TBC: Why Founders Should Consider Raising From Angels

‍Jason Yeh: Hey there. Welcome to another episode of the back channel and today's episode. I'm going to cover a couple things. One thing that I'm seeing over and over again with founders who want to raise capital, and then the second thing being what I think the market has to do, and founders need to consider in order to address this problem. So the problem is that. As I talked to founders on a daily basis about fundraising, what I'm seeing more and more often. Is founders who are interesting, they are working on something. Pretty compelling. and that I think could go somewhere, but at this very point in time, I don't think there'll be able to raise from venture capitalists. And that happens with founders who are at the very start of their journey, trying to think about raising their first. Bits of capital. And it's happening with founders who are stuck at the pre-seed trying to raise their seed.

Sometimes their seed going to their a. And in those situations, [00:01:00] what I'm seeing is that because we're in a place where the venture capital market has kind of swung back from being overly aggressive now to being fairly conservative, needing way more proof points needing to de-risk more of the elements of a startup. It's leaving a lot of founders in this state where. Um, they unfortunately can't get to the next level. And so what do I think about that?

What do I think founders could actually do in order to address that? Well, I think the move here is to actually focus on raising from angels and friends and family. Now the common pushback around this idea of raising from angels or raising from friends and family is. Uh, especially at the earliest stages, what kind of friends and family do you have?

I need to raise a half a million dollars minimum to get started on X, Y, and Z. I just don't know anyone that would write a hundreds of thousands of dollars of checks in order to get to a half a million [00:02:00] dollars. The thing that is so difficult about this is I get it.

It's a bit of a chicken and egg where someone says I need money. And then the market says, well, I can't give you money unless I see this amount of traction. And the founders like, well, in order to get to that, Amount of traction. I need money. I need to build a product. I need to, uh, launch a product.

I need to market something. I need all these different things to get to that proof point that you're telling me I need in order to raise capital. In the past, it was this place of being stuck that I didn't see a lot of way out. I'd I'd often be like, you got to find a way. And I felt bad, not giving specific instructions on how to execute against that, but it was kind of one of those tough situations where, uh, People had to find a way people had to hold their breath, learn some new skills, execute even harder in order to get to that traction point. Now today, there's [00:03:00] something a little bit different than call it five years ago. The thing that's different is founders now have access to two important assets.

The first is AI. AI has such an incredible ability to make founders more efficient. Uh, give you another set of digital hands in order to execute stuff. And even on the technology building side of things for an innovative and hardworking, clever founder, They can actually start coding in certain ways and producing at least initial prototypes that they can get into market, that they can get customers to react to even start using on a daily basis.

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Jason Yeh: [00:04:00] On top of that five years ago, I would say. The access to, or understanding of how to [00:05:00] use overseas talent was extremely underdeveloped.

But today there are a lot of different ways that you can go out and access. Talented developers overseas in south America. South Africa. In Asia. And actually get real products built for you at a fraction of the cost. I'm seeing relatively talented engineers who can certainly do the work of building initial products for something like three to $4,000 a month. Which means now when we thought about in the past, oh, how can I even get to enough traction or real milestones that will allow me to have conversations with VCs? What used to be something like a half, a million dollar bogey that you needed to fill? Is now maybe a hundred thousand dollars, maybe $200,000.

If you think about it. A $4,000 salary means that a hundred thousand dollars could last 25 months. Distribute that a little bit more with [00:06:00] some spend. We're certainly looking at a year of runway to actually get stuff done so that you can build the traction and build the momentum to have a real conversation with investors. So I think angel investors is something that founders who are at the earliest stages of building a company should very much consider Now, the question that follows from this is, okay.

So you're saying that I don't have to raise as much money, but still, how do I raise from angel investors? I'm going to save that for another episode where I talk through what you would actually need to get done, the things that you need to understand about angel investors and how to actually execute the initial parts of raising an angel round. I hope this was an interesting insight into what founders need to consider. When raising rounds of capital in today's market. And that you'll join me for a follow-up episode.

As I jump into those small details on how to execute it. Thanks so much for joining me on this episode of the bacterial. And I'll see you next time.

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