What Every Angel Investor Wants You to Know: An Insider Reveals How to Get Smart Funding for Your Billion Dollar Idea

256 Pages·2013·1.98 MB·English

by  Brian Cohen

What every
angel inveStor
WantS you
to KnoW
An InsIder reveAls
How to Get smArt FundInG
For Your BIllIon-dollAr IdeA
Brian S. Cohen
and John Kador
NEW YORK CHICAGO SAN FRANCISCO
LISBON LONDON MADRID MEXICO CITY MILAN
NEW DELHI SAN JUAN SEOUL SINGAPORE
SYDNEY TORONTO
Copyright © 2013 by Brian Cohen and John Kador. All rights reserved. Except as
permitted under the United States Copyright Act of 1976, no part of this publication may be
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ISBN: 978-0-07-180072-3
MHID: 0-07-180072-7
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To my amazingly supportive family
and the New York startup community,
which nurtured my entrepreneur dreams
and now allows me to nurture those of others
Brian Cohen
To my son, Dan, who lives what
his father merely describes
John Kador
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Contents
Foreword vii
Introduction ix
1 Angel Investing Is a Contact sport 1
2 early stage Investing and Why
Angels Are Your new Best Friend 13
3 Let’s Get to Know each other 27
4 What I’m Looking for in
an entrepreneur 47
5 What I Look for in the Pitch 69
6 every Business starts with a Belief 89
7 Investor Raising vs. Money Raising 107
8 Don’t Hurt the ones Who Love You 117
v
vi ContentS
9 Going Belly to Belly with
Your Customer 125
10 Due Diligence and Do Diligence 133
11 Accelerators, Incubators, and
Crowdfunding 143
12 It’s All About teammanship 155
13 Getting to no Is Just as Important
as Getting to Yes 167
14 Iterating the startup 173
15 Baking in the exit from
the Beginning 181
A Due Diligence Checklist 191
B the new York Angels term sheet 197
C Five Indispensable tools Founders
Can Use to Do Due Diligence
on Angels 201
D own Your Venture equity simulator 211
Acknowledgments 213
Index 215
FoReWoRD
If irst met Brian Cohen in a noisy auditorium at a business
school competition at New York University. There were scores
of investors and entrepreneurs, all trying to get their voices
heard. It was hard not to be taken aback by Brian’s desire to talk
with every person in the room. What stood out to me was the
fact that he treated everyone more like a long-lost relative rather
than a potential investment or stepping stones on a path toward
personal financial gain—he treated us like humans.
Starting a company is a journey into the unknown, especially
for first-time entrepreneurs. In May 2008, I started this journey
by leaving a job at Google to build a mobile app with my friend
Paul Sciarra.
That initial app was called Tote, a collection of catalogs that
you could browse on your phone. Tote had a few decent features,
but none stood out as being great. We soon learned that in order
to succeed, we needed to excel at one thing. Nearly two years
later, in March 2010, Paul and I launched Pinterest along with
our friend Evan Sharp. We focused on one core feature: the abil-
ity to collect in one place images that users found inspiring.
Four months later, we had only a few thousand people on
the site compared to the millions that other successful consumer
startups now see within weeks. Nevertheless, with Brian’s guid-
ance, we kept moving forward.
vii
viii foreWord
When Pinterest finally started growing, we realized that, for
our first users, Pinterest was an extremely personal tool. People
spend time on Pinterest planning the most important things in
their lives, such as a wedding, the addition of new family mem-
bers, or what furniture they will put in their homes. As we grew
our team, we wanted to make sure we worked with people who
understood what Pinterest meant to us and to our first users.
When the time came for Pinterest to raise money, we knew
we wanted to find not just a financial backer but an angel investor
who would also be able to help us navigate the journey on which
we would embark. Advice from others indicated that the best
angel investors are those who provide not just money but guid-
ance, contacts, and wisdom—all backed by personal experience.
Brian is ever optimistic and has shown me the value of being a
positive leader. At a time early in Pinterest’s journey, he believed in
what this very personal project of ours could be. He understood
what Pinterest meant to our small team and what it could mean
to millions of people. This book is full of advice on how to work
with angel investors like Brian, but it’s important to note that not
every business deal will follow the same rubric. Every entrepre-
neur’s journey is different, making it especially important to sur-
round yourself with people who truly care for your cause.
Ben Silbermann
Cofounder and CEO
Pinterest
Palo Alto, CA
Introduction
tHe Closest tHInG to slAverY
My path to angel investing began with a piece of unsolicited
advice from my favorite professor while I was in graduate
school at Boston University. Harold G. Buchbinder, or “Bucky,”
as he invited his students to call him, created the science commu-
nications program at Boston University.
I was just a kid from Brooklyn. I’m still not entirely sure why
Bucky took an interest in me. I know he was intrigued by my
organizing a dance marathon to raise money for muscular dys-
trophy and by how I was getting the university’s administration
to support it. I certainly didn’t know the meaning of the word
mentoring. But one day, Bucky asked me to stop by his office
after class. “I think I need to share with you something that will
make you more successful,” Bucky said.
I was certainly intrigued. No one had ever spoken to me like
that.
When I sat down in his office, he gazed at me intently and said,
“Never, ever work for anybody. It’s the closest thing to slavery.”
I didn’t understand what he was talking about. Everyone I
knew in Brooklyn worked for someone else. I didn’t even realize
he was mentoring me. But his words must have settled some-
where deep within me, because when I graduated, all I wanted
to do was start a company. Most of my friends went to work for
ix