Building an angel investor army

What do F1 Racing and Fundraising have in common? In both, the outside world sees a solo hero tackling an extremely difficult contest.

Lewis Hamilton, driver for the Mercedes car, comes back from 10th to win the São Paulo GP in stunning fashion. Emily Rasmussen, CEO of Grapevine, navigates a daunting fundraise disrupted by holiday breaks and investor indecisiveness to close an awesome pre-seed round.

The other common thread in both sports is that success is dependent on a team in the background- despite it seeming like an individual effort. The Mercedes engineering team and pit crew do so much to put Lewis Hamilton in a position to make magic happen in a race.

In startup fundraising, having a team that wants to help push you over the finish line makes a massive difference. This team is separate from your co-founders and the employees actually building your company. It's the people who are helping make intros, backchannel, send positive notes/references, and build the momentum that closes fundraises.

It’s possible to build this team organically and slowly over time. That's what I did before I launched my last fundraise in 2017. My "team" was built over 10 years in tech and investing. I worked alongside amazing individuals who would go on to build huge companies and I helped people when I could without asking for anything in return. So when it was my turn to fundraise, I had a team that was excited to make connections for me and speak positively about me.

My leisurely approach over a decade worked for me, but most founders don't have that luxury. The question is how do you assemble a team to support you if your deadline to start fundraising is 10 weeks and not 10 years?

This is where the idea of the Angel Army strategy comes into play.

The Angel Army strategy is usually deployed before raising your first round of funding (pre-seed), but I'm seeing it executed now in preparation for later rounds like Seed, A, and beyond. The idea is to allocate a tranche of capital whose purpose is not primarily for operations. The goal of that bit of capital is to get the most helpful, influential people that you can to join your team. No better way to get someone on board than to give them financial incentive to help.

For the Angel Army strategy, you would rather get an up-and-coming product manager at Coinbase on your cap table for $1k than you would a dentist for $100k. The added Credibility and Network you derive from your Angel Army is more valuable than the dollars they actually contribute.

So how do you go about building an Angel Army? Think about it as a slightly condensed version of a full fundraise with a few tweaks to consider. Here are some to consider:

1. Identify a target list optimized for credibility and reach - Optimize for credibility in your space and network within the investing communities. The larger your network to start, the easier it is to be targeted. If you start as more of an outsider, get as close as possible. Remember, any angel you get on board will enhance your network and get you closer to other more valuable angels.

2. Get introduced - I realize this isn’t a tweak to the standard approach in formal fundraising BUT it’s so important that it bears repeating. Angels may respond to cold outreach with the right targeted email, but your chances always improve when there is a warm intro involved.

3. Butter them up - Tell the angel why you're excited to have them on. They're not just money to you. You want them to be a part of the team and their experience / network / intelligence makes them the perfect addition, which is why you want them on board before you go raise (at a better valuation…see below).

4. Give your angels a deal - Price this round attractively, targeting a raise amount and valuation cap that dilutes you 2-5%. Let them know that this deal won’t be available once the full raise starts. IMO it's a waste of time and effort to try to optimize the pricing of a round that will dilute you 2-5% but could net you a far speedier fundraise with a higher valuation.

5. Set rules/parameters and be ready to break them - setting limitations on the angel round you’re raising accomplishes a few things. It shows a level of formality that adds credibility to the process and demonstrates that you aren’t desperate for their dollars. It sounds something like this, “I only want to raise $250k to bring on great people with a minimum check size of $10k and max of $25k. We’re closing it off next Friday.”

This shows that:

a. You don’t need the money (max round size),

b. You only want really committed people (minimum check size),

c. We want more amazing people not more money (max check size), and

d. There’s a shit ton of demand and we’re serious about getting back to work (time deadline).

Every one of those rules can and should be broken if pushed. People love when you bend rules for them and as mentioned before, investments outside of those parameters (like the $1k check from a well-connected operator) can be even more valuable.

6. Ask for other angel recs - Whether you're successful closing them or not, ask if there are other angels you should consider. You can quickly gain access to other great people through this approach.

Recruiting an Angel Army with super connectors and domain experts gives you value far beyond the invested capital that can be an absolute fundraising gamechanger. Call this the “Halo Effect” of an Angel 😇 Army (couldn’t help myself 😜). You enhance your network and credibility while multiplying your ability to secure warm introductions, in turn building undeniable momentum on your way to closing an institutional fundraise.