How we raised $180 thousand in a few weeks with no product
Hey, it’s FreShlaganov on air!
I left VC for the startup world this May and founded EduDo where we’re developing a mobile platform with short interactive educational videos generated by users (hopefully!).
Today I’d like to tell you how we raised our first investment.
In case we prove our main hypotheses EduDo is a story of quick growth and raising large investments. For example, TikTok in 2018 spent over $200 million only on Google Ads!
We are making a platform product, so we inevitably face the chicken and egg problem from the very beginning: no content — no value for users, no users — no content. Therefore, we need a sufficiently large amount of content on the platform from scratch to test our fundamental hypothesis (that users generally need short interactive educational videos).
Accordingly, you need to motivate content makers and pay production companies for video processing. All this sums up into a lump sum. Besides, we still need money for marketing to attract the first users, and the team. Therefore, I set myself a challenge to raise at least $150,000.
Of course, I cheated a bit in the fundraising game, because I have a VC background. I had some idea what angel investors might be interested in our story, and who would be of interest to us. Besides, I personally knew many of them well enough. The result was the fastest possible raising of investment commits with a fairly decent conversion rate of 117% (I met with 6 angels, everyone decided to jump in, and one of them also invited a friend ready to commit). As a result, we raised about $180,000. There are also several investors ready to join in case we need additional investments.
How did I present the startup? My VC experience helped me understand that at this stage, investors have several basic motivations, and it is important to inspire confidence in them in each of these areas.
Primary motivation is, of course, making profits. It is important to show that a startup can grow into something huge (not a problem at all in our case), and that there is a clear plan (or rather an if-then algorithm) on how to achieve this. By the way, a small life hack to check how cool an angel investor is — the best of them understand that the details of the type of business model and target audience can and should change a thousand times, so they make a decision based on two basic questions — how big a company can become if successful, and will these people be able to grow it to such a state?
Another motivation is becoming a part of a cool story at the earliest stage. Startups are very interesting and new, so many angels invest in order to feel involved in something cool, at least for the sake of telling their friends and partners at meetings what an interesting company they’ve invested in. It is important to show that what you do is really cool, that you are making a breakthrough product that can provide more value to users and cool insights to everyone involved.
The third motivation is access to talent. It’s no secret that 90% of startups fall short of their goal, and that’s okay. But what remains is people, many of whom will try again and again after the first attempt until they succeed. Accordingly, angels often invest in long-term relationships with people who are meant to create. It is important to show that this is the kind of team you are. There is no one-size-fits-all way to do this — it’s about a mix of your experience, desire to learn and motivation.
These are the basic conclusions I made when I tried the investment market from a different side. I hope my experience was helpful to you. Stay tuned!
You can also read my previous articles: