How To Secure a Lead Investor #FIChat Q&A

I don't know how taboo I'm allowed to be on the Founder Institute webinar, but a sex toy company that is doing quite well called Oh My Bot, and another one called Bedroom Candy. So with that, why don't I talk a little bit about why I'm here and my involvement with the Founder Institute. I've been One of my recent activities has been to help set up something called the Founder Lab at the Founder Institute. And the Founder Lab, for those of you who don't know what the Founder Institute is generally, I imagine most people on this webinar probably do, the Founder Institute is the world's largest startup launch and entrepreneur training program. They've launched about 1,500 companies to date. So far around the world, and they're in almost 100 cities right now. And the Founder Institute is really focused on super early stage, so ideation through incorporation and maybe having an MVP and that kind of stuff. The Founder Lab is a little bit different. It's a slightly later stage, although still super early. I would describe it as seed stage companies, and it's a week-long crash course in Silicon Valley, so it's targeted at companies from around the world that are kind of stuck in the position they are, or just want something faster than an accelerator. They don't want to wait around for 3.5 months to go through an accelerator. So even though we target it at international companies, I think we have a lot of people from the Bay Area who participate as well, just because they like the program. It's a week long, as I mentioned. The next one is in the fall. I think it starts on Sunday, September 13th, that evening, and then it runs through the following Friday. And you can go to founderlab.com. I'm not going to push it too much, but basically you make the progress of an accelerator in those 6 days while you're in the program. And by the end, you have a really fully refined pitch deck, you've built a network, so you do some networking here in Silicon Valley and meet VCs and and other founders and people who can help you out with your business, and you should have a pretty clear tactical execution plan to go ahead and raise money. Often we do— we end up doing business triage, so sometimes there's something fundamentally that needs to be fixed about the business, so we'll do that as well in that week. So it's a pretty intense week, it's a lot of work, but if you feel like not sleeping very much for a week and coming to Silicon Valley, it's something I would recommend taking a look at. So with that, Why don't we move on to the subject here, which is securing a lead investor. So, you know, first I think it's probably important to talk about why you need a lead investor. I think a lot of startups don't really understand why it's really important to have a lead investor. And the reason for that is, you know, although there are a lot of investors, especially now, especially in Silicon Valley, for example, there are a lot of angels. Not all of them lead. In fact, many of them don't want to be the first money in a startup. The person who leads an investment generally needs to be a little bit more sophisticated. They need to set terms, so they need to be able to understand how to value the business. They generally do more extensive due diligence. So, and it doesn't mean that someone who follows isn't as sophisticated, but it means that they're not as sophisticated in that deal. They're not putting the energy into that deal to do it. And it's more work to be a lead investor, so you'll find a lot of investors who only follow, and often they'll have specific other investors that they like to follow. So they'll say, if so-and-so invested, then I will also invest. And some of them lead sometimes but rarely, and they usually follow. And so it's important to know who you're talking to and whether or not they are a lead or a follow. And if they are a follow, it's great, it's fine. You know, you need to keep them engaged and keep that conversation warm, but you're not really going to start fundraising until you find a lead investor. So they are the ones that kind of If you view investors as sheep, which I know is an analogy that has been used quite a lot, the lead investor is the shepherd. The lead investor is the one that kind of brings the flock along. So that's the person that you need to really go about securing. So the purpose here is to answer questions you have about how to find a lead investor and how to secure a lead investor. I could probably just babble for an hour about it, but instead of that, let's answer some questions that you guys have. So I want to read some questions here for a minute. So the first question here is, "What are the characteristics of the ideal lead investor?" Well, that's a good question. I think those characteristics obviously depend on your business. So what I recommend doing is if your business is in a particular space, so let's say you're a B2C business, let's say you're building an app for consumers in the food space or a restaurant space, like some kind of competitor to Yelp or something like that. What you're going to want to do is find out, you know, you can go on something like AngelList, you could probably do this on F6S as well, but I'm not I'm not totally familiar with FSuccess, but you can go on to something like AngelList or FSuccess and find other companies in the space doing similar things and find out who's invested in them in the past. And what you're looking for is someone who's basically interested in the space. I would say that's the most important characteristic for a lead, someone who likes the space, knows the space, probably is connected to other people in the space, can help you secure either business development assistance or maybe advisors or, you know, perhaps other investors that are the right people for you. So you want someone connected and engaged. The other thing I would say about a lead investor is you want someone who's pretty familiar with angel investing. So I've made the mistake before of having a lead investor who I liked for other reasons, but hadn't really been a startup investor before, and it caused a lot of legal expense and nightmare and headache because he was wanting things done in weird ways, and we had to negotiate, and it was just a pain. You want someone who's super familiar with startup investing and angel investing and likes the space that you're in. So I hope that answers that question. If there's more follow-on, go ahead and— and let me know. Let's see, so the next one here is, "How much does a lead investor typically invest in a seed-stage startup?" That's an answer that's— that's a question that's really hard to answer because it varies so wildly, and it also has been changing over time. So there are VC firms who call themselves lead seed-stage firms who will lead a seed— they call it seed stage. And, you know, they'll plunk down $2 or $3 million as a seed. I don't really consider that seed anymore, it's kind of— but they're calling it seed now. So that has changed over the years. As for angels, it's much less than that. I mean, I've seen angels lead for as little as $50,000. $50K, and because the round can be maybe only $100K, $150K, so an angel can come in at $50K and lead the round at that point. Typically, it's 1 to 200, I would say, but that's just a ballpark estimate based on my experience. I don't have any vast empirical data on that, but— It really depends on what you're raising and how big the round is. In terms of the amount of the round, the lead investor usually takes a decent chunk of the total raise, so anywhere between 20% and 50%, at least, of the round is typically put in by the lead. So let's see, next question: What are effective strategies for turning a warm potential investor into a definite yes and ideally a lead? Okay, well, you should know whether they're potentially a lead at all before you even have the conversation, so you can't turn anyone into a lead who wasn't going to lead in the first place, or who can't lead. But getting to yes, you know, I think for angel investing in particular, and this is a little bit different than— it's a lot different than VC investing. Angel investing is very relationship-driven, so I think you've got to really focus on building the relationship and getting them excited about what you're doing. One thing that I like to do— there's an old adage that if you look for an investor, you'll find an advisor, and if you look for an advisor, you'll find an investor. And there's some truth to that. So typically really good angel investors often, unless you're connected to someone like Ron Conway and you can find a great angel investor like that, but typically good angel investors come through being advisors but not formally early on. So you'll have a founder that finds someone that they that has maybe had some success in the space or is connected in the space, and they have money and they could be an angel investor, and they would be willing to lead, they're that kind of a person. And they just start building a relationship and asking them questions, but they're legitimate. You're not faking asking for advice, you're actually asking for advice. And one thing that tends to work really well is if you have a good rapport with someone like that, you can show them your pitch deck, you can show them your business, and you can say, you know, before you're even trying, you can kind of— instead of thinking of yourself as raising money now, think of yourself as not quite ready to raise money, and they're going to help you get ready for raising money. And so that— there's a different kind of conversation that you have around that. You build a relationship there, and you basically say to them, help me, you know, help me get this business ready to look good for angels to raise money. I know I'm not ready, I know there's probably problems with it and I don't know what they are yet. I know that I would like to be raising money soon, but I'm not really quite ready. Help me. And if you can build that relationship and they can help you with aspects of your business that maybe need to be worked on, or maybe it's just your pitch and your deck, but if they can help you refine that and they can help you get to the point where your offering is really solid, what you've done at that point is you've got investment from them in terms of their emotional involvement and their time. And so now they have this feeling of ownership over your business in some way. So you get to this point where one day you're sitting with them and like, okay, anything else that I need to change, or is this really good to go? You think I'm ready for investment? And when they finally say, yeah, I think, you know, you've taken my advice, you've made the changes, I think now you're good for investment. That's a really easy transition to, "Great, do you know anyone who could invest?" Like, you're the one who just said I was ready, you're the one who helped me get ready, and in some sense their name is on the product at that point in a little bit, even if it's not public, they feel a little bit of a sense of ownership, and if you can get them to the point where they've been working with you and they kind of agree that you're ready for investment, I find that's a really great way to get angels onboard, and often the answer to the question of, "Do you know anyone who will invest?" often the answer is, "Yeah, I would like to put in some money, and I know 4 other people, and I'll contact them," and that kind of turns into a lead. It doesn't always happen, but that's one method. Okay, next questions. How do you know if you are— how do you know if you are ready for getting an investor? Subrat, I'm not sure how to pronounce your name, sorry. How do you know if you are ready? Well, most of the time, most of the founders that I meet think they are ready when they are not. And the simple reason for that is we always feel like we need more resources and we need more, you know, it's always great to get a check and be able to build your business. You always kind of feel like you're ready even when you're not. I would say you know when you're ready when you have the relationship that I just described, when you have people who are potential angels or potential, even just potential high-power advisors or people who are in that space who you're working with, who are helping you out, who like your idea, who like your business, and who have helped you get to a point where they think that you're ready. Which I know is kind of a soft answer, but every business is built on different assumptions, and the riskiness of those assumptions are different. So from an investor perspective, they want to see some of those early assumptions vetted, or at least de-risked as much as possible. And what those assumptions are for your particular business, and what exactly that looks like, depends on your business. So I would say having some experts in the space who are who are working with you informally to help get your business ready when they think it's ready, then you're probably ready. But I'm sorry that's not like a super specific answer, but I think that's the right answer. Okay, so angel syndicates would be the best option. It looks like— by the way, this is Carlos. Thank you, Carlos, for the question. Angel list syndicates, are they the best option? No, I don't think so. They're fine. I think they're fine for filling out a round. I don't think they're— you know, they're not going to lead. And the problem is you have— when you have that many investors, each with a tiny bit in your company, no one really— there's not really a sense of ownership or responsibility. So it's great. I'm not knocking angel syndicates. They're great, actually, for filling out rounds. A lot of syndicates are led by, obviously, a prominent angel investor, so that prominent person is the lead, and if that person is leading by saying, hey, let's use our syndicate, then fine. But you need them involved and them engaged in some way, I think. Because otherwise, I don't know if you've— go to any empty lot in a city that no one owns, that no one is paying attention to, it's not taken care of very well. So when you have something where there is no sense of ownership, and no one really has any big stake in it, you tend to get stewardship of that asset. So you're not going to get the access to help that you might get. Now, if you've got a strong lead who's running a syndicate, absolutely, because that lead can leverage the network of that syndicate and prompt people to do things. But you need someone in there being your lead who's got more of a vested interest in seeing your success. Okay, so I can scroll down. Oh, there's a whole bunch of questions. Okay. Does the sustainability seem to have the greatest appeal to investors? If so, why? Betsy. Does it seem to have the greatest appeal? I don't think so. It's a fad, right? It's something especially in the Bay Area, especially maybe in Oakland. It's definitely a fad. It's something that people talk about and they like sustainability, but— and so maybe you can find some angels who are more philanthropic, but I don't— you know, the answer to the why is basically people— it's a fad. Philanthropy. It's a form of philanthropy. So it's people feeling like they want to do good and make a difference, and they have some money, and instead of investing it in some new app that's going to be the next Uber, they'll invest it in some kind of sustainability tech. And it makes them feel good about themselves. I mean, that's the why. I don't see it having a greater appeal. I don't particularly go for it because I think Often the people that are running sustainability— and this is not a blanket statement about every founder doing sustainability business, so I apologize if it seems that way— but often people running businesses like that are too focused on the cause and less focused on the business. So to them, a successful business is making some kind of cultural impact in a way. They feel like if they get a lot of people doing something or if they shift a conversation, they feel like they've made an impact. It's a socially-minded business, which is fine, but I think people that focus on sustainability tend to focus on that at the exclusion of actually having a return, and I tend to be someone who wants a return on my money. A lot of angels are like me, they want a return. They get excited about other things, but they want an Uber, right? Sustainability, I think, is cluttered with a lot of people who would not otherwise be founders, and therefore you're probably getting, on average, not as high quality. You can make a counterargument that because it's very popular, you have the best founders going into sustainability, and that's a fine counterargument, I'm not sure. Had you not asked the question about sustainability having the greatest appeal, I wouldn't have thought about it, so maybe that gives you an answer. Let's see, next question from Jacob: What are the top 3 things that a lead investor looks for in the software space, in the app space specifically? Well, You know, I was— I had a securing a lead investor conversation last night, actually, and a similar question came up. You know, the things that an investor is going to look for have changed over the course of the past, I would say, 10 years. Earlier, there was less of a focus on actually having gotten a little bit of traction at the angel level. So it used to be that it was mostly about the team and the idea and whether you felt like the team could maybe execute on it in the market, the size of the market. And those things are still really important, right? Who's doing it, the team, the size of the market, right, and execution. But I think the bar for execution has been raised in the past, I would say, 8 or 9 years, and now because it's so cheap and easy to build apps, they expect the app to be deployed often. Few people will give money to an idea or a bunch of wireframes. So usually they want some— they want it deployed. The number of people using the app I don't think generally is that important. So it might just be a beta. But what is important is, are they addicted? So are your core users for your app, the people that are, you know, the people that are really excited about it, are they addicted to your app? Are they gonna— do they use it all the time? Do they keep using it? Do they want to share it? Are they really engaged with your app? I think early on engagement is more important than than scale, because it's relatively easy to be a flash in the pan or to get people to open your app, but to get people to reuse it and come back to it and have a low churn rate is— that's compelling, at least to me. So hopefully that answers your question. So next one. Do you seek an investor once you have a prototype only or at the idea phase? Oh. I'm going to butcher your name, I'm sorry. It's Simri, I think, or Kimri, I'm not sure how to pronounce your name. So related to what I just said, I think I would start— so let's talk about the verb seek. I know this is kind of a weird answer, but I think you seek an investor right away. So at the idea phase, but you don't expect investment. And the way that you seek them, you're probably not going to get investment until you've got a prototype at least. You're probably not going to get much investment until then, but the way that you seek them is not by going around saying, "I'm raising money," right? It's by getting back to the little cliché phrase that I said earlier, you seek advice, right, and you'll find investment later. So what you do is you spend your time at the idea phase finding people who can help you with your idea, people who have built stuff like this in the past, people who have invested in things like this in the past. You find those people and you get advice, because at the idea phase you probably need a lot more advice than money. So get that advice and start building that network, but really you are kind of laying the groundwork for getting investments later, because you are building those relationships with the exact people that you need. And I'll say this, if I could get— let's say I was building an app and I was at the idea stage. If I had an option of getting— let's pick someone that maybe everyone knows just for this example, but If I could get Jack Dorsey, right, if I could get Jack Dorsey to give me $100K just as an investment based on my idea, or he was instead willing to spend time with me and help me on my idea and help me develop it and introduce me to people and just, you know, really help me solidify it, as tempting as it would be to take the $100K, it would be more valuable to just get his opinion and his help, and so, you know, with no expectation of him ever investing. So I would look at it like that. Obviously you're not going to— you probably won't get Jack Dorsey, but that's the— that's, I think, the best attitude. There's a— I'm going to quote a Founder Institute mentor named Avery Leifert who you can look up. Pretty successful guy. He kind of— I'm going to butcher his quote here, but the way he describes it is the best way to build the next billion-dollar— the next way to build the next billion-dollar business in a particular industry is to find the person who built the last billion-dollar business in that industry and to get them on your board. Or get them to help you, or get them to help advise you. And I know that seems out of reach to a lot of founders because you think that some of those people maybe are very wealthy, or they just don't want to talk to you, but a lot of times people who are passionate about a space and have built a company in that space are more than happy if you're smart and you're a hustler and you're really working hard and there's something special about you and your idea, a lot of times they're more than willing to help out in some way, especially as an advisor. All right, so let's see. Next question, Ahim. We're a pre-seed startup. By the way, have you noticed that the past 10 years there used to be no such thing as pre-seed, and now there's pre-seed. I think there's going to be pre-pre-seed in 10 years. I know what you mean though, because everyone starts calling what used to be Series A is now called seed, so I get it. You're a pre-seed startup and we're working on a demo, could you think of anything that could help us move ahead with an angel investor although we don't yet have something to show? Yeah, so kind of getting back to what I talked about earlier, I'm going to— I don't know if you're an engineer, Ahim, so I apologize. I'm going to assume that you're an engineer, although this is not just true for engineers. Engineers tend to get excited about building a product, and that's great, and products are obviously necessary. But early on, generally the business itself is based off of assumptions, and those assumptions are things like people have this particular problem, people will spend money on this particular problem, people prefer X to Y, people will talk about X, or people want this particular thing solved in this particular way. Those are assumptions that you make. And, you know, just as a stupid example, right, when you open a restaurant, you assume that people eat, right? Now we all know that people do eat, and so that's a fine assumption to make, But if you opened a restaurant in a planet where no one ate, you would fail. So there's those assumptions that are kind of built in. And often they can be tested. And engineers— the reason I'm picking on engineers, and I feel like I can do that because I'm an engineer— often we don't think of ways to test them without building a product and seeing how it goes. But there are plenty more creative ways often to test assumptions. You can test assumptions sometimes just through customer surveys and interviews. You can test assumptions sometimes through really low-tech manual solutions to things. So you can throw up a website, for example, that looks like it's automated, but really it's just you and your friends in the back doing all of the work. And you're losing money on it, but you know, you only do it for a little while. And you do it to test whether the customers actually want what it is that you're offering them. So I would encourage you to kind of figure out what are those main assumptions, because as an angel, those are the assumptions that I'm looking at and I'm thinking, is that assumption true? Because it introduces risk, and I want you to be able to come back and say, yeah, look, we don't have the demo yet, but here are our main assumptions, and we've tested this one, and we've tested this one, and we've tested this one, and here's how we've done it, And we've shown that these assumptions hold, and therefore we know that this demo or this prototype that we're about to build will have a higher chance of actually succeeding because it's based on these particular assumptions. Okay, Javier is next. What are some warning signs? Why would I not want to go with someone as a lead investor? Oh, that's kind of a good question. Well, from personal experience, as I mentioned before, one warning sign is that an investor who, even if they want to be the lead and they're in the space, they are not familiar with seed stage investing. So if you throw a kind of normal capped convertible note in front of them and they start asking questions about how these note things work, and I've never done this before, and shouldn't I invest in stock directly, and don't you need a shareholder agreement, and blah, blah, blah, and then if they start doing anything kind of out of the ordinary. By the way, everything I'm saying is pretty Silicon Valley-centric because obviously that's where my knowledge comes from. But Silicon Valley, angel investing in Silicon Valley is pretty standard and pretty templatized, so there's just a few, maybe it's a safe agreement, maybe it's a note with a cap. Beyond that, there's not much, there's not many other vehicles or many other ways to angel invest that people do typically. Anyone who pushes back on very standard documentation or terms like that, I would say screw it. Also, if they negotiate really hard on price, like your valuation, I would say screw it. The caveat there is I say the same thing to angel investors. If founders negotiate too hard on price, screw it, because founders often negotiate on price when they shouldn't, because the price— you know, valuation doesn't matter very much super early. So I would say that's a red flag if someone is overly legalistic in negotiating. I wouldn't go with them. I would say also if, you know, if you feel like they are going to micromanage you in some way that you don't want to be micromanaged, that's rare, but sometimes you can find an investor who thinks that they have better ideas than you about everything in the business and aren't content just to tell you, which they will. Telling you the ideas is fine, but trying to kind of reach in and control you in some way, that's kind of a personality thing you have to suss out when you're interviewing them. Let's see, other warning signs for angels— make sure that they're currently investing. A lot of people, you know, I go through periods like this, and you know, just to be clear, I haven't made an investment in several months, and I went through a period of like, "I'm not investing for a little while." I had some other stuff going on in my life, wasn't investing for a period of time. And I would tell people that if they asked, but you need to ask. And you know, so during that time I didn't go actively look for investment that would be kind of, or for companies that would be kind of rude of me to do, right, to go seek people and then not invest. But people still came to me and they would ask advice and they would talk, and I've ended up helping some people in that time, but make sure that they're actively— it's fine to say like, hey, are you actively investing at all right now or not? Now a lot of them will say no even if they are, so the best way to check is to see, go on AngelList or something and see how recently they've been making investments, because Unlike a VC firm, a VC firm has capital they have to deploy, right? It's their job to make investments, and so they're a machine that just, you know, they run, they're always looking for new investments up until they've made all the investments they can for that fund, and they're constantly doing this. But angels don't have to invest, right? They could just go buy a house in France or something. They don't— like, there's not— It's their personal money, they've got other things going on in their world, so it's fine to say, it's fine to ask them, like, "Hey, are you investing right now?" And they might say, "No, I'm not," and that doesn't mean that you shouldn't talk to them. They might be the right person to talk to still, because they might have a lot of advice and they might introduce you to other angels. So when I've gone through, you know, there have been a couple periods in my life when I've stopped investing for 6 months or so, During that time, if I met with a founder, I would give them advice and I would try hard to connect them to a friend of mine who was active at the moment and say, "Hey, go talk to this guy. He's investing right now." Any other warning signs I can think of? Not really, not beyond, you know, you have to like the person, right? So if it's an awkward relationship and there's something that doesn't feel right about them as a person and you don't like hanging out with them and you don't like talking to them and you it's just, you know, you wouldn't hang out with them in any other context ever, eh, probably might want to not have them own part of your company. Okay, next question, Sumit: What are the basic differences between seed funding and lead investor-based funding? Well, seed funding is referenced to a stage of funding, like stage of your company and fundraising, and lead investor-based is— lead investor-based funding isn't a description of a stage. They're not— you're comparing apples to oranges. I mean, lead investor-based funding is seed stage funding, it is Series A funding, it is Series B funding, it is Series C funding. All funding is lead investor-based funding basically. In just about every stage I can think of, there's a lead investor. Now at Series B, that lead investor is Kleiner Perkins or someone, you know, a big firm. At the seed stage, it's either a seed stage VC or a super angel or someone there. At the angel stage, it's an angel. So lead investor-based funding isn't a different stage of investment, it's just a— I've never actually heard the phrase lead investor-based funding, so all funding is lead investor-based funding for startups, basically, unless you're crowdsourcing, I guess. What is your thoughts on convertible notes, and how do you set valuation in immature space with little to no comps? That's by Rich. Great question. It's a question that every founder has, but the dirty little secret is Every angel has the same question too, Rich. So convertible notes are fine. I mean, I've only ever invested in capped convertible notes, so I think if you try and get someone to invest with a convertible note and it's not capped, any semi-sophisticated, even mildly sophisticated angel won't I don't touch that usually, unless it's, you know, unless you're Mark Zuckerberg and you're starting another company, then wait. But I'm not sure if— you know what, I will ask the question to you guys, and hopefully someone will respond. If you want me to explain what a cap is, I'll do that in a minute, but let me know on chat. So how do you set evaluation in an immature space with little to no comps? That's really tough. I would say if you're raising— these are just rules of thumb, there's nothing hard and fast about this, this is based on my experience and what I've seen. If you're raising and your valuation is less than $1 million, if you're asking for a valuation of less than $1 million, you probably shouldn't be raising. If you're asking for a valuation that's more than 7, 8, 9, if you're up at that end, you're probably not at the angel stage anymore. So that's kind of the spot I would say where most angel investments happen in terms of your valuation. How you set that in an immature space with no comps, I wish there was a way. No one really knows. It's based on what you feel like and what the angel feels like. There's not— I'd love to say that there was some great mathematical formula for it, but the truth is it's mostly just people, you know, "Eh, I'll guess," right? The thing I will say about that is if you pick something in that range that's reasonable, you know, no one will really balk at it. I would say typically a lead investor is the person who sets that. Or sets that valuation. So a company comes in to me, let's see, what do I do to set a valuation? Basically if they're early, early, early, they've got like an idea and they don't really have much of a team, I mean if it's a super early thing, it's a low valuation. I'll set it at $1 million, and I'm like, look, you know, this is a huge risk, you know, I need massive compensation for this risk. And the farther along they've gone, the higher that valuation goes. And I know that's not very mathematical, but if they've got a team, maybe they've got a prototype, they've done some stuff, eh, $1 million is too low at that point, because they've done something and at that point they're worth a few million. But it's kind of guesswork in many ways. So I hope that answers your question, Rich. Alright, last 3 questions here. What's the best way to pitch a lead investor? That's from Roman. I think it's a relationship and a conversation. I think that— let me put it this way. I'll tell you what I've never invested in. I've never invested in a cold email that was sent to me that said, "Hi, my name is Roman," or whatever, "my business is X, Y, and Z, this is why it's great, please look at my deck," or "please meet with me," or whatever. I just don't, I don't even answer those emails, half the time I don't even read them. It's not because I'm rude, it's because I'm busy. And the difference between an angel and a VC is a VC will answer those emails generally, they will look at them because it's their job and they have to invest something, and they need to be aware of the space. Angels are less worried about missing out on some big opportunity. They don't have to invest their money. They don't have to spend any time doing it. In fact, like I mentioned before, they can take months off at a time and say, "Eh, you know, I'm going to go travel the world for a little while and then I'll come back later," or whatever. So angels don't, in my experience, or maybe just for me, don't respond well to just cold pitching or cold emailing, like, hey, look at my thing. I saw you on LinkedIn, or I saw you on AngelList, and you're in this space. Please do something for me. That just never happens. So the best way to pitch them for me is to have it come through a friend. It's to come through someone. And I know that's really hard, and I used to hate it when investors said that when I was a founder looking for money, because I didn't know. I'm like, "How do I come through a friend? I don't know you. I don't know your friends. How the hell am I supposed to get to you?" And they would say, "Well, come through someone." The truth is, if you do the legwork, you can usually come through someone. And you do that by, like I said before, you look for people in the space, you start meeting them, you go to meetups, you go to events, you build a network, an advisor network, you spend a lot of your time. It's a lot of legwork, and it's a lot of time, and it's gritty, and it's no fun most of the time, but you're just meeting people and connecting and talking about your business constantly and trying to figure out how to eventually get to the right people and who the right people are and really understand the landscape. And once you get to that person, then the pitch is less of a pitch and it's more of a conversation because then they're coming to me and it's a friend of mine saying, hey, you know, I had a friend of mine email me recently, hey, you should look at these guys. He's right in Berkeley, which is near where I live. He said, "You know, you should look at these guys. The guy's really interesting. I like what he's building. I think you'd be interested in it." He didn't say, "Go read the pitch," and blah, blah, blah. He just said, "Go meet with these guys. I think you'd like the person." And as an angel investor, I want to take meetings with people that I might like and who I might think are interesting, even if I'm not going to invest. If that intro was coming through a friend who I know knows what I think is interesting, because we're friends, then I'm much more likely, and I took a meeting with the guy, I had several meetings with him, and I ended up not investing, but I did end up connecting him with a bunch of people, and actually the jury's out, I may still try and jump in on that deal. But I like the guy, and I really like the offering, and I wanted to help him in, That's the kind of stuff that I respond to, and I think that's true for a lot of angels. They want you to come in through someone else, and they will connect you. If you meet someone who is a potential angel investor, instead of pitching them right away, ask for something very specific from them. "I have this assumption. Can you tell me about how to validate it?" or "Can you tell me if this does validate it?" or "Can you introduce me to this other person?" or "Can you give me advice about whatever it is?" ask for specific small action items. I was at an event last night and someone asked me, "Hey, can I take you out to coffee?" And I felt like a jerk, but I said no. And I know to them going out to coffee is like not a big deal. They're like, "Oh, come on, go out to coffee, it doesn't take time." But the truth is, if I said yes to everyone who wanted to take me out to coffee, I would never do anything but sit around and drink coffee. And so I have to say no. But what I told him was, "Go on LinkedIn or go on AngelList or whatever, look at my profile, look at what I've done. If you have a specific thing you want me to help with that's going to take 5 minutes of my time, like reviewing an email or introducing you to someone or giving you a piece of feedback, I'm much more likely to respond to that." So I would reach out, like I said earlier, look for advice rather than investment, and the investment will come. Okay, that was a long answer, sorry about that. Patricia, "Are there any business sectors that are more difficult to get funded, and advice for improving chances of getting funded?" I'm going to be quick on those last 2 questions because I rambled on Roman's question, sorry. Yeah, there are— I mean, so there's always trends, right? So there's always trends in what's hot and what's not in terms of sectors getting funded. So I think that's pretty easy to predict. Generally, investors are looking for not necessarily big markets, but growing markets. Markets that are— it's fine, it's great if they're big and growing. Big and growing is the best. Small and growing is fine. Dying markets, not great. So someone the other day tried to talk to me, or they did talk to me, but they were trying to get me excited about a business that was all about like landline phone lines, land phone lines, and it was hard to get excited about it because when I look out 20 years, I imagine, is there going to be a phone line network? Who cares? It's not something that— it's not a growing industry, it's a dying industry. So I think that kind of a sector is interesting, and there's also always just buzz about various things. For a while it was big data. I feel like there's a lot of machine learning and AI stuff happening now. You can kind of see trends in those. Those tend to be easier to get funded. That's just the way it is. It's not necessarily the right way to do it, but not everything works the way it should. Sheep, they are sheep, and they follow trends. Advice for improving your chances of getting funded? I mean, yeah, I think I probably answered that elsewhere. I'm trying to move on. Sorry, Patricia, but I want to move to the next question. Okay, as entrepreneurs, what should we avoid while presenting and introducing the products or the ideas? That's kind of a cool question. I give a lot of talks actually on pitching generally. What I think you should do, first of all, when you are presenting, I highly recommend making it interactive and paying attention to the body language and the questions that the people you are talking to are asking. If you're— I don't have my phone with me, I was going to do a demo here, but if you're pitching and there's an investor sitting there— I'll pretend this is my phone— there's an investor sitting there and he's like typing on his phone, doing whatever, he's not paying attention. Stop. Don't just pitch at them. Stop and ask questions and get them involved. So you want to have it be a conversation. The other thing I would suggest is, you know, I don't like, and I think a lot of more sophisticated investors, they don't like to be told conclusions, especially with superlatives and a lot of adjectives. They like to be told the information so that they can draw the conclusions themselves. So what I mean by that is instead of saying like, "This is a great big opportunity and this is awesome," like those don't mean anything. Those are value judgments that you've made about your business. Just saying it's great and saying it's awesome doesn't give me any information. It just means you think it's awesome. But if instead you say, well, you know, this industry has been growing 25% year over year for the past 5 years, and it's now at $4.7 billion, and it's projected to hit— it's going to be a $15 billion industry in 2017, and, you know, like, if you're giving me data, I can get excited about it, and I can say, "Wow, that's impressive, that's really cool." So I would focus on less abstract value judgments about the business and more concrete, concrete pieces of information that lead the investor to making the conclusion that you're trying to foist on them. So if you want me to think it's great, explain why it's great. Don't tell me that it's great. It's similar to the— there's an adage in fiction writing which is show, don't tell. Don't tell me what's happening. Show me by giving me pieces of information that I can put together myself and draw that conclusion. So I would avoid that kind of stuff. I would also avoid having no emotion. It's really hard to get excited. Angel investing is particularly emotion-driven compared to other stages, and if you stand up in front of an angel or you're talking to an angel and you just don't seem excited about the business at all, it's going to be really hard for them to get excited, and they're also going to wonder how you're going to convince anyone else. So I've seen people— I coached a founder recently who was building a really, really, really cool piece of technology that literally pulled water out of the air using solar power, so it was off the grid, and made fresh water with this device. Super cool, super impactful, awesome. But the way she pitched it was like, so this, you know, we're using hyperdehumidification, and I mean, it was just so boring. And I had to have this long conversation with her about caring about what she was talking about. She did care, but she didn't appear to care. Make sure that you appear excited about your business. That's the last piece of advice on that one. Okay, I think I'm being told to give some closing tips here, and any other closing tips to— so I'm being told by our moderator here, any other closing tips to efficiently secure a lead investor? Any other closing tips? I would say, don't— I know it's hard to say this to people because it— I've been in your shoes, right? And it's hard to hear this, but don't seem desperate, right? Know that you can do a lot with very little and that you're building something that you really believe in, that you think is going to be awesome. Know that the right people will get excited if you are doing your thing right, and that investment will come. Because one of the things that turns off especially angel investors really early on, any investor, is an air of desperation. So think of— always be thinking about this from their perspective, not from your perspective. "The fact that you really need it, or the business needs it now, and if you don't do it now, the business will have a problem and I'll have a problem and blah, blah, blah." Fundamentally, even if the investor is a nice person, they fundamentally don't care. It's not their problem. It's not their business. So what you have to do is flip it around and think about it from their perspective and why they would want to invest now and why it's important now for them to be doing this. So I would, you know, if you come across as desperate, it's very unlikely you're going to get anything, even if it's a really compelling business, and that's unfortunate, but you've got to manage your own psychology, and that's just the way it is. One of the hardest things about being a founder is managing your psychology, and I think probably trying to find investment is the worst possible way to spend your time, but it's necessary, and it sucks, and you have to do it, and no one likes it, and it's very difficult psychologically, and just be prepared for that and manage your psychology. So, okay, let's see, I don't know, I think we're, I'm being told we're kind of running out of time here, so I'll wrap it up. You can learn more about the Founder Lab if you'd like by going to founderlab.com. I think the link is in the chat somewhere. Like I said, I'll be running the next one along with a colleague of mine named Luis Guzman, and so if you happen to do that, great, we will help you build your company. So go check it out. And I think that's it. Everyone's going to get an email with the webinar recording and links to, you know, Founder Institute, the best of the Founder Institute investor content and stuff. You'll get all of this, you'll get this video and everything else in your email. And that's about it. Thank you everyone. It's been a pleasure, and I hope I helped. Take care.