– One of the many inefficiencies working against the U.S. economy is that a large mass of entrepreneurial energy is consumed with hunting for investors. Simultaneously, a huge amount of investors’ energy is spent screening promising entrepreneurs. By creating a channel for connecting the right entrepreneurs with the right investors, Silicon Valley entrepreneur and strategy consultant Sramana Mitra and the One Million by One Million (1M/1M) initiative aim to streamline this process.
Through her Seed Capital From Angel Investors interview series, the One Million by One Million entrepreneurs have heard from several of the most active investors that, while they have very large deal-flows, they invest in very few companies:
“We get about 1,500 pitches a year. I look at all of them,” says Paul Olliver, Wider Wake Networks. “Only 5%-10% pass the initial sniff test.” In the past twelve months they have made four investments.
In one month Mike Maples, Founder And Managing Partner, Floodgate, says, “We get about 600 pitches. Out of 600, we’ll probably meet with about thirty or forty. And we might fund one of those companies in a month.” That is 12 out of 7,200 in a year.
When asked how many investments they have made in the past 12 months, Peter Birkeland, RAIN Fund Program Manager, RAIN Source Capital, says, “On average, we probably do 15.” Since they receive about 150 pitches in a month throughout their network, that is 15 out of 1,700 deals a year.
Investors also spend a great deal of time screening deals. Jeff Clavier, Founder and Managing Partner, SoftTech VC, is a solo operator managing a $15M super angel fund who gets 2,000 deals a year and invests in 12. He constantly gets pitches from people who view all investors in the same light without knowing the scope or types of investments, markets, and industries that interest him.
Mitra says, “Entrepreneurs are going to investors much too soon, and without doing adequate validation, positioning, and other homework. As a result, most of them fail to raise money and waste precious time and energy.”
By combining the pre-screening and coaching process of the 1M/1M program with Mitra’s extensive knowledge of how the investment eco-system works, entrepreneurs are first advised to follow a specific methodology, and only when they are ready are they introduced to the most appropriate investors efficiently, quickly, and without wasting time. While introducing some entrepreneurs to investors, the 1M/1M will also introduce some entrepreneurs to customers and channel partners, which will help to further validate their businesses.
“Most investors are looking for a reliable pre-screening method, and they use their trusted networks for this,” relays Mitra. “In 1M/1M, we do a lot of pre-screening and coaching of the entrepreneurs before sending them over to the investors. In doing so, we make sure that a square peg is not trying to fit into a round hole.”
Mitra is a passionate entrepreneur who has three of her own ventures under her belt and knows the pain of funding an early stage business first hand. An MIT grad in engineering, Ms. Mitra learned business by building her own companies. She parlayed her own experience and expertise into a successful consulting practice, where she has advised over eighty small and large businesses on their positioning, product validation and go-to-market strategy.