Advice from Jason Calacanis.page

Every few years, at least for the past 20 that I've been in the technology
space I've witnessed a change in how startups go about getting funding
from investors.

In the mid '90s, the best way to build a pitch was to collect a couple of
MBAs and build a kick-ass business plan, a slick PowerPoint deck and, of
course, a killer business model in Excel. (Back then, people spent more
time building their business plans than founders spend on the first
versions of companies I see on today¹s AngelList!)

Ten years ago, the best practice was finding an emerging market and
building the category killer in it. Basically, you paired a large
vertical (healthcare, sports, kids, plastics) with a buzzword (blogging,
photo sharing, social, e-commerce) and put a for between them. For
example: blogging for sports, photo sharing for kids, or social for
healthcare.

Today? People are obsessed with the lean startup genre of businesses
that reinvent, basically optimize traditional activities like hailing a
taxi or booking a hotel room.

If you came into a room with a VC 10 years ago and said you were building
any of the following businesses, you probably would have been quickly
dismissed:

1. Hail a taxi

2. Back up your files

3. A message board for employees

Yet those businesses: Uber, Dropbox and Yammer are three of the hottest
startups. (Full disclosure: I'm an investor in Uber, and while I didn¹t
invest in Dropbox and Yammer, they did debut at my conference.)

So, how does one get an investment for an idea that seems obvious? Very
simple: Understand what angel investors and VCs are looking for and give
it to them. Investors have pattern recognition, and they are driven by
four Fs: fortune, fame, fear and fun.

<strong>Fortune</strong>
<p>Investors are typically already rich. They have all the basics covered in
my experience: homes, cars, vacations and private schools. As such they
need big, big returns for an idea to get them (and their LPs) excited.

Do not (I repeat, do not) come to them with an idea that can make $10
million or $100 million a year in revenue. Come to them with an idea that
can hit $1 billion in revenue.

This doesn't mean building a spreadsheet that shows you make $1 billion
in revenue after five years. Everyone knows that's BS.

Instead, tell them X number of hotel rooms are rented every day and Y
number are not rented, and that if you discounted the Y by 50 percent and
sold just 10 percent of those, the total revenue would be Z and 30
percent of Z in 200 cities equals $1 billion. (I'm imagining Airbnb and
Hotel Tonight doing that math).

Investors don¹t care if it's a one in 500 shot of hitting $1 billion in
revenue, because their return will be 10,000 fold when you do. Investing
is about hitting a moon shot like Facebook, Google, Yammer or Dropbox.

<strong>Fame</strong>
<p>Almost every investor I¹ve met is driven by ego, and if they're not, you
don't want them as an investor. If you don't have an ego about winning,
then you're not going to fight like a tiger when the chips are down. You
want crazy on your side when things get real.

There is nothing that makes me more proud than rattling off the
successful startups I've invested in. It shows I can pick winners, and
let's be frank: We all want to be on the side that's winning.

It's your job to explain exactly how big and powerful your startup will
become. If you do it properly, people will jump on board.

READ the rest of Jason's piece on the American Express Open Forum site &
post your comments there, too:
[http://www.openforum.com/articles/4-surprising-inside-tips-attract-invest](http://www.openforum.com/articles/4-surprising-inside-tips-attract-invest)