As a seed stage angel investor I’m constantly running into pre-money companies that need just a little capital to get over a perceived hump in order to raise a “real” round. This is actually very hard money to find.
You’ve got this great idea that you’re pursuing. You’ve run up your credit card to the max, raised a little money from friends and family who know and believe in you, and tightened the belt at home – good thing your spouse still has that job – but that money is gone now, you have a prototype and a few users, but you still haven’t really proved product market fit. Just another $100K should get yo to that point, but it’s not easy to find that money!
Here’s the problem: most angel investors are looking for you to have shown that your idea has “legs” when they invest. You need to show that there’s a real market there, and that often takes money to demonstrate. You have a hypothesis about your users or customers, but professional investors, generalists that we often are, take some convincing that there are enough folks that fit your thesis, that they are willing to do what you say they will (whether that’s sign up, pay, or make your product go viral), and that you can reach them cost effectively.
So when you come to us you have to prove so much about your business idea, and you also have to convince us that you’re the person or team to do it. That’s a tough thing to do – no easy money here.
What’s the solution to this problem? Well, going back to the day job is always a reasonable option, but if you’re absolutely committed to doing this thing what you need to do is find that investor who already believes in the product market fit that you’ve hypothesized. This may be someone from the industry you’re addressing, or simply someone who has been convinced by your sterling pitch and argumentation. You now have reduced the problem from having to prove both team and product/market, to just proving that you’re the right entrepreneur.
Another way to look at it is that your first money should be from people who believe in you, second from people who believe in your idea, and only after exhausting those sources do you try to hit up the folks who need convincing on both fronts at once.