Episode 165: Raising Funds For Start-Ups with Hall T. Martin
Hall T. Martin is a man who lives in the startup world and has founded several angel groups. He is the Founder and CEO of TEN Capital and Host of the Investor Connect podcast program.
He launched the firm as the Texas Entrepreneur Networks in 2009. Today, TEN Capital has over 15,000 investors in its network and has helped startups raise over $900M.
After a career as the 93rd member of a company called National Instruments, supplying measurement and automation firms, he started making his way into the angel investment niche. Investment is a numbers game that is not so different from sales. Hall has experienced every side of the game - both good and bad! He’s a man who has mastered the market and grown from his mistakes. If you’re looking for a way to get your numbers up, a way to get the deal ready, a way to get the deal out there, Hall is YOUR MAN.
Who Are Angel Investors?
Angel investors are accredited investors who want to invest in a startup for returns. They provide capital for startup businesses, usually in exchange for ownership equity. Angel investors provide support to these businesses during the early stages – usually when risks of failure are relatively high. Still, we all know no one wants to get into anything with a loser mindset. YOU, as a start-up, need to make your brand attractive to angel investors.
We’ll get to that in a bit, but for now, let’s talk about the common mistakes angel investors make.
Common Mistakes Made By Angel Investors
- Spending too much time focusing on current market or products - This is one of the top mistakes that investors make – markets change; products come and go. The team is what will really carry it all the way through, that’s what you should focus on. Yes! You want to look at the products, check out the competition, hang out with your team, and see what they are doing right and wrong.
- Looking at the latest hot thing - Yes! That new product looks promising, but you don’t want to put all your focus on it. You can check it out, but you shouldn’t put all your energy into that one product – you’re obviously missing something. Remember that the product won’t be hot forever.
How To Attract Angel Investors
Before getting into any investment, angel investors want to see evidence of traction. They want to see you go into the market with proof that you can sell your product or service. As a company looking for funding, you need to put some things in place to attract angel investors. They include:
- Using product and market validation as a criterion - When you start putting systems in place to prove and show you can have some repeatability and predictability around your startup, it attracts angel investors because it shows structure within the business. To achieve a better business structure, you need to test your model. You have to show investors it’s a profit-making model and can grow even bigger!
- As a startup, what you want to find is “what does the model really look like?” Testing is key. It shows you’ve figured out the lowest cost channels and how far those channels can go before moving to the higher ones. That’s always very impressive to investors.
- Make sure you give a name to everything you have - every product, technology, platform, and data set should have a name. If you don’t have a brand name, investors can’t give you credit for it - they don’t know or realize it’s there. You can also add an AI algorithm on top of it to make it more attractive!
- Everything is going online – you have to look at how everything will be connected or represented online.
- You need documentation, a pitch deck, diligence box, 3-5yrs financial projection, and key documents in the box – All these can only be achieved when you work with experts that help put these things in place. They help make your deck look good, more professional, and fill in the missing pieces. They also help maintain the structure of the business. They see the market every day, so they are the best to give a read. They can coach you on how to break the steps and the actual market valuation. Always remember that valuation is not a formula; it’s a negotiation. Approach it that way.
Are You An Aspiring Angel Investor? Here’s A Little Tip On How To Learn
- The investment methodology, the timesheet, and terminology; pre-money, post-money can be very new and different. The great way to learn is with other people – You need to be around other investors, watch how they do their thing, share the deal flow and diligence that goes with it.
- Different people bring different skills and strings to the table as well - that could be very helpful
- Podcast – A podcast is usually a useful resource! Listening to someone tell the story straight up is also a good way to learn about this investment niche.
And when you do start angel investment,
- Do not find a product and want it on day one – It’s going to take you a lifetime to get to the full vision. You have to go into the market with what you can deliver. Then you can start building your visions from there.
- Understand the rule of software development – It takes 6 months to build and 6 months to sell. If you can’t build it in 6month, you’re scoping it too broad; and if you can’t sell in 6 months, you built the wrong thing.
To learn more about Hall, head here:
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