How To Find Your Way To Investors’ Pockets - Tips From 3 Business Angels
When creating your startup, it will most likely be important to get some funding to realise your idea. However, there are some pitfalls to look out for.
TechBBQ got the insight from three prominent Nordic Business Angels: Esben Gadsbøll (founder, Whiteaway, chairman, NordicBAN), Klaus Nyengaard (co-founder, Geniebelt, partner, Nordic Makers, ex-CEO, Just-Eat) and Nicolaj Højer Nielsen (entrepreneur & investor).
Left to right; Klaus Nyengaard, Esben Gadsbøll and Nicolaj Højer Nielsen
- Make valuable relationships
It’s better to start looking for investors before you really need it and create trustworthy relations.
- Be honest
Both to yourself and your investor. Make sure you are aware of your strengths and challenges.
- Have a clear idea of what you want with your business
It’s better to have a goal to reach for and fall a few times on the way than making it seem like it’s right.
As a founder, what should you do to get investment?
It’s important that you know what pieces you need for your startup. It goes for creating a team as well as finding an investor. If it helps, you can think of it as a puzzle, as Esben Gadsbøll says. The pieces are the people you need. It’s almost always better to have investors who have experience in the same field as you are working in.
This also connects with why it’s important to start making contacts early on. Klaus Nyengaard says that most startups make the same mistake of starting to build their network when they need money to build or scale their startup. This can lead to making a panic decision. As it goes for investors, many of them also like to ping pong with a team for a longer period of time and get to know the people and business before they invest.
Another great tip, coming from Nicolaj Højer, is to try and make a beta product before you ask for investment. Try and figure out how far you can reach with the resources you have and use those to show why your idea is worth time and money. It doesn’t have to be perfect, but it’s a strong statement when a startup is able to go from an idea to building it themselves.
You've connected with an investor, what do you do now?
First, make sure you know what you want with your business. Find a balance between your ambition and the truth.
According to Esben Gadsbøll, it’s important to be realistic with what you have built so far. If you want to go big, that’s great, but when pitching to an investor, make sure that your work also shows that your ambition can go there. For example, if you have built a business around a Danish market, focus on that; or show that you have started a process that can go global, if that’s your goal.
Klaus Nyengaard also appreciates honesty in investments. According to him, it’s more important with the truth (and of course a little bit of hype) than to just listen to exaggerations of someone’s startup. Be realistic with yourself, know your strengths and what challenges you. An investor knows that nothing is perfect. Make sure to testdrive your pitch beforehand. Ask for feedback on both your written and spoken presentation. Also keep in mind that all the data is relevant, even if it’s not great. Or even good.
What is important to watch out for when raising capital for your startup?
Esben Gadsbøll has seen startups spending time connecting with famous investors rather than with those who have the best skill set for your business. Don’t put your focus on getting your picture in the newspaper at this stage. Focus on developing. Learn from your mistakes, they tell you what doesn’t work. Finding an investor who can help you with this is highly valuable.
When trying to raise capital, there are 3 mistakes most startups do according to Nicolaj Højer. The first is to go to a bank. Banks don’t usually loan money at a high risk. The second thing is to go to a venture capitalist, who are more likely to take high risks, however, the type of companies that get funding from VC's have often been running for 5 years or more and have a solid business. The third way they go is to find a business angel. At an early stage startup, this might be a good idea, but the mistake many of them do is to only pitch an idea of a business.
To sum it all up:
- Honesty, ambition and patience are important for your startup to grow.
- Make sure you know what you want with your business, be realistic about it, give yourself (and your business) time to let it get there.
- Rather than making panic decisions, let your company and network grow, already from an early stage. This will give you time, which will lead to a more steady growth.
- And, of course, believe in what you are building.