Build Your List of Potential Investors, Pitch Investors Properly, How Kevin Systrom Raised $500,000 in Two Weeks to Launch Instagram
Find Angel Funding & Venture Capital for Business Startups, Entrepreneurs, & First Time Founders – Episode 12
Most startups need funding at some point. Once you have the addressed all of the items in the previous episodes, it is time to build your list of potential investors and start the conversations. They can be friends, family, social network, social media contacts, work colleagues, people in the business industry, etc. Try to put together a list of at least one hundred people. A list of one hundred potential investors may seems like a lot, but the more people you have on the list, the better your chances are of success.
The next step is to talk to people on your list about funding your business. If you want to pitch investors properly, I suggest you do it in a soft, but direct manner. I typically kick off the conversation on a light note. Something along the lines of, “I am starting this business project,” or “I am testing this business concept.” Avoid using salesy language and observe if others show any interest in being a part of your startup business plan.
After starting the conversation in a casual manner, discuss your investment opportunity. Warning, discuss does not mean pitch. These people know nothing about your business. You do not want to overwhelm them with loads of information about your business model.
Think of fundraising as giving people sips of water. Give them information in bits and pieces so they can process them. It depends on how you phrase your sentences to make the potential investor ask for more sips of water.
One mistake excited entrepreneurs make is sending every business detail to everybody. It is almost like giving sips of water with a fire hose and drowning all your potential investors. It makes you sound desperate and you lose credibility. Be patient. Some investors will come to you, and some will not. If they are interested, they will come to you for more. And when they do, feel free to explain your business to them. For the ones who do not come for more, move on to the next one. Or maybe try again with a different business approach in six to nine weeks.
In 2010, Kevin Systrom went to a party for a startup called Hutch. Kevin met two venture capitalists that were impressed by his App, Bourbon. The purpose of Bourbon was so people could make plans, check in, and share photos from places that had good drinks. Shortly after the party, Kevin decided to quit his job and focus on Bourbon. Within only just two weeks, Kevin raised $500,000 from those venture capitalists at the party. By July 2010, they pivoted Bourbon, focusing just on the photo sharing feature of Bourbon. Bourbon was renamed Instagram.
Two years later, in March 2012 Instagram had 27 million users. Facebook purchased Instagram later that year for $1 billion.
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