5 Steps to Vetting your investor
Just like all filmmakers and Entrepreneurs are not created equal, nor are all “Rich Guys.” Many will jerk you around, and not actually deliver on what they promise. So how do you know if your potential investor is legit? Well, here are a few tips.
Note: This Article is largely in response to a piece by Jason Brubaker at Filmmaking stuff. Overall it’s a good piece, but I felt it lacking a few things so I’m expanding it with my thoughts. You can find the original article here. Even though Jason was a bit too involved with Distribbr and that whole debacle, he did make some good content so my response blog is getting a port.
Look them up online (Duh)
You need to know who you’re dealing with, so before you meet with them you should do some diligence. The goal of this step is just to ensure they have money, and get an idea of whether they’ll be likely to spend it.
You want to find out what they’ve done, and where they got their money. Generally start by looking them up on AngelList and Slated. These sites do some pretty deep vetting for to make sure that investor members are accredited. They’ll also list the previous investments of the investor, so you can see how they stack up against yours.
Slated is strictly for film, AngelList is focused on Tech. If they have active profiles on these sites, then you know that they are active investors. Active investors are more likely to invest.
If they don’t have either of those profiles, look at their LinkedIn. Generally Linkedin will show you previous positions, if they have multiple executive positions at companies with more than 15 employees, or list that their company was sold to a bigger company they probably have excess capital to invest.
If you’re too far away from them to see their full Linkedin profile, google them. If they have a profile in Forbes or Bloomberg, you’re set. If they have a ton of lawsuits or if you find something saying they, I Don’t Know, tried to buy a baseball team but were laughed out of the room then lambasted by a major newspaper, maybe steer clear. Totally not at all a real example, by the way.
2.Look at what they’re wearing and what they’re driving.
As Brubaker says, this technique is far from perfect. Sometimes the guy in the three-piece suit has less capital than the girl in the jean jacket and yoga pants. However, there are some things you can take into account. Fashion is highly dependent on the area you live in. Here in Silicon Valley, it’s common for the people in sweats to be worth more and be more likely to invest than the suits. Try to understand the cut of the clothes, and get an eye for designers. I know some people who wear T-shirts that cost more than I paid for my first Armani suit. Admittedly, I bought that suit secondhand.
But there are some constants. Before you look at the clothes, look at the shoes. People, especially men, overlook the importance of shoes to the overall aesthetic, but they’re a relatively constant indicator of wealth. Watches are also a good indicator of status.
Whatever make or model of car they drive will give you a good idea of how much they’re worth. Generally make is better than model, for example, hybrids are big here in the bay. for a time, a Prius was a status symbol. Now that most luxury brands have a hybrid, the make is generally a good metric to judge by. Teslas are still a great indicator.
3.Do they pick up the check?
Here’s one that I totally disagree with Jason on. He makes the point that if he can’t pick up a 50 check you’re not getting a 50,000 dollar check from them. Whether or not an investor picks up the check is largely dependent on a few factors. If they’re an independent angel investor, they can take about 8 meetings with entrepreneurs a week. If they always picked up the check, they wouldn’t be an accredited investor for long. Also, most of the rich guys I know are surprisingly stingy.
Generally, if it’s a first meeting I split the check. I pay for my seat at the table, they pay for theirs. A fear of many legitimate angel investors is whether or not the entrepreneur is going to carry their weight, so in a way splitting the check is symbolic of what a good relationship with an investor should be. Future meetings are up for debate.
4. If they’re talking about “Money Coming In” it’s BS.
Jason is completely correct on this one. Unless the startup they were one of the first ten employees at a is about to IPO, (You can google that, and easily fact-check it) that money won’t come in.
However, if they say their money is tied up, that’s a different story. Savvy Rich people don’t let their money sit in a checking or savings account. They invest it. Most of the time, they’ll have a respectable stock portfolio. That means they’ll have to sell something (Liquidate Assets) in order to free up money to invest in your projects. Here’s a tool to help them to do that.
5. Is it too Easy?
It may sound counterintuitive, but if it’s too easy to get the check that should be a huge red flag. I’ve worked in Silicon Valley and Hollywood, and it’s never easy. It requires finesse, charisma, and luck. Just like you need to do your homework, your investors need to do homework on you. They will need a deck, a business plan, and a good relationship in order to give you a check.
This analogy is crass, but the more I play this game the more I realize the truth behind it. Getting investment is like dating. You have to get to know each other first. Then you figure out if you like each other you figure out if you could work well together. Finally, after 3–7 excellent meetings and more phone calls and messages, you get into bed together. Often the more meetings it takes to get into bed, the better the relationship will be. That’s not always the case though.
If you want more like this, you should grab my free film market resource package. It’s got lots of templates to help you talk to investors and distributors including deck templates form letters, and tracking sheets as well as money-saving resources and a free e-book.
