its impossible. I feel the same way about early-stage technology investment. I see it happening all around me, both on a personal level and in the products I use every day, but I still find it hard to wrap my head around the idea that people will really hand over money for something as risky as a technology startup.
That put me in the worst possible position for raising money. I was interested in getting more resources to build the business, but wary of the strings attached. That meant I burnt up valuable time asking for investment, but wasn't committed enough to close a deal. As Brad Feld said in one of the talks, "Do or don't do, there is no try" when it comes to fund-raising.
Have a bias towards technology risk
I tried to pretend that I was driven by the market in what I was doing, but in my heart I've always been driven by the changes in technology that make new things possible. Almost no investor will be current enough on the geeky details of whatever area you're working on to judge the risk of whether you can actually build something that's never been built before. Most of them are extremely familiar with the human side of the business world, so they do know what questions to ask about your market. Put simply, they can't tell if you're bullshitting about the delivery and barriers to entry to any untried technology, but they can spot bogus market estimates a mile away. Building around technology risk radically limits the pool of investors willing to bet on your company.
Be a lone founder
This one has been beaten to death elsewhere, but a single founder is a major red flag for most investors. It's like seeing someone eating alone in a restaurant. Sure there's all sorts of reasonable explanations but it leaves a question hanging – "what's wrong with that guy that I don't know about?". It also left me with zero time to make product progress while I was talking to investors.
Don't provide reassurance
I've always tried to be very honest that I'm groping and iterating my way towards something that works but that I don't have a master plan. My hope is that I'm finding a thousand ways not to build a lightbulb, and I'll soon find one that works. As a sales pitch to potential investors, that sucks, and I can understand why. If you're going to be putting your money into a company, you want the founder to exude confidence, even if you know that's irrational based on the facts. If nothing else it's a social mechanism that investors hope will motivate everyone to live up to their side of the deal. It's also a crucial part of leadership, something you need to keep the team motivated through the rocky times.
Going back to Techstars, I realize I'm supposed to say that the experience was fun. It wasn't. It was painful and the constant rejection was emotionally grueling, but it was incredibly valuable. I made some amazing friends, absorbed a massive amount of wisdom from some of the smartest people I've ever met, and I'd do it again in a heartbeat. I just hope I've learned enough from it all that I'll be making a whole new set of mistakes over the next year.