This link has been bookmarked by 4 people . It was first bookmarked on 10 May 2007, by Orlin Monad.
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22 May 07
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10 May 07
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When we made the decision to take on angel funding while Wufoo was still a few months away from launching, we decided that we were going to be pretty picky about who we wanted to work with.
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The Right Money
While all of the angels we met with had the money we were looking for, we realized that taking the same amount of money from two different people can come with very different strings attached.
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Minimal Hurdles
We were getting a little low on cash when we were looking for funding and we obviously preferred to have the money sooner, rather than later. Our primary focus at the time was to finish our product and not spend that time in unnecessary meetings. If an investor was willing to write a check after only a meeting or two, rather than after a demo, committee vote, multiple meetings, and a couple months of waiting, they scored major bonus points.
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Interests Aligned
There are a number of angel and VC firms that actively seek out deals with companies looking for seed funding. This is great, but our problem was that these professional organizations were usually looking to provide seed funding with the expectation that you would later take larger investments that they would also provide. I don’t really find anything wrong with this, but we were pretty sure that we didn’t want to go the VC route. So we had a conflict of interest if our investors wanted us to take more funding, and we wanted to grow without more investment.
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Financially Independent
We were extremely confident in our team and our idea, but we know from research and plenty of stories that any business can fail. With the understanding that failure is possible, we definitely did not want to take 100k from somebody who couldn’t afford to lose it. Part of why we wanted an investor with some serious assets, rather than through family, friends, or somebody who was barely an accredited investor is because we would have felt horrible if we were going to end up really hurting someone financially. The other part is that we don’t want our decisions to be emotionally charged by the thought of losing somebody’s nest egg.
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Personality
A good angel isn’t just some “suit” with a bunch of money, they’re also going to be a member of your team. Just as personality matters when you’re hiring a new employee, it was very important that we got along with our investors at a personal level. I can’t exactly put into words what type of personality we were looking for (think about the personality it takes to build a site like Wufoo), but if we enjoyed going out to dinner or lunch (and we had them take us out to BBQ and pizza, not fancy pants restaurants), they pretty much passed the test. It was also important that we found somebody who could be blunt with us. Many of our best decisions have been made after disagreements, and we wanted somebody who wasn’t afraid to say what’s on their mind.
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Connections
As much as we hate to admit it, connections, rather than your IQ or demo, usually start relationships in Silicon Valley. We learned the value of connections by attending YCombinator, and trust me, it’s much easier to get some quality face time with lawyers, successful entrepreneurs, and VC’s when you’re introduced by someone that they already trust. Whether you’re looking for employees, partnerships, or even a buyout, try to find an investor that can provide those necessary connections.
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Control
We didn’t really have any serious control issues since we weren’t giving up too much stock for 100k. The only control related deal breaker that we ran into was the requirement that we take on some type of “business guy” in order to help us with the non-technical related decisions. The reasons for us are pretty obvious. Not only would the “business guy” make us part with more money and stock, but we honestly didn’t want to take on more employees until we need to. We also hated the idea that anybody other than us would be making key decisions about how we were going to approach our company and product.
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Freedom of Location
It seems that most angels and VC’s require you to live in close proximity to their headquarters, or at least in a startup hub. This was a problem for us, because we knew that we’d have to move back to Tampa after YCombinator was over. We did have plans to move back to California after we had launched, but for a number of reasons, we’re still located in Tampa. Knowing that we would have to leave for at least a few months, it was critical that our investors were alright with this.
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Minimal Time Wasting
Running a company with a small team is incredibly hard work. The three of us are responsible for creating new features, supporting our customers, and worrying about issues such as scaling, fraud, accounting, legal, and any number of other miscellaneous problems. The last thing that we wanted to do was attend pointless meetings or write reports. We’re cool with talking on the phone, having dinner, or sharing our statistics, but one angel lost us when they wanted us to present a weekly progress report for their money.
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Belief in the Idea
When we told people that we were building a form builder, their reaction was usually something like “awesome” or “I’m not sure who would actually use that.” We know that form building isn’t exactly the sexiest idea in the world, but we’re pretty passionate about it. Our investor had to be truly excited about the space, and not someone who just liked our demo and had their own plans of what it could or should be.
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