Nivi · June 18th, 2008
A reader asks:
“I’m an entrepreneur looking for seed investment. All I have right now is an idea and a pitch. I’m presently pitching friends and family and it has been very positive. Do you know any other idea investors I should approach?”
Larry and Sergey had a product and traction before they got their first check from an angel. Investors want to see products and preferably traction unless you already have a significant track record. But,
If you only have an idea.
If you have no traction, track record, or product—if you have nothing but an idea for a product in a large market, the only people who will meet you are:
- Family and Relationship Investors: People who already know you and are willing to bet on you, based on your history together. They’re not betting on the company, they’re betting on you. They wouldn’t invest in the company if you were replaced by someone who was equally effective. Todd Vernon calls these people family and relationship investors.
- Idea Investors: People who believe there’s a big opportunity to serve the customer because they understand the customer as well as you do. Perhaps they’ve noticed the same opportunity as you but they haven’t done anything about it.
- Once Removed Investors: These investors trust or regularly co-invest with one of your family, relationship, or idea investors.
These investors sometimes have little to no experience investing in companies, but that is not an insurmountable hurdle. You will need traction, a track record, or a product to get meetings with other traditional seed stage investors.
In general, the more you need money, the less likely you are to get it. But making something out of nothing is what entrepreneurs do.
Another option: Cold call funds.
There are a few funds like Y Combinator, Seedcamp, and TechStars who will look at applications from anybody doing anything. But you will probably need traction, a track record, or a compelling product to capture their interest—ideas need not apply.
Salesmen are an exception.
Salesmen are good at getting people to comply with their wishes. That’s what it means to be a salesman. Great salesmen can get meetings and raise money with just a large market and an idea (and maybe a sprinkling of track record).
Also read the exceptional comments to this post: Ideas need not apply.