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.
Topics Angels · Ideas · Starting Up
“We help startups through what is for many the hardest step, from idea to company.” – Y Combinator.
Seems like a fit.
I’d like to you Aaron if that’s possible. I visited the Y Combinator site and am prepared to head to the Bay for the development of my dot-com website.
This is the challenge for us we need our seed $ to build our game. We can code it ourselves but it order for it to be compelling; it needs the zing that only can happen with some $ behind it.
I just pinged Nivi looking for a push, but I am feeling that perhaps we still fall into the idea only – or intangible category, which is tough. Then again, champions find a way to win. That is what we will do.
Know anybody with $250large lying around?
I like how a wise venture hacker put it to me. Investors assess risk through three variables:
1. technology (product)
2. market (traction)
3. people (track-record)
Develop (plan-out & execute) 1 & 2, and 3 self-affirms in tandem -> mitigate risk for investors, increased likelihood of investment, increased leverage in negotiations.
I invest in ideas by providing product development experience.; normally working with someone who has an idea, but little to no technical experience, and taking it to launch.
Having a functional product or service with some idea on it’s fit with target customers and how to acquire said customer profitably will go a long way to helping you attract investment.
See my website at mikal.org for more information and contact details.
I’d say if you can’t bother to build it yourself, get potential customers lined up, build revenue on an easier offshoot, or convince someone else to build it in their spare time, then you should reevaluate whether you are an entrepreneur.
I’d say if you need to have the idea implemented, sold to clients and proven in the market, then you should re-evaluate whether you are an angel investor.
You can’t evaluate the merit of the idea or its inventor, you just want to invest when no investment is needed. At best, you are a banker.
Angels should help entrepreneurs when they need it most, not least.
Absolutely.
Where is the risk, if you have already the product, the customers and a track record.
And what’s about the opinion and the experience of the investor? Shouldn’t they be able to evaluate the concept by themselves?
I have a great and already detailed concept for a huge market – but no money and dev-skills. It seems that there is no investor who is willing to take some risk.
The idea is the easy part. If you are a first-time entrepreneur, try scaling down your concept to something whose value you can prove with friends & family money, then go to professional investors. If your idea does not lend itself to such an approach, try your hand first with something you can bootstrap.
BTW as far as I know TechStars and Y Combinator don’t take lone entrepreneurs at all – only teams capable to deliver. They don’t offer a lot of money, but rather a stimulating environment with lots of coaches and mentors.
Actually we do sometimes fund single-founder startups.
Your accountant is a good source of finding introductions to once removed investors.
I agree with Michael, if all you have is an idea then you also need a team. An idea has a dollar value of $0. If you dont believe in the idea enough to commit your cash/sweat equity to build it or a version of it to show it can work, why should friends, fools and family ?
It’s really interesting to me that much of the VC space of today is so focused on technical founders. While the returns can be good, at some point, the broadening out of technology into realms where engineers have little context/experience is going to drive mass adoption of hybrid online/offline businesses driven by domain, not tech, expertise.
One observation is that engineers more broadly haven’t been in the executive ranks as you look at companies, but that early stage tech companies have primarily engineers in the founding team. As we’re seeing with Web 2.0 chaos, engineers making products using technology and based on their own instincts will be limited to areas where their experiences of market opportunities mirror stakeholder gaps. Where engineers aren’t the folks with the greatest pain points, internet innovation appears to lag.
Where markets are more convoluted, I think we’ll increasingly see different, made-to-order solutions driven by a non-engineer founding team building off of increasingly effective open source and other “pre-fabricated” constructs able to be tweaked/customized by a less engineering dominated executive team.
How VCs bridge back into this space after the landgrab of consumer internet will be interesting…we may see a new wave of VCs as the old are unable to move back into seed rounds requiring more substantial investments in building initial value chains.
After reading a few of the comments, especially the ones that actually made the “Venture Hacks” cut on the home page, I gained a new perspective on the entrepreneurial landscape.
Many of the entrepreneurs, it seems more evident in Silicon Valley, seem to think that a good idea has no real value. Sometimes ideas come to entrepreneurs in fields that they are not familiar with, or in areas they are not able to even bootstrap in.
The negative comments really gave me new perspective on how arrogant entrepreneurs can be. Almost like seniors treating freshmen like dog crap in order to give their accomplishments more meaning.
To the original post, an idea is a great place to start. Even if you don’t have the skills, the ability, or the money to get it off the ground. So where do you go when your friends and family aren’t a potential investment opportunity?
Network, and not with entrepreneurs. Get out and meet with companies that could possibly benefit from your product or service. Meet with companies that could be future advertising clients.
Meet with anyone who will listen. The one thing that I have learned is that an idea, if it is a passion and not just a means of making money, is like a living being. It is born, it crawls, it walks, and if you work hard enough, eventually it runs. Nurture it.
I point back to a hack by John Doerr about mercenary versus missionary entrepreneurs…..
First off, many of you who made the rather bleak comments about ideas being worthless without traction or a beta version sound like the leaders of wolf packs versus mentors and coaches. Maybe you never heard the stories of entrepreneur Billionaires who started with an idea and passion before working to build empires few can argue had meaning.
Second, to the original poster, this is why advice not ideas are worthless. Do what is in your heart, follow your path, and build your meaning. If it means something to you then you will be able to show its meaning to others through your thoughts, conversation, and pitches.
Good Luck.
We are actually here to help entrepreneurs making their idea come alive for free….. crazy – I know 😉
My name is Maynard Thomas . I have an idea for a new line of toys that is getting a lot of praise at this point just for the idea. My friends and family absolutely love the idea and the wide ground it covers, but in this economy no one seems to have investment seed money,understandably so. I have a few sketches that a friend of mine put to paper, but at this point I’m not sure where to go. I have talked to a couple of toy companies without giving away my idea, and they only deal with professional designers or do their designs in house. IF I could talk to someone and explain my idea you would see what I mean. I could almost guarantee you would love it. send me an e-mail, let’s talk.
You might want to give the guys at Edison Nation a call. They have the the experience to help you evaluate marketability and the contacts to make it happen. They will require a very large equity position if they take on your product but keep in mind that it is very expensive to develop and launch a product and they foot the bill for everything.
Good Luck ;)!
Pitching to customers will help you shape your idea into a marketable form, and to talk about it so that people will buy.
It won’t work with everything, but having waiting customers is a nice place to start when looking for people and funding to get your business going. Good luck!
This past summer, I started with an idea. I didn’t know exactly what to do and how to begin. I believe that this idea is simply revolutionary (like everyone’s ideas). Like Anthony said, I spoke with everyone that would listen. I mean everyone! I spent a lot of time looking for the “no” and got more the “go for it.” Eventually I was able to find two partners to share my vision. We then collaborated to build a working business plan for execution and endless market research. With the group we were able to increase the energy levels and make a great and fun collaborative team. In fact, the team is what makes it the most fun. I then hit the road and practiced my pitch on friends and family. I put as much money is as I could and we began to build out the demos and proof of concept. With something to show, we were able to bring more people onto the team and build out some marketing strategy and hire on a great engineering partner to build the prototype. We began a series A round of angel funding and are trying to raise 2 million dollars and are almost half way there.
One of the prototype was actually delivered today. What a scary day. A little buggy, but the vision is there and the feeling that we have actually created something we can touch and feel out of just an idea is overwhelming.
Now we are planning a team kickoff meeting and beginning our beta testing on July 1.
I don’t know what is going to happen and I went all in with everything. I don’t think there is any other way. It has been the best thing I have ever done. That being said, man I am broke.
I am also a big fan of John Doerr.
Good luck and go for it!
I’m part of a community of investors who meet up once a month in Birmingham, UK. We allow entrepeneurs to pitch at us initially via email, which we then discuss when we meet. If we deem a pitch successful we then meet the entrepeneur.
How can we get in touch with you?
I’m looking to create an online forum for investors whereby we invite pitches from entrepreneurs via video. Is anyone aware of anything like this already available online?
Ask the Angels » Blog Archive » AngelList - Santa Never Sleeps // Dec 16, 2010 at 2:49 pm
[…] to talking. If you can’t get that far without some outside help, there’s an informative post on Ideas Investors that’s worth […]
With regards to Maynards point i suggest you visit seedcamp.com. Seedcamp is a programme created to jump start entrepreneurial businesses.
I’d like to echo Arash’s reply. How do we get in touch with this group of investors?
It’s funny how everybody mentions scaling it down. Not every person is building SAAS web companies. Some need to build hardware and actual software like an OS.
Yeah don’t worry though bootstrap 500k-1M at age 23.
The more i read about this industry the sicker it makes me. What kind of an unimagitive person do you have to be to not understand an idea or concept and see market fit ect.
Can’t wait till i have money one day to revolutionize this disguisting industry and become the richest person in the world by investing in ideas.
Ohh no you have an idea of making a 100mpg 1000hp car, which we know it can be made because hybrid diesel technology exists. nahhh though we want to physically see it first.