Growthink Blog

Educating Angels & What That Means for Entrepreneurs


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A few months back, a unique conference called "AngelConf" took place in Silicon Valley. The conference was organized for angel investors and its goal was to educate angel investors on how to invest in startups.

Key questions that the event addressed were:

  • How much are you supposed to invest?

  • What legal agreements do you need?

  • Where do you find startups to invest in?

  • How do you pick winners?

It was this last question that conference organizer Paul Graham from YCombinator agreed was the most important.

Graham's first point on this topic is that angel investors should pick startups that "make things that people want." Seems simple enough. However, Graham went on to say that angels should not invest in things that are already wildly popular. "By then it's too late for angels. VCs will already be onto them. As an angel, you have to pick startups before they've got a hit-either because they've made something great but users don't realize it yet, like Google early on, or because they're still an iteration or two away from the big hit, like Paypal when they were making software for transferring money between PDAs."

As such, angel investors need to be able to predict future market sizes (not just identify markets that are already doing well).

Graham's second point on this topic is that angel investors need to pick founders who are winners. On this point, he said the following:

"What makes a good founder? If there were a word that meant the opposite of hapless, that would be the one. Bad founders seem hapless. They may be smart, or not, but somehow events overwhelm them and they get discouraged and give up. Good founders make things happen the way they want. Which is not to say they force things to happen in a predefined way. Good founders have a healthy respect for reality. But they are relentlessly resourceful. That's the closest I can get to the opposite of hapless. You want to fund people who are relentlessly resourceful."    

Now, what this means to you as the entrepreneur is that this is how you will be judged by many angel investors. They will judge the future potential of your business concept and they will judge the potential of you and/or your management team.

With regards to the potential of your business concept, you must convince them that your market is poised for growth, and in doing so, you MUST cite multiple research and statistical points that confirm your views (I can't reiterate enough how critical great market research is).

With regards to the quality of you, the founder, and/or your management team, you need to show the investor, via past performance and ALL current interaction between you and the investor that you are a winner. You need to show them that you make things happen. Here are some examples of how can you accomplish this:

  • Tell them a current business objective and come back to them two weeks later and show them you have achieved it.

  • Find some way you can help them (e.g., introducing them to a business contact of yours that could help them) and execute on it right away.

  • Ask them about questions they have about your opportunity and/or market and come back to them within 24 hours with great research and answers to their questions.

These smaller, short-term accomplishments which show investors that you can execute and that you are clearly not 'hapless' will massively improve your chances of getting them to invest in you.


Breakthrough Business Idea Generator


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I want to tell you about a technique I picked up, that I can directly attribute to millions of dollars of revenues that I have generated over the years. But, even so, I'm far from mastering it.

The technique is a brainstorming technique called Assumption Reversal. It is incredibly powerful. It's the technique that has been responsible for, among many others, the ATM machine and Henry Ford's development of an assembly line which revolutionized manufacturing.

The Assumption Reversal brainstorming technique allows you to look at things differently and triggers new, creative ideas. It can be used to develop new business ideas and new product ideas, and for you to overcome virtually any challenge you face, from marketing obstacles to staffing difficulties and more.

I have put together a brief video that walks you through the four steps of the Assumption Reversal brainstorming technique and gives you a real-world example. I think you'll get much more from the video than just reading about it.

Mastering this technique could revolutionize you and your business. Check out the video below:


Exclusive Report: How to Quickly, Easily & Expertly Conduct Zero-Cost Market Research For Your Business


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I started my career in market research. At one point, I was pretty immersed in it. In fact, articles I wrote were published in Quirk's Marketing Research Review and I was a member of SCIP, the Society of Competitive Intelligence Professionals.

Having helped start and grow hundreds of companies since then, I can definitely say that my market research background has been a HUGE asset.

Every successful venture I have launched or help launch leveraged opportunities and strategies based on the industry, customer and competitor research we conducted.

I have also used market research time and time again to find investors and joint venture partners for businesses.

Since market research is so critical to businesses, and since the Internet presents such a goldmine of research for those who know who to find it, I decided to put together a report on how to quickly and expertly conduct market research online.

Some of the report is methodologies I use and other parts include my most prized bookmarks….those “go to” research sites that I visit each time an important research question or project comes out.

Want to learn how you can conduct market research for free instead of paying thousands of dollars to market research firms? Well, I put together a brief video to show you how:



I'm excited to get this report in the hands of as many entrepreneurs and business owners as possible, because I know the value effective and efficient market research has had on my business endeavors.  The report is currently free for current Growthink University members, so if you're a member, you are in luck! Just go to the download center and pick up your copy.

For those of you who aren't members of Growthink University, I would like to make a special offer available to you.  Because I'm in a celebratory mood, (this month is my wife’s birthday) I would like to offer this promotion to those interested in obtaining a copy:

As my wife would never allow me to post her age on my blog, what I have done is incorporate her age into this promotion.  For the next few days, I'm offering this market research report for one CENT for each year of my wife’s age.

As a bonus with your purchase, I’ll also include 30-day access to Growthink University so you can see the wealth of capital raising, business planning information we've assembled for entrepreneurs and business owners just like you. You’ll also gain access to all the Growthink University bonuses like our Ultimate Business Plan Template, special reports, VC Directory and Angel Investor Group Directory.

To order the market research report (and to find out exactly how old my wife is :)),follow this link:
https://www.growthinkuniversity.com/public/268.cfm

Raising Angel Capital The Wrong Way: 1,000 Times Harder Than Harvard Business School?


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The last few weeks have been a little frustrating for me and my team. Why? Well, we've been hard at work developing a new guide on how to raise angel financing. And some of our findings were a bit disturbing (fortunately other findings were very encouraging).

In developing the report, we took some GREAT advice that I encourage each of you to use whenever creating a new product. The advice - find out all the questions that potential customers have and make sure that your product addresses them.

So, using our online market research methodologies, we found all the questions that entrepreneurs and business owners were asking about angel financing.

  • Will an angel investor invest in a ______ (insert restaurant, website, etc.)?
  • Where can we find angel investors for our company?
  • What is the difference between angel investors and venture capitalists?
  • What return on investment do angel investors want?
  • Where can I find angel investors to submit my business plan to online?


It was this last question that really bothered me...the notion that you can simple complete a form online and have angel investors (or venture capitalists) flock to your company. Our research shows that the chance of an angel investor funding your business based on an online form is about 0.01%, or 1,000 times WORSE than the odds of getting into Harvard Business School.

Sure there are many sites that tell you to pay them, submit your plan or complete their form, and that your plan will be sent to thousands of investors. And each of these sites prominently display their success stories. BUT, these success stories are the outliers. They are the 1 in 10,000 businesses that got funding for one reason or another.

The FACT is that angel investors (and venture capital firms) DON'T invest this way.

But, the good news is that tons of angel investor do invest, and in fact, they fund 15 times more companies than venture capital firms. According to the Center for Venture Research at the University of New Hampshire, last year 55,480 ventures were funded by angel investors.

And because the public stock market has being doing so poorly, more and more individuals are considering angel investing.

So the angel investors and money is out there. It's just a matter of knowing how to raise angel capital.

From our recent research and having been raising angel and venture capital for the past decade, we uncovered all the ways that you and your business CAN raise this type of capital. And it doesn't include filling out forms online.

Are you an entrepreneur looking to find angel investors to fund your company? Learn proven strategies and tactics when you download Growthink's Step-By-Step Angel Investor Guide.


How Less Fortunate Businesses Thrive with Focus And Funding


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I for one take a lot of my business resources for granted. The fact that I have high-speed, uninterrupted (well, at least usually) internet access. The fact that I have a quiet office with a desk. The fact that I have a computer and programs that automate a lot of my routine tasks.

These things all help me be much more productive, and give me the ability, when combined with hard work and focus, to accomplish great things.

Like everyone else, most of the things that I do don't go precisely as planned. Like Growthink University. Clearly I was hoping for thousands upon thousands of new members the day we launched. But then, like everything else, I knew that tweaks would have to be made, the service would have to continuously be improved, etc., in order to reap long-term success.

When things get me down, one source of inspiration that I've turned to is Kiva.org. Kiva is "the world's first person-to-person micro-lending website, empowering individuals to lend directly to unique entrepreneurs in the developing world."  Specifically, on their website, individuals who need small loans to start or grow their businesses request funding. And other individuals from around the world offer this funding in increments as low as $25.

The following are some new and completed funding requests I read today:

  • A $1,000 loan request from Mr. Vun Nem, of Cambodia who requires funding since he can't pay for the materials needed to run his construction business.

  • A $625 loan given to Ludmila Boiko of  Kherson, Ukraine. Ludmila has one daughter and sells domestic electrical appliances in a market in Dneprovskyi. Ludmila has paid back 12% of the loan to date.

  • A $1,075 loan given to Norma of Ayacucho, Peru who needed the funds to purchase outfits, polos, pants and blouses. This money was successfully raised on Kiva. In addition, she invested all of her savings to construct a third floor in their house and to buy machines to use in a dressmaking shop. This loan was made on June 30, 2008 and by October 31, 2008, she was able to repay the loan in its entirety.

Equally as inspiring as the entrepreneurs are the individuals who have funded them such as:

Philip, a student from Eaton, NH who lends because, "I am more than willing to help those who want to help themselves."

Judy, a teacher in Manassas, VA who says, "The impact of collective small gifts is breath-taking!"

And

Levi, who lives in Saskatchewan Canada and invests simply because "It works!"

When entrepreneurs throughout the world are able to raise tiny amounts of capital, amounts that I often charge to my credit card without flinching an eye, and are able to execute on their businesses and quickly repay their loans, it is truly inspiring.

What's also interesting is that these entrepreneurs may have more focus than many of us in the Western world. They aren't getting bombarded with phone calls and emails. Rather they are laser-focused on creating a business that provides money to feed, clothe and house themselves and their families. With laser focus often comes success!

Key Man Insurance: Why It Is So Important To Your Business


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Did you know that venture capital firms nearly always require the companies they fund to get key man insurance (KMI)?

Well, understanding the rationale behind this fact should give you insight into improving your business operations and structure.

To begin, Key Man Insurance or KMI is a life insurance policy covering a business owner, president or a key employee. The business is the beneficiary under the policy.

The fact that most venture capital firms require KMI explicitly shows that venture capital firms provide funding to PEOPLE, not firms or ideas. It is the people who are able to execute on the ideas. Remember that a good person with a mediocre idea is often much more successful than a poor person with a great idea.

What this does NOT mean is that you should rush out to purchase key man insurance if you are seeking venture capital. What it does mean is that you need to make sure that you have a management team that is worthy of KMI. A team that is so capable of achieving success that investors are actually frightened that their investment would be in jeopardy if something happened to them.

What it also means, and this applies even if you are not seeking venture capital, is that you should create systems to minimize the business risk of something happening to a key employee.

These systems can include:

  • Training manuals that document key tasks performed by key personnel, so that someone else could take over their job requirements in the event that they were out of the office temporarily or long-term

  • A hiring plan that allows you to efficiently recruit and train new personnel

  • Constantly networking and telling people the exciting aspects of your business so that there is a pent-up demand to work at your company

You and your management team are the lifeblood of your business. You always need to be thinking about how to improve, protect and grow your team, as this will have the greatest impact on the long-term success, or lack thereof, of your business.

Yellow and the Investor Pysche


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What does the girl who rejected me at a dance when I was thirteen years old have to do with your ability to raise capital for your business?  Well, it all has to do with psychology, human nature, and how you can leverage the two to attract capital. Watch the 4-minute video below to learn more:


The DogBall - The Good, The Bad, & The Ugly


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Yesterday, I received an interesting package in the mail. I opened it up and inside was a shoebox. And inside the shoebox was "The Dogball." The Dogball, as I found out, is a new toy for dogs, and the founder, based in France, was trying to get me to distribute it here in the United States.

There are actually several important lessons from The Dogball as it relates to your business plan and raising capital. So, I documented them in a video since I had to make sure each of you could actually see exactly what the Dogball is:


Is There VC Money Out There?


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Sometimes it feels like you’re just spinning your wheels. This is how I felt a few years ago when I was helping one of my clients raise VC (venture capital) funding. The client was an early-stage, Southern California-based networking company…

I started by creating what I felt was an awesome VC prospect list with 455 prospective investors.

The list looked like this (number of prospects in parentheses):

  • Priority A: Strategic/Corporate Investors (24)
  • Priority B: Most Active Southern California Investors (24)
  • Priority C: Active Southern California Investors (25)
  • Priority D: Most Active Networking Investors CA-based (72)
  • Priority E: Active Networking Investors CA-based (88)
  • Priority F: Most Active Networking Investors U.S.-based (46)
  • Priority G: Active Networking Investors U.S.-based (176)

The list itself took me days (and a proprietary database) to compile. As any direct marketer knows (and raising capital is direct marketing), the quality of the list is everything. For example, if you’re trying to sell a franchise opportunity to folks at a nursing home, you’re not getting any buyers no matter how good the opportunity is!

Armed with my list and my teaser email (teaser email = solicits interest without giving away the farm), I started calling and emailing investors.

And I had lots of early success.

We had about 20 first meetings with strategic and venture capital investors. And the result... nothing.

We only got about 5 investors who explicitly said “no” but the others weren’t quite ready to write us a check.

So, naturally I started getting discouraged. As you can imagine, I had already invested over one hundred hours on this project and had no multi-million check to show for it.

But fortunately I remained persistent, and eventually one investor referred me to another investor (which, believe it or not, was not on my list of the top 455 prospective investors!!!!) who wrote us a $3 million check.

I bring up this story since I’ve been getting a lot of questions about whether or not there is VC funding out there right now.

The answer is an emphatic YES. It is out there. And like always, it takes great knowledge and persistence to get it (and probably now more than ever).

Here are the facts. According to the National Venture Capital Association, 3,808 ventures raised VC funding in 2008 totaling $28.3 billion. And, according to the Center for Venture Research, 70,000 ventures were funded by angel investors last year totaling $37.2 billion.

So lots of companies continue to receive funding from venture capitalists and angel investors.

It’s mostly a matter of REALLY wanting to receive capital for your business and making the investment to do it (i.e., the time/money to learn how to, and the time needed to execute on, a capital-raising campaign).

So, capital IS still out there, and YES, you can raise it!

Why I Hate January At the Gym: Parallels To Raising Capital


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I’m really good about working out. With few exceptions, I go to the gym every day after work and try to work out at least one day over the weekend.

Part of why I go is to stay in shape, but I think it helps me a lot business-wise as the exercise helps me release excess energy so I can really focus on the tasks at hand when needed.

Because there’s always too much to do each day and yet I insist on going to the gym, I’ve devised a laser-focused 25 minute workout that I follow. It’s nothing too fancy -- it’s mainly that I go from machine to machine to machine with no breaks in between (many people do a similar routine but it takes them twice as long since they take breaks in between each rep and/or machine).

Anyway, what this means for me is that every January is a nightmare. Why? Because every January, the gyms are full. And this means that I can’t quickly go from machine to machine to machine because I have to wait for others who are using the equipment.

This happens because every year, tons of people make New Year’s resolutions to go to the gym more. So, in early January, the gym is full of these “resolutionists.” Fortunately, by February, they’re usually gone and it’s back to normal.

The reason I tell you about this is that it’s incredible how much this mirrors raising capital.

To begin, raising capital, like weightlifting and exercising, only works if you do it EVERY DAY. You don’t get strong working out like crazy for one month and then relaxing the rest of the year. Rather you need to put in an hour a day or an hour every other day throughout the year to realize an impact.

When raising capital, you need to constantly be speaking with investors, finding new investors, and making presentations. You need to constantly tweak your business plan to make it better and better. This will not happen overnight. It takes months.

Also, in weightlifting, if you don’t know what you are doing, you will have poor form and you will most likely hurt yourself. In capital raising, if you don’t know what you are doing, you will also hurt yourself and your company by failing to raise the capital you need.

And, like in the gym example, all the “resolutionists” HURT YOUR CHANCES of success.

At the gym, the “resolutionists” hurt me be using my machines and thus slowing me down.

When raising capital, those who don’t know what they are doing also hurt your chances. They submit their business plans haphazardly to every investor who will accept them. While these investors will rarely if ever fund these plans, they waste the investors’ time. As a result, the investors have less time to review good plans and meet with good entrepreneurs, like you.

I wish I could tell you that raising capital was fun. But I can’t. I wish I could tell you that it was easy. But I can’t do that either. Like weightlifting, it’s neither fun nor easy, but once you learn how to do it, and you repeatedly do it right over a period of time, you can succeed and the rewards far outweigh the costs.

GrowthinkUniversity.com, our new membership website, was designed to teach you how to raise capital using the proven techniques that we have implemented over the past decade for our consulting clients.


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