A Guide to Investor Outreach
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Fundraising is similar to any other Sales process — find prospects, reach out to them, set up meetings, and finally close the deal.
Like Sales, fundraising is also a numbers game i.e. roughly out of 10 investors you meet, - unless you've strong rapport among investor network - 1-2 might say yes. Therefore you maximize your top-of-funnel numbers to have a reasonable chance of closing your round.
Which investors should you target?
What I normally suggest is to create two buckets of investors:
1. Dream list - investors who you'd love to have on board for whatever reason. They have sector expertise, brand reputation, founder support, etc.
2. Practice list - investors who are very less likely to fund you but can be used as a practice bed for pitches.
How to approach investors and build relationships?
Like most businesses, VC and Angel investment is a game of trust. After all, we don't give our money to strangers. I can't recall any other industry where so much value is placed on trust. Every investor will try to find multiple data points as a proxy for trust. So it's always advisable to gain their confidence before you start pitching your company.
There are usually two ways to connect with investors ー online and offline.
Reaching out to Investors Online
There's no harm in connecting with investors through online channels such as email, LinkedIn, Twitter, etc. but you need to appreciate the nuances of each channel to connect effectively otherwise you will come across as spammy.
Target the investors you want to reach out to and start following them. Listen to their conversations, like their tweets and if you've something to contribute, just jump in and let your point of view be heard. It's a good way to get noticed by other investors who might be part of the same thread.
With all the spam going around, LinkedIn has recently become the laughing stock of cold messages. However, it's still one of the best channels for building professional connections. You must connect with investors you've targeted and learn about them. Once your request is accepted you should reach out to introduce yourself through a brief note.
By far the most effective or spammy channel depending on how you use it. Investors get tons of emails from founders like you and usually, they don't have time to go through everything. But when they do you must stand out with a compelling, short, sharp, and crisp note. More on that later.
Reaching out to Investors Offline
Offline channels are less scalable but definitely more effective to build relationships and trust. In order to build their brand and network, investors keep doing offline activities to build their pipeline.
Investors love to attend events and usually get invited as guests on many large or small-scale startup events such as pitch competitions, industry discussions, and more. You should aim to attend such events and connect with events during the networking session to introduce yourself. The purpose should not be to pitch them your company but to get them interested enough to want to meet you.
Many investors regularly schedule office hours to meet entrepreneurs and provide some mentorship. This is a good opportunity to connect with them and share what you're up to. Most investors are looking for opportunities to invest when they do such sessions.
How to get introduced through a warm intro email?
The life of an entrepreneur is incredibly easy if they've prior direct or indirect connections in the investor ecosystem. Like I said it's all about trust in the fundraising game so if someone can introduce you to VCs, the problem is half solved.
If you know someone who knows an investor, use these warm intro email templates to request an intro.
How to write cold emails?
In most cases, founders won't have the luxury of getting introduced through a mutual connection. But that shouldn't deter you from achieving your objective.
Most people shy away from sending cold emails but the reality is that a well-written cold email with a good story is equally compelling to potential investors.
Writing investor notes is an art and most first-time entrepreneurs struggle to generate interest through their outreach campaign. It doesn't have to be this way.
Follow a short, sharp, succinct method to generate interest in what you're doing. Here are the ingredients of a good investor email:
- a sentence on why you're contacting them
- a sentence about what are you doing
- a couple of key highlights (traction, team, IP, etc.)
- a sentence on how much you're raising and the status of round
- Finally a closure sentence with a question (deck, meeting, etc.)