Only friends of Dave McClure raise funding!

So you want to raise funding? Either an angel round or a Series A round, from the HOT investors. An angel or VC fund in either New York, Boston or Silicon Valley? Yes, there have been cases where entrepreneurs have gone to the “Send me your pitch” page, and emerge with bucket-loads of cash ready to build a global business. But I believe these are few and far between!

evly

When we were building Clicks2Customers, Vin, Llew, and myself use to travel to the States often! We attended Affiliate Summit, PubCon, AdTech, Search Engine Strategies and plenty of other conferences. We became friends with people. And when we weren’t travelling, we were interacting – commenting on people’s blog posts. (and if Twitter had been around in those days, we’d have been using that as well)

By now you should have figured out, that when I say “only friends of Dave McClure raise funding”, I’m obviously not referring to…

…only building a relationship with Dave McClure. It could be Dave, or it could be one of the other hundreds if not thousands of angels and VC’s just like Dave.

But the best way of getting funding is to get to know people – if you can, get over to the events happening EVERY DAY in the hot hi-Tech spots. If you can’t travel, interact – don’t post stupid one line reply’s on their blog’s or meaningless twitter reply’s – REALLY think about what they are saying, and whether you agreed or disagree – ENGAGE MEANINGFULLY!

The key is to find 1 or 2 people who are influential, and build up a relationship with them, so that they’ll either fund you themselves, or intro you to the right people who can fund you. And these guys are ALL connected!

If you want to see HOW connected, take a look at http://angel.co (Brilliant Site if you want to see a tasting of how many hi-tech angels there are. Check it out)

It lists hundreds of influential angel investors, and their companies, blogs, twitter, linked and facebook accounts and WHO THEY LISTEN TO when they decide to invest. Look at Dave McClure’s profile on the angel.co site:

Entrepreneurs can get referred to me through these people (I listen to these people)

Jeff Lawson, Twilio
Hiten Shah, Kissmetrics
Rashmi Sinha, SlideShare
Dave Schappell, TeachStreet
Brian Phillips, Thread.com
Aaron Patzer, Mint.com
Lukas Biewald, Crowdflower
Leonard Speiser, Joonto
Rich White, UserVoice
Ken Lin, Credit Karma
Oren Michels, Mashery

So Dave is talking to all those guys to find out what they think both about your concept and about you. Thought facebook was a “six degrees of seperation”? Angels & VC’s in Silicon Valley are more a “2 degree of seperation”. And if you need funding you need to have an IN to those 2 degrees.

evly for Crowdsourcing

RECOMMENDATIONS:

1. Get on the next flight to the States, and attend some conferences where the angel’s and VC’s hang out, and the restaurants they network at. (GET OVER TO BIN 38!)

2. If you can’t get over there, to meet them face to face, ENGAGE through SOCIAL MEDIA. (and remember to rather not engage if your interaction is not QUALITY!)

3. Don’t pitch your business idea – rather just INTERACT!

4. Don’t only READ their social media posts (blog postings, facebook postings, twitter postings etc), as you’ll see a 1 dimensional side to them. Try find video postings of them. Yesterday, I watched Dave McClure discussing & debating with David Hornik (who appears to be one of the NICEST guys in the space!) from August Capital in a TechCrunch.TV clip – “VC versus the Angel smackdown”. Want to know who butts in when they talk, and who swears a LOT? Watch the clip and you’ll get to see character traits.

Disclaimer: I haven’t discussed our “Crowdsourcing Social Network” Start-up venture with Dave yet, as I’ve just started taking my own advice and don’t want to pitch yet. So for others, other than Dave (who i’m building a relationship with first), check out evly.com

evly is ready to move to Silicon Valley

P.S.: I’m putting together a twitter list of people that you should be interacting with to “FOLLOW THE MONEY” – if you’ve got more names to add to the list, please tweet me at @EricEdelstein

UPDATE: ONLY ENTREPRENEURS – All the comments appear to be from ENTREPRENEURS. All the angels & VC’s I asked to comment declined. All I want to know is “What is the better way of pitching? Building a relationship via face-2-face at conferences / interacting with social media OR applying the traditional way via the company websites?”

UPDATE 2: DAVE VISITED – I’m honored that Dave himself checked out this posting (see pic below) BUT I’m upset you didn’t leave a comment, Dave? What did you think of the posting? When I mentioned Robert Scoble in a posting 3 years back, he made my day by commenting “And now I’m commenting on your blog! Funny how this all works, isn’t it?”

Dave McClure

(left to right: Visitor x, Dave McClure, Visitor y)

UPDATE 3 – WHY DAVE? - I could have chosen any of the Silicon Valley Angels to discuss my point, but I picked Dave’s name out of the hat due to his energy, passion, and attitude displayed on the “Angel vs VC smackdown” show on TechCrunch.tv which I watched yesterday.

Eric EdelsteinOnly friends of Dave McClure raise funding!
Comments
Chris M says:

Really simple question – Let’s say I needed funding, what would be the best first move to make?

Lance says:

Interesting post. The human factor is so important. As with everything in life where human relationships are involved, the creation of trust is paramount. Unfortunately there are signs that trust nowadays is a scarce commodity. Its all about building trust based relationships. On an unrelated note, is the really a distinction between Angel and VC <> or are the 2 blurred here? I am also interested to understand your focus on getting foreign VC’s on board as opposed to local ones.

bevmerriman says:

Interesting post, Eric.

We’ve been fortunate enough to fund ourselves for a year. We’re pretty stubborn and have never thought about venture funding – starting without money is all the fun. This said, not needing money makes us very appealing to investors. We’ve had offers – these offers originated from relationships I’ve built in the past.

I thus have to say that relationships are key. Finding and building a relationship with an investor is much like building any other business relationship through networking.

I’ve always found strategic networking does the trick. I look for specific people within a network to link me to the rest. @Patrick is clever looking at other investors.

I believe that although it’s easier in today’s world to build relationships abroad, we must remember that proximity overpowers any other efforts.

In six degrees of separation not all degrees are equal. There are a small percentage of people that link the rest of the people to one another. The “strength of weak ties” suggests that the number of acquaintances represent one’s social power. The more you have, the more powerful you are. Practically speaking: If you don’t know the right person, you should know the person that is going to introduce you to the right person.

Andrea says:

Okay – here it is – the view of a VC. People buy from people, investors invest in people. While the technology and the market potential are critical – the most important decision we as VCs need to make is if we believe in the management team. And what better way to start off such a relationship then getting a good recommendation from someone you trust. So, you are absolutely correct. If you want to raise money, build a relationship with potential investors or those who have good relationships with them. All of our investments came through the network.

You’re right, Eric, the super angels bring plenty more than cash. They’re probably a bit like hotels in Monopoly. They’re worth about four regular angels:)

If you can convince a super angel to invest in your business, you’ll be laughing. You’ll get cash, connections and code.

But I think we shouldn’t ignore the fact that we’re surrounded by savvy, wealthy people who might not know the net too well, but they know business and we can learn a lot from them. They bring cash and they bring connections too.

And as for code… Well, there are coders for that:)

Eric says:

@Eran – you’ve got me thinking. How much is the most that has been Crowdfunded for a Startup? Was it the $200k for Diaspora on Kickstarter?

Eric says:

Great posting @Patrick – but let me throw something back at you: Is it only about the money? My feeling is that these “super angel’s” bring so much more – connections, & relevant experience being the BIG 2. And that’s the difference between them and the investors with just cash.

When I watching Dave McClure in a TechCrunch.TV interview, he mentioned he’s walked the walk, and understands coding, marketing and all the other necessary ingredients to take a hi-tech startup succesfully global.

Thoughts?

Eran Eyal says:

Eric

I could agree with you more… and what the heck – I’m actually going to give it a shot.

Last week I went for a meeting with one of the top eCommerce sites in SA who had recently raised funding from a New York-based VC.

The message before settling on the final meeting place and time was : “Do you play golf?”

Visions of me hacking away at more turf than dimples flooded my mind as I cringed

It’s true – the deals are concluded at the boardroom table – but they start somewhere VERY different.

A good ‘ol cuppa joe; a sunny day at the green (with you intentionally a few behind par ;) ), the buzz and hum of a conference. These are the staging grounds for the initial foray.

You want to take home the prom queen – you gotta hit the chatroullete.

The future of this – in my mind – is crowdfunding. Whilst crowdfunding may never truly replace the “BIG VC/SUPERANGEL” pitch, it definitely offers entrepreneurs a new staging ground. This poses a huge strategic threat to the VC, as now the entrepreneur/startup has recourse that doesn’t bleed them of a huge amount of equity or potentially lead them around the primrose path instead of developing their business.

On the other hand it also eases the job of the VC potentially reducing the risk represented in the initial raise.

What I can say for sure is this :

Get yourself out there. Make the phonecalls, be ballsy! Overhear a conversation you can add value to – find a way to get involved without coming across as a shmo. NEVER MISS AN OPPORTUNITY OR LOSE YOUR HUNGER.

…just don’t salivate when you talk :)

I had the pleasure of meeting Dave McCLure at Seedcamp in London. For about 30 seconds, that is. And that’s after having spent about six hours in the same room as him. Sure, about half the time he was either presenting or watching other presentations and it would have been somewhat rude to interrupt him. But the other three hours were at a cocktail party. And even with a solid dose of Dutch boorishness, I couldn’t beat my way through the crowd that had gathered around him. He was like a hunted animal.

I take your point, Eric, that you’re using Dave as a metaphor. But I reckon it would be easier to take a metaphor out to dinner and a show than it is to meet guys on his level. Of course, persistence counts for everything and if you’re really keen to meet the well-known guys, then I’m sure you’ll get to them.

But I have another theory here. And it’s a bit like John Forbes Nash’s epiphany in A Beautiful Mind. In a nutshell, John realised that if you want to score, you don’t go for the hottest blond in the room. And my contention is that Dave McClure and his ilk are the really hot blonds and we would do well to look around for their relatively plain friends, because we’ve got a better chance of coming right with them than we do with Dave.

So now that my metaphors are completely mixed, let me clarify what I’m saying: there are plenty of rich people around who want to invest in your business, but just don’t know it yet. By all means, go for Dave McClure, because the guy is an astute investor who brings a lot more than cash to the table. But you may have an easier time identifying someone with cash to invest and then inspiring them to take their first punt at a small business.

Many people with lots of cash would like to invest in start-ups, but they don’t know how. They don’t know how to think of small businesses as viable multipliers of capital. It’s really up to us to teach them. And this, I hope, is one of the goals of the Silicon Cape initiative: to educate angel investors and increase their number.

Dave McClure isn’t making any more angels. That’s up to you and me.

aaron wall says:

My thinking / view is to build something interesting enough that investors come chasing after you, rather than the other way around. :)

Great post Eric, thanks for sharing your research. And very pertinent seeing as the SA-based angel fund that was purported to be in the offing doesn’t seem to have materialised after a pretty tough 2009.

While digital networking and interaction is a vital activity for any entrepreneur, I have to wonder how close a second it is to real-life engagement. Take a look at Silicon Valley and Israel to see what a difference face-to-face, “see the whites of their eyes”, interaction can make to entrepreneurs raising money. Let’s hope the Silicon Cape initiative achieves its goals here.

At the end of the day, though, entrepreneurs can’t neglect who they know in favour of what they know – it’s key to getting the money they need to succeed.

Dean Horwitz says:

Excellent post Eric.
We are looking for some VC/Angel Investment for our Student Marketing and Information company, we are trying to get a student hub/centre started in Rondebosch and we need some capital.
Will have a look at these contacts.
Thanks
Dean Horwitz
Studentology

Steven Green says:

Couldn’t agree with you more. My entire business has been built on referrals and affiliate networks…

It’s all about word of mouth marketing :) – he says coming from an online background.

With precious little public VC/Angel around, relationships are the only thing that’ll get you anywhere… my 2c

Dan Avinir says:

Wow! thanks Eric. great read!
Really love the evly.com preview! quite amazing platform.

Eric says:

I was wondering about that Alan – so the 2 Dave’s are not one and the same person. Thanks for clearing that up

Alan Levin says:

Hey Eric, thanks for the heads up. Please don’t confuse this Dave McClure with Dave McClure – President and CEO, US Internet Industry Association – who is better known in the South African Internet industry.

I must admit that I’m not sure about VC on the whole. I mean all these things you have to do to get a few bucks from strangers. I suspect that in South Africa there are a number of Angel Investors you could catch. Maybe a good idea to hang out at the Hyatt in Rosebank and see who you can meet. At the end of the day it comes down to your business, if it can work and you have real proof then you will get funding. The rest is finesse…

Chris M says:

When I hear the words “VC” or “angel funding”, I cringe at the thought of an incestural gathering of circle jerking players in industry. It’s sad that I feel this way, it’s just how our industry has gone.

That being said, meeting with people who aren’t known or aren’t trying their best to be heard online or have people tweeting about them, are usually the people who are worth talking to and engaging with. The problem for me is quite simple: investors are all about money (can’t argue that), so startups who are fairly ignorant and don’t have fancy lawyers, normally get far less out of a deal than they can deserve, which leaves the investors on top and the startups looking for a round 2 far too soon.

I don’t want to grosely generalise, because I know some investors who aren’t like this, but I maintain that the ones who are loud and dying to be popular are all too often more interested in the bottom line than actually assisting the startups.

With all this being said, creating awareness around investing and getting fresh people into the mix is definitely not a bad thing, because we need to hear about people in order to approach them.

I long for the day that there is a platform that allows startups to, well, startup without the huge worry of being pulled into a circle jerk squashed situation, and hopefully this will become a reality.

Anyway, just wanted to kick things off here as I think it could be an interesting topic :)