Loveshark's investment story: How to impress angel investors

This is the second and final part of Loveshark's investment story. The first part -- in which Game Dragons' Philip Oliver shares why he chose to invest in the studio and how developers should approach investors -- can be found here.

When we started Loveshark 18 months ago, we were completely new to games. We would walk into games events and know no one. Since then things have changed a bit; we have made many friends and connections, and raised over £750,000 from amazing angel and venture capital (VC) investors, and grant funding.

We started Loveshark because we saw huge opportunity in the camera games space. My co-founder Sam Weekes and I had been working in augmented reality company Blippar for several years and could see that there was a huge opportunity for technologies like AR and computer vision (CV) to create the next paradigm of games. Sam is an engineer and I was a product manager so we had the perfect mix of business, creative and tech skills to get started.

The first cheque is the hardest

Usually potential investors will ask you, "Who else is in?" If the answer is a list of smart people that they respect, and there is limited availability of investment, it creates scarcity and momentum so they will move fast and be decisive. Philip [Oliver, Game Dragons] met us at this time in our investment round which helped with a fast investment decision.

So how do you get that first cheque?

• Target investors who have a specific passion in your genre/space/audience. If they get it and already believe in what you are doing, they are more likely to invest with conviction as well as being your best evangelists going forwards
• Target investors who know the team well. This could be an old boss, colleague or someone who has seen your progress over a matter of months/years. In this case if they are impressed by your speed and ideas they may write the first cheque based on their belief in you as a team

What do angels look for?

Angels and VCs have a different approach. VCs are looking for the next billion dollar company and angels are usually looking for a way to make a return on investment and give back to the industry.

Here are some of my observations on how angels invest:

• They are not a charity. They want to see how your business could grow and make money so you need to show them your potential
• They want proof. They might have worked with you before and know you are awesome or perhaps you have an impressive team or track record, maybe you've tested a prototype and gotten some promising data. Usually for angels, it's not just about the idea -- they need something else to convince them that your team has what it takes to do this
• Often they want to invest in companies that they understand and they can help with. For example, among our angels we have a performance marketer, programmer, advertiser, operations professional and multiple games company CEOs. They invested because they understand the potential of our business and can offer more than just money, they can offer advice and mentoring -- this type of angel is solid gold

Find supporters in the community

"When you are fundraising, you will be rejected often and it can feel really disheartening. Try to remember that it's not personal"

Find people who believe in you that will vouch for you to others in the industry. At the very early stages, Games London and UKIE gave us a lot of support, inviting us to events where we could network with games colleagues and potential investors.

Once we had our first angel investors, they would talk about us at events and test the water with other investors. Investors are people too, and having advocates that can pitch you in an indirect way takes the pressure off. Plus, it's way more convincing when they themselves have invested their own cash.

Look in different places

Equity investment (angels/VCs) can seem like the only option for a startup business but there are other sources too. Grant funding does not require you to give up any equity. Innovate UK was recommended to us by a colleague and we worked hard to create a compelling application. It took us five applications to them over the last few years to be awarded a grant: it was hard work but was definitely worth it to have the backing of the UK's innovation agency.

We heard about UK Games Fund via Twitter and kept an eye on them until they announced a new grant. As well as awarding us funding, they gave us access to mentoring, events and a booth at EGX to exhibit to over 80,000 people. They have been a huge supporter of us and are an amazing resource for the early stage games community.

Talk to other founders

This is your secret weapon -- other founders have been through exactly what you are going through. This is a time you can be really honest about the challenges and frustrations of fundraising and get candid advice. It's also likely that they have met the same investors that you are targeting and have behind the scenes info.

If they really like what you do they may also be able to introduce you to their investors. These introductions carry high value to investors as they usually respect their founders highly.

Keep showing up

When you are fundraising, you will be rejected often and it can feel really disheartening. It's a fact that most investors will say no (usually 90%+) and it can be awkward when you meet those same people time and time again at events.

Try to remember that it's not personal -- they may just not be interested in your area, or they may have already committed to other investments, It is also possible for them to be wrong about their predictions of which way the market will go.

But one important lesson I have learnt is that showing up counts: it shows perseverance and resilience. And guess what, investors who say no, may say yes in future. Keep good relationships, try to avoid grudges and keep going.

The fundraising journey is certainly a challenge but we have brought together an amazing group of supportive investors who believe in us and have our back. It has made our business stronger and given us the fuel to experiment and be daring. Thank you to Hoxton Ventures, Innovate UK, UK Games Fund and all of our angels for backing us.