How to Find Investors
Advice from Reid Hoffman, founder of LinkedIn (and later became an investor):
Investors see a lot of pitches. In a single year, the classic general partner in a venture firm is exposed to around 5,000 pitches; decides to look more closely at 600 to 800 of them; and ends up doing between 0 and 2 deals. The goal of an entrepreneur is to be one of those [two] deals.
First, understand your audience. Research prospective investors thoroughly. What kinds of businesses are they looking at? What model/criteria/triggers do they use to judge whether a project will be successful or not? If you don’t have some sense of their points of view, your likelihood of making the pitch go well is more random. You may happen to emphasize the right points that pique an investor’s interest, but you shouldn’t leave your financing up to chance.
Second, understand the broader financing climate. In 2004, investors regained interest in the consumer internet again. Friendster raised a big round in 2003; MySpace started gaining traction. But with so many investors still licking their wounds from the dot-com bust, many focused on proven business models, such as advertising or e-commerce. As a result, we knew that our pitch would need to steer into investors’ biggest concern: the lack of revenue.
