This post was originally featured on Forbes.
We live in incredible times. Young, inexperienced, naive founders without any connections or experience can raise millions of dollars from angel investors without a product, plan, revenue, users, or clients. My company Pristine is a testament to that fact – we recently followed the seed round described below with a $5.4 million Series A.
When we first started in May of 2013, my co-founder Patrick and I thought we knew what raising money meant. After all, we’d read about hundreds of financings on TechCrunch. It seemed like 20-something founding teams could get funded to build just about anything in Silicon Valley. VCs couldn’t find enough 20-somethings to quit their jobs and change the world.
We didn’t have a clue.
Through dumb luck, my blogging connected us with an anesthesiologist who ended up investing our first $100,000 in June of 2013. In the ensuing months, we raised hundreds of thousands of dollars in $25,000 and $50,000 increments from smart and dumb money without a demo, let alone clients or revenue. In retrospect, I can’t believe we raised when and how we did. We had nothing and we were entering an awful market — health care is 10 years behind in terms of technology. Why would investors think that physicians would be the first adopt Google Glass?
So how did a 23-year-old and 21-year-old in this space do it? In short, we hustled. Specifically:
Blogging
My New Year’s resolution for 2013 was to blog three times per week, every week, for the entire year. I succeeded in keeping my pledge, writing about everything I found interesting — human computer interaction on PCs, the strengths and weaknesses of Google Glass, why Macbook Pros are amazing, healthcare policy, macroeconomic changes in the healthcare landscape and more. Blogging led to a number of strangers emailing me, some of whom ended up funding Pristine to the tune of $250,000 and helped us find some of our first clients. One of those strangers was a physician at UC Irvine, who became our first client.
AngelList
This is an obvious choice, but one that I can’t stress enough. There are angels that scavenge AngelList just looking to invest capital. We ended up raising about $150,000 from cold intros via AngelList. We did however make one big mistake — we incorporated as a Texas C-corp instead of Delaware, which made us ineligible for AngelList’s syndicates.
Other Crowdfunding Sites
We were promiscuous fundraisers. We signed up for as many crowdfunding portals as we could find. RockThePost, HealthFundr, AngelMD, MicroVentures and others. Some of these portals didn’t drive any investment, but those that did drove an additional $350,000 in investment and led to paying clients. Although each portal may consume several hours’ worth of time, it was worth it to pursue every one. Founders, don’t hesitate to flirt with everyone.
Shameless Begging
Young, naive entrepreneurs aren’t selfish enough. Successful people who like to help entrepreneurs often ask how they can help, but entrepreneurs are too shy to directly ask for money. I wasn’t, and it worked. Whenever someone asked me how they could help, I would always ask, “Do you know any angel investors that you think might be interested in our space?” That question alone generated over $200,000 in investment.
…And a Few Less Successful Strategies
We also did a few foolish things. For instance, never again will I spend capital attending a startup pitch contest. We spent over $25,000 attending and winning a major pitch competition. What did we get? Nothing, except a temporary ego boost. If there’s a local pitch contest that you can participate in without spending any capital, you should attend to practice your pitch and network. But don’t spend a dime.
We also wasted an enormous amount of time meeting with VCs while we were at the seed stage. VCs will not fund first-time entrepreneurs at the seed stage, period. They receive too many pitches from seasoned executives to invest in an unproven team and will always wait until you demonstrate real traction.
But the most dangerous mistake of all was allowing an angel — we’ll call him Bob — to get actively involved in the business by taking a board seat. Bob was a first-time angel investor who led a syndicate of his friends to invest $300,000. A few weeks after investing, he got cold feet and demanded all of the syndicate’s money back. He had no legal basis for doing so, but threatened us with lawsuits. We sent the money back, but it was a serious morale kill, and a massive time and money suck (lawyers are expensive).
Moral of the story: Be cautious about allowing angels, especially first-time angels, to get involved in your business. Use them for advice, use them for their connections, and take their money, but be wary of anything else.
For first-time entrepreneurs, the fundraising process is confusing. There are no magic tricks, but there are some pitfalls that can be avoided. So long as you are incredibly passionate and have a business that could theoretically work, you can succeed. Let the fear of missing payroll coerce you into approaching strangers in person and on the Internet to shamelessly ask for money. If necessity is the mother of all invention, then fear of death is the mother of the entrepreneur hustle.