If I had the kind of traction you wanted, then I wouldn’t need to be going to ANGEL investors. Why do the angel investors in Texas suck ass? They want at least 100K users and/or 200K in revenue.

True story:

I was at an angel network event in Austin. Had recently launched and picked up 2,000 users in 2 weeks for a b2b product. I wouldn’t call it a hockey stick but I figured it wasn’t a bad start, given that it should be easy to charge.

The angel told me I should have 25k users before he’d be interested. I thought the same thing as you, with 25k users, I’d def be cash flow positive and wouldnt need this clown. (He really was pompous, not just because he wanted more traction.)

A buddy was equally dejected, having talked to him before me and was angry that the angel wanted him to have 100k users.

I thought about my 25k answer and called it a small win… 🙂

Anonymous says:

May 8, 2014 at 4:55 pm

OP here: This is why we’re thinking of moving elsewhere. People are so risk averse here. But yeah, I was at a CTAN event when I found this stuff out. It was mildly annoying at best. They didn’t even have any real feedback.

Reply
- Anonymous says:
  
  May 14, 2014 at 11:38 pm
  
  Most Angel Networks (in TX at least) are going to suck. They’re for people who don’t know how to network w/ startups & entrepreneurs, but don’t want to “risk” their money in a VC fund.
  
  They want their cake… and pie… for the best possible terms. They expect something for nothing. They don’t want to seed anything, they want something that already works.
  
  Reply
Anonymous says:

May 9, 2014 at 3:27 am

2000 b2b users in 2 weeks – I’d be thrilled! Can you share how you accomplished this?

Reply

We have 200 users and $200K in revenue, profitable, and they aren’t interested in us either.

Anonymous says:

May 8, 2014 at 7:36 pm

Small market size?

Reply
Anonymous says:

May 8, 2014 at 8:25 pm

Yearly or monthly?

Reply
- Anonymous says:
  
  May 8, 2014 at 9:42 pm
  
  $200K per year, 100% bootstrapped, recurring revenue stream, and profitable. Market size is online, large, and underserved. We figured out the model on our own dime, and are now ready to add some fuel to the fire.
  
  But like they say, Austin is a weird town sometimes.
  
  Reply
  - Anonymous says:
    
    May 9, 2014 at 12:55 am
    
    Congrats! Are you hiring?
    
    Reply

It’s all about mitigating their perceived risk. Everyone wants the upside and a limited downside. It’s not about the #s but how you communicate that enough of the model is proven through real business. Sounds like you had a bad experience with a dumb investor who came off as a douche. Remember tho, you’re the one asking for money.

Anonymous says:

May 8, 2014 at 6:11 pm

Yup. Angels want to invest in companies that are guaranteed successes, but by the time a company is a guaranteed success they don’t need angel investors anymore; they can go to VCs and get much bigger investments.

Angels are supposed to be the ones that help a company up to the point where they get their series A or a large seed round, which means that they take on the most risk but most angels don’t want that; they just want to get in on the hottest new thing like a Snapchat or Uber, etc., but like I said those companies don’t need angels; they go after big money.

This is why I stopped contacting angel investors; they’re just a waste of my time. Sometimes they’ll even act excited about my startup and give me their business card without my asking them, but when I email them to follow up they don’t respond. Waste of my time.

I’d rather just build my company up to the point where VCs come knocking on my door; then any angel investor who tries to contact me is going to get ignored just like they ignored me.

Oh, also the reason why angel investors are so risk averse is because they’re investing their own money, so they have more to lose if an investment goes wrong whereas VCs are investing the money of rich people who’ve contributed to their fund, so even if an investment goes wrong, the VC will not lose money personally; their reputation might suffer though.

Reply
Anonymous says:

May 14, 2014 at 11:40 pm

No, it’s a two-way street. You’re selling shares (hopefully not debt) in exchange for money. They aren’t donating, they’re investing. If you get rich, they’ll get a piece of the treasure.

Reply

Your investors are “risk averse” because they quite correctly realized that your product offering almost certainly offers negative returns. That’s why they want to see numbers that size. Can you offer 20% YOY return? Because you probably aren’t going to be the Next Facebook.

Anonymous says:

May 8, 2014 at 11:57 pm

FFS, there is a HUGE gap of profitable outcomes between small co. and Facebook. Just for example, say earliest FB investors got 100x: does that make companies with possible 0-99x outcome chopped liver? Even 2x-10x is great return.

And frankly, even if we go back in time and FB had gone to these angels back in the day, they would have also ignored it, because they wouldn’t know $billion outcome even if it hit them on the head. The only time they know one is when it’s rocket growth future is self evident and it’s already has passed seed/angel stage.

Reply
- Anonymous says:
  
  May 9, 2014 at 1:33 am
  
  +1
  
  This is the angel dynamic in Austin and it sucks for those of us who are actually doing something that makes money but doesn’t fit their profile.
  
  Reply

OP: Write the idiot off on your f*çk-off pile because he’s bluffing. OR if you’re up for a little social experiment:

Assuming you were asking him for 100k.

Go back to him tomorrow and say “we’ve exceeded 26k users, raising $100k (or whatever your # was) now and would like to close next month on the 5th. We’ve gotten 50k from friend/family. Are you in for 50k at the same terms?” Technically, this should mean a fast close since things are popping, you got some money, and you’re even asking for less now.

Instead, you’ll probably observe the MoFo do any combination of:

•Come up with some other metric he needs to see before committing

•Ask for more meetings, although by now he already has the most crucial info needed. Meaning he’ll waste your time discussing off tangent scenarios that have no bearing on the startup’s progress within next year.

•Ask for more time to think about it. Contact him again 1-2 weeks after and he’s still thinking.

•Ask for more information over a series of emails, including minutiae that doesn’t help decide.

•Endless haranguing and pontificating on terms, despite not actually committing.

Etcetera.

Anonymous says:

May 9, 2014 at 8:02 am

+1

Reply
Anonymous says:

May 14, 2014 at 11:43 pm

Brilliant. We need to have a few pieces on here about investor pitching strategy. Not “how to write a business plan”, but rather, “how to manipulate arrogant investors”.

Reply

I bet they want 51% too..

What I’ve found is the sooner you start talking to investors the better. They’re always going to want more and push you to the next milestone before putting money in.

Talking to them sooner will let them see that your capable of your promises/predictions regardless of stage.

Angels (and any investor) want to put money in to help a company grow while still avoiding risk as much as possible. Just because you have 200k in revenue doesn’t mean you don’t investment, you could still grow much faster with extra capital.

Think its bad in TX? Try mid-Atlantic… Out here in ATX considering a move for my startup now from the East bc its even worse where we are. At least here there is an ecosystem!

OP here:

I just learned what a lot of the term sheets from CTAN look like. They typically want 2 board seats on BoD. It’s the most investor friendly term sheet I’ve ever seen in my life, and showing it to some SV and NYC friends, even they went DAFUQ. I think I may have dodged a bullet. I will just keep on bootstrapping until it’s time for a series A.

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