After taking our investment, keep us in the loop

Send Out Quarterly Updates to Keep Investors In the Loop. Photo by Markus Winkler on Unsplash

Congratulations. You’ve had a successful seed raise and collected checks from angel investors and a couple of early stage funds. Now you’re busy building the team, extending the product, and signing up customers. Those investors are busy people and the only thing they want is that big check when you exit, right?

Not really. The biggest frustration I hear over and over from other angels is that after taking our money, we never hear from the company again. What we want more than anything is to be informed of your progress and stay involved in the business.

Most angels invest…

Lifestyle Businesses Leave Venture Investors in a Pickle. Photo by David Todd McCarty on Unsplash

The first time an investor asked if I was building a lifestyle business, I felt insulted. With images of working from the beach or spending my days golfing with clients, their question seemed to belittle the insane hours I was working.

I eventually learned “lifestyle business” is a specific term that isn’t what the name implies. And now as an angel investor myself now, I’ve learned the hard way why lifestyle businesses are deadly for investors, and now ask entrepreneurs the same question when deciding whether to invest.

What’s a Lifestyle Business?

The term itself seems to imply a company…

And why all startups should do the same

Photo by LinkedIn Sales Solutions on Unsplash

In building three startups, I really wanted to hire a head of sales as soon as I could. Not doing so was the best decision I ever made and probably the most important reason those companies were successful.

As a startup investor and mentor now, I meet too many founders who believe that hiring a head of sales is what they need to get the company to the next level. It isn’t. And it rarely works out well.

Personally, I hate doing sales and I know I’m not alone. …

Photo by Bill Stephan on Unsplash

After writing more than twenty articles on pitching, I was asked if I could sum up my advice in a single sentence. My first reaction was a snarky, “Yes, my advice is read all the damn articles.”

But while working with various startups over the past few weeks to help them prepare for their pitches, I realized I frequently said, “The one thing you need to keep in mind is…”

When getting started raising money from friends and family, and even into pre-seed, people are investing in you because they know you, they want to support you, they love you…

What Happens to Angel Investors When the Big Money Comes In

Conventional wisdom says startups should begin their funding process with friends and family, then raise an “angel round” before grabbing serious venture capital. However, crunched between the interests of the founders and the venture capitalists with only a thin slice of equity, investing in the angel round rarely leads to good outcomes and is best avoided.

If everything goes perfectly, the angel round has huge upside for investors. The company’s valuation should continue to grow round after round so that even while angel investors are diluted by later capital, the value of their shares continues to increase. …

Unleash the power of storytelling to draw investors into your world

Storytime for Investors

Imagine you’re the CEO of a startup with an important new product. You’ve developed a device to create an instant communications network after a disaster. The prototype works great and users are excited; now you need investment to produce the devices. You’re in a room filled with investors, but they don’t even understand the difference between 5G and wi-fi.

So you start to explain — cells towers can take weeks to fix so you’ve developed a temporary replacement. As you move to the next slide you look up at your audience. Half the room is chatting with each other; the…

Here’s why you shouldn’t change your business plan to meet venture funding models

Image by author

When I went through YC Startup School, their advice often made me angry. Their attitude is that the only way to build a business is to go big or go home, and that infused everything they taught. If you’re building a unicorn, their advice was usually right. For everyone else, it’s wrong. Which wouldn’t bother me so much if their attitude wasn’t that unless your startup is shooting for the moon, go back to working at Starbucks. As my previous article outlined, there’s many ways to fund a great business besides venture capital. …

How do you build a startup if you can’t get venture funding? Learn how to fund a profitable startup under $25 million.

Photo by Brian McGowan on Unsplash

This is my 18th article on startup funding and my most important. Because somewhere around 2/3 of the startups I work with are building businesses that aren’t suitable for venture investment.

The venture model is simple — investors put in cash in exchange for a cut of the payout when the company is acquired or goes public. Since venture investors get nothing until the exit, no surprise that’s their only goal. And since startups are valued by revenues and revenue growth rates, accepting venture investor money is a promise to focus exclusively on explosive revenue growth.

This venture model works…

Hurdling Over the $25 Million Minimum

In an earlier article, I mentioned that startups need projected revenues of at least $25 million by Year 5 for angels to consider investing. This article explains the reasons for this seemingly arbitrary requirement.

Like everything else in venture financing, it all comes down to the exit. Until the company is acquired or completes an IPO, the investment has no actual value. It generates no interest, no dividends, no royalties, no rent. That million dollars an investor handed you is nothing but a number on a spreadsheet. Legally, the investor owns a fraction of the business, but since she gets…

Every day, I get a dozen messages on LinkedIn that say: “Hey Palter — I’m the founder of a great startup building an incredible app and looking for angel investors for our pre-seed round. Want to see our deck?” Sorry kids (and elderkids), but that isn’t going to work.

Without a doubt, pre-seed is the toughest round of fundraising. Finding investors is challenging and your valuation will be low. If there’s any way you can bootstrap through this stage, do so. …

DC Palter

Entrepreneur, angel investor, writer, and sake snob. Author of the series on pitching your startup to angel investors at

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