I am an aerospace engineer. On a whim I went to an entrepreneurial conference at the university that is in my town. And then, on a whim, at the evening pitch session, I pitched some hair-brained idea that I had been working on for a couple of weeks. Somehow it sounded pretty darn cool! I was actually even amazed with the way it sounded.
Still enjoying this unexpected high, I went to the social gathering after the pitch session. There I was approached by an older gentleman that said that he and his retired CEO buddies would be interested in funding my idea. Since my idea is a fairly cheap idea to implement, I told him that I wouldn't turn away funding, but at this point I most wanted solid business strategy advice. In a couple of emails since then, he has reiterated that he is interested in my idea, and that funding is no problem, and that I should arrange to meet with him after next Monday.
So, what do I do?
I have all the typical concerns of an early stage entrepreneur. Namely, could it be some scam or some way to take my idea? I'm also concerned that I'll do something to foul a good situation up. Also, although the concept is simple enough to implement, marketing and branding and entity formation are going to require money and expertise that I don't have - so I will have to enter into some arrangement like this at some point. How do I treat this, my first one? What if I show up and all individuals there are 70+ (like the man who approached me)? Should I be so audacious as to request that they bring in someone would understand the 20-something market?
The important questions:
What are the hazards? And how do I avoid them?
What should be my goals? And how do I reach them?
1) As NeoTycoon said, do your research.
2) If it seems they're legit, get yourself an advisor. Whether it's someone who has taken angel money before, a current angel investor, or an early-stage startup-friendly lawyer (recommendation: I use these guys ), get someone who can help you think things through.
Unlike NeoTycoon, I wouldn't recommend strong-arming or even hinting at other investors. Just play it through with some outside help - if you start playing games, it's much easier for them to walk away than for you to find another investor.
Do some background research on the person you met - does he have a history of funding people like you and ideas like yours? Is he involved in any outstanding litigation (or worse, does he have a criminal record)? Lexis-Nexis is your friend here (find someone at a law school to help you do a little research). Wouldn't hurt to ask him via e-mail either about his experience, with a little tact of course.
Is there a way you can pitch your idea without revealing all your cards? May be a watered down version that is tasty enough for them but also gives you a chance to test their reactions.
You can also hint that you have other potential investors - what's preventing you from pitching to say, Peter Thiel? This will pressure him and his associates to play their second hand.
Some similar issues are also addressed here: How do I get funding without "spilling the beans" on my idea?
wow, surprised at some of the comments on this one. Here is my advice:
1) Do you need the money or can you self fund?
2) can you raise friends and family?
3) Have you done a google on this guy? LinkedIn profile?
4) Have you asked him who is partners are?
If they are not a recognized investment company and are just a bunch of guys who have some bucks, then it is appropriate for them to sign an NDA. If they are an angel or VC, probably not.
My advice if you need it is to find someone with some startup and funding experience. Someone who has been there before. Most investors don't want to create companies. They want to invest in them and let other people do the hard work. The one beautiful safe guard of pitching your idea.
take his contact info and advise him you will get back in a few weeks...give yourself time to think things over properly. Get some advice and go into that meeting knowing exactly what you need and what it will take to get it done. Only one chance to make a first impression.
Best of luck