Entrepreneur Office Hours - Issue #116
Entrepreneur Office Hours - Issue #116
What can Greek mythology teach us about entrepreneurship?
I love a good parable! It’s a great way to teach people an important lesson in an entertaining way. And Greek mythology has lots and lots of good parables. One of them, in particular, offers some great insights into how to build (and not build) a pitch deck. Who knew those Ancient Greeks were thinking about fundraising!
OK… they weren’t really thinking about fundraising. At least not in the way startup founders think about it. Still, the lesson they were thinking about can definitely be applied to pitches, and that’s what I do in this issue’s first article.
This issue’s Q&A also deals with fundraising. A reader asked a great question about angel groups and their relative benefits/drawbacks. I’ve always been a fan of them, but they’re definitely not for everyone.
-Aaron
Everything You Should Know About How to Structure a Startup’s Fundraising Pitch
Giving a perfect pitch is possible, but it’s also hard work. And whatever someone tells you, chances are, their advice isn’t right for you.
Is Your Startup Worrying About the Wrong Competitors?
Founders spend lots of time stressing about their competitors. But what if the companies you think are your enemies are actually more like your frenemies?
Office Hours Q&A
———————
QUESTION:
Hello Aaron!
Big fan of your newsletter and podcast. Thanks for all the time you spend creating and sharing with all of us.
I finally had a question I felt like could be useful to more than just me, so I wanted to ask it. Would you mind explaining what an angel group is and how they’re the same and different from venture capital funds? I’m coming up on a chance to pitch an angel group, and I’d like some insights on what to expect.
Thanks a lot!
- Kennedy
----------
I love angel groups! To be fair, I think they’re actually some of the most difficult people to fundraise from. But they’re also kind of fun and present an interesting challenge.
As the name suggests, angel groups are groups of wealthy individuals (i.e. angel investors) looking to make investments together.
The first thing you should understand about angel groups is that they don’t all operate the same way, and you need to make sure you know how the one you’re talking with operates. In my experience, the two main paradigms are: 1) each member contributes a certain amount to a fund, and then the entire group makes a decision on whether or not to invest in a company from its collective fund; or 2) the groups hear pitches together but each member invests individually (though, when someone is excited about a deal, that person usually tries to build a syndicate from within the group).
Both types of angel funds have advantages and disadvantages for entrepreneurs, so let’s explore a bit of those.
For the collective angel funds, the disadvantage is you have to convince more people to invest. Usually it’s a simple majority rules kind of thing, but some angel funds require larger percentages. Either way, convincing 50% (or more) of an angel fund with, say, 60 members is harder than convincing three or four people from a 60 member fund to write their own checks.
Conversely, the advantage of having a collective angel fund invest is that, when you do, it gives you lots of people on your side. Suddenly everyone in that fund is an investor in your company and they all have a strong incentive to help you succeed. Smart entrepreneurs figure out how to tap into those resources.
As you can imagine, the other type of fund where each investor makes decisions individually has basically the opposite benefits/drawbacks. You only need to convince a small number of people to invest, but you also only have their support.
In either scenario, the interesting thing about pitching angel groups is you get in front of lots of people at once. That can be valuable for all sorts of reasons ranging from building awareness for your work to getting great feedback, mentorship, and advice. Just be careful about who you’re listening to because angel funds tend to be composed of people with all sorts of different backgrounds. Not all of them are going to have a great understanding of your type of business. For example, a lot of the angel funds around where I live mostly involve professionals (e.g. lawyers, doctors, etc.), which doesn’t necessarily make them knowledgeable about tech startups. While I’ll definitely take the advice of a physician about how to treat a cold, I’m less inclined to listen to that person’s advice on building a scalable customer acquisition pipeline for a B2B, SaaS martech product.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!