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Tien Tzuo @tientzuo
, 15 tweets, 7 min read Read on Twitter
1/ I recently spoke to @AccelepriseSF’s 9th cohort. Topic turned to how to approach #angelinvestors for #seedrounds. I shared some of these thoughts with @TomTaulli on @Forbes,…
but let me expand...
2/ According to @ACAAngelCapital, every year +200k angels invest +25 billion in +71k startup deals! This has changed 3 big things: 1. how formal VC firms operate 2. Silicon Valley’s stranglehold on talent 3. How founders raise funds. Let me explain.
3/ Let’s start with VCs. Initially wary of angels as competitors, they realized that letting angels take the initial bets actually helps reduce risk, letting them focus their own bets. Win.
4/ Startup Hubs. The pattern of successful #founders reinvesting in the next gen is invigorating startup hubs outside of #SiliconValley, which is awesome to see. According to @ACAAngelCapital 63% of angels live outside of SF, Boston, NYC. Also Win.
5/ Founders. This is the biggest change. The rise of angels has changed how #startups get going, making it easier. Also a win! But raising money from an angel is very different than from a VC. The conventional wisdom of #fundraising doesn’t apply.
6/ I witnessed this in 2013 with @joshuareeves who started @GustoHQ with a monster angel-only $6.1M round. He actually TURNED DOWN top tier #VCs to accommodate angels. Wow. So what’s so different about raising from angels?…
7/ #VentureFirms are ultimately … firms. All have some kind of disciplined approach. GPs have to justify bets to each other. Cost of choosing wrong is high (loss of reputation, inability to raise next fund). So they really need to know TAM, business model, metrics, etc.
8/ But angels have different motivations: pleasure of giving back, excitement of the tech sector, founders reliving those fun early days, badge of honor of finding the next @uber or @wealthfront.
9/ Angels know their chances of winning are slim. They aren’t about reducing risk, heck they often see it as playing with house money. They are about the pursuit of glory. So if talking to angels, here are some lose/win pitches:
10/ Lose: “We are a mobile content optimization solution.” Win: “We are the Akamai for phones.”
11: Lose: “We are a learning program aimed at legal documents.” Win: “We give every startup in the world their own blue chip law firm.”
12/ Lose: “We are an e-commerce SMS platform.” Win: “We are bringing the Wechat shopping experience to America.”
13/ Lose: “We’re a SaaS platform that accelerates hardware development.” Win: “We’re part of the revolution and revitalization of manufacturing in an age where every product is a smart product”
14/ Your job as the founder: get angels excited about a big idea they can relate to, help them visualize the fun of helping this idea (and you!) succeed. Sell the idea, sell the team. The company will come later.
15/ OK everyone -- please share the best angel pitches you’ve heard! Thanks for reading, and may you and your angels enjoy #theclimbtoabillion!
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