Startup funding 201

Before approaching any angel, angel group or venture capital firm, do your homework. Know what they’ve invested in previously, and how those investments have performed. Know what types of investments they like to make now, which could be different from just a few months earlier. Know the backgrounds of the key players. And be sure you meet their investment criteria before you waste your time and theirs.

One tactic I’ve found particularly successful is to start by finding a lead angel – someone with expertise and credibility in your startup’s industry. Get that lead to commit before approaching other angels. If they are advisory board worthy, get them involved there too, and they’ll have even more upside to their involvement. You can even make their investment contingent upon your ability to raise some minimal amount from others, so they won’t be the only money in. Having a lead will give other angels more confidence in your opportunity and will also help settle questions about valuation.

In general, always seek out “smart money” investors – people with expertise, experience and skills and the willingness to use them to help grow your business. These investors can provide far more than just a check. They can help with strategy, provide business development leads, help you find and screen employees, drum up customers, suppliers, and more. Investors who have been successful entrepreneurs themselves are particularly beneficial. They know what it takes to start a new business, and will be both helpful and understanding.