RateMyInvestor founder and CEO Austin Stofer was promised investment by a venture capitalist. But after months spent jumping through hoops and reworking financials, he was left without a check.
“After sidelining other opportunities to focus on this one investor, I got five minutes to pitch,” Stofer explained. “The investor’s eyes were on his phone the whole time. Three months later, our emails were unreturned and no decision was made.”
After speaking to other founders, Stofer heard similar stories about the same investor.
“We got burned, and we aren’t alone,” said Stofer.
That experience was the inspiration for RateMyInvestor.
RateMyInvestor is a free online platform where founders review their experiences with investors. The platform places more knowledge in the hands of entrepreneurs, which enables them to make more informed choices.
“Founders and funders want to find each other,” Stofer said. “We’re just providing the place for that to happen.”
RateMyInvestor also wants to reward investors who practice ethically by featuring those with great ratings. Reviews left by founders are personally vetted by Stofer, and his team.
“We have to hold these reviews to very high standards and vet them very carefully,” said Stofer. “This is not a revenge platform, but a place where founders and funders can come together to break down the fundraising barrier.”
In addition to what is provided by the RateMyInvestor platform, Stofer has specific advice for Silicon Prairie founders who might be trying to gain access to investors in other markets.
When pitching to investors, have three different funding scenarios drawn out to show them the use of funds depending on how much you raise.
What I always suggest are these three scenarios,
- What your company will be able to accomplish without any funding,
- What your company will do with only half of the investment you are asking for,
- What you will do if you get 100% of the investment you are looking for.
This shows the investors that even without their money, you will still be able to gain traction even if the type of traction is different. For example, maybe you don’t get the $100,000 to put into development. However, you can continue to build out the platform in-house, it will just take an extra six months to hit monetization and your user goal.
The goal is to make it appear as if you are not 100% reliant on the investor’s money and have a survival plan even without it. This makes you appear as a resilient entrepreneur, which is an important trait that most investors are looking for. This also shows that you are a very methodical and strategic entrepreneur who has put a lot of thought into your use of funds and likely won’t be wasting the investor’s money.
A common misconception amongst entrepreneurs who dream of building a software product is that they can’t do anything to show traction until the software is built.
Too often have I seen non-technical founders sit around and try to raise money on a concept simply because they do not think they can achieve proof of concept without the software. This is completely false.
Go out and try to emulate your business model without the piece of software. If you are launching another “Uber for XYZ”, create a website on WordPress, explain your product and what the customer will receive with their purchase, and see if people will buy your product even in its earliest form.
Typically, if you can get people to subscribe to your product or service when it is in an early beta phase, this is a great indicator that you are onto something and will help you justify the development to an investor.
The days of investors investing in concepts are over. Go out there and show them how you can make money with what you currently have. It doesn’t have to be a crazy amount of money, but going into an investor meeting with a few customers and $800 in revenue is a lot better than walking in with only empty promises.