I often receive questions from founders about how to approach investors and raise venture capital for their businesses. The best advice I have is to take a strategic approach, in the same manner they might approach B2B sales, and build a fundraising pipeline. Although this method may require more effort upfront, it has been tried and tested, resulting in the best outcomes and saving time in the long run. Here are a few top recommendations for getting started:
- The fundraising process can be broken down into three basic stages: top, middle, and bottom of the funnel. At the top, you need to engage qualified investors for your business, while in the middle, you are actively pitching them or sharing different fundraising assets. At the bottom, you are working through due diligence to close.
- In this approach, the top of the funnel often takes the most planning. Alongside gathering all of the decks and documents you’ll need, spend time creating a target list. Talking to the wrong investors is a waste of time and can make a startup appear inexperienced. To avoid this, create a target list of potential investors and do your homework to ensure the investors you spend time with are a good potential fit for your unique goals (e.g. stage and industry fit are must-haves before any conversation).
- Once you have identified your target list, ask around within your network for warm introductions. Create a document with the target list that is easily shareable. Add the critical contacts’ email and LinkedIn. Speaking of LinkedIn, check to see if your network already has connections to your list before reaching out to those “looser” connections. Be sure to have an email ready that you can send to your contacts that they can easily forward (not copy-paste). This email should have all of the important information about the company, major milestones or metrics, and spell out why this round would be a good fit for that VC. The more you can reduce friction, whether it is making an introduction or making a decision on why someone would take your meeting, the higher your chances of success – this applies to most things in life.
- After you’ve connected with an investor, pick out 3 people in their network that you know could be interested in your startup, and ask for an introduction in your thank you note. It’s amazing how many fundraisers forget this simple step. Investors know other investors. In fact, it’s part of their role in the ecosystem to connect other investors with potential opportunities occasionally.You are doing them a favor by already picking out who would be a good fit for your company.
Keeping track of ongoing conversations with potential investors is crucial. Founders should have a place to track and monitor these conversations, which can help determine which investors require more attention and set up a rhythm for follow-ups. This should look and feel much like a basic CRM. And last but not least… Show up prepared and go crush those meetings. Later on, we will talk about cold outreach, materials to bring, key metrics, and how a conversation between a VC and Founder should go.
