Choosing an investor is like getting married — except there is no glamorous reception with friends from college or an exotic honeymoon. Most importantly, once you’ve chosen an investor, you’re not likely to untie the knot anytime soon. That being said, it is critical to seek out the right partner from the very beginning.
But how do you meet Mr. or Mrs. Right in the first place? In my book, The Secret of Raising Money, I talk about the subject at length, but here’s an inside look at a handful of the most important tips every entrepreneur should know.
Raise Capital the Right Way
Get a Warm Introduction
Undoubtedly, the best investor outreach method is a warm introduction (i.e. an introduction from a mutual friend or acquaintance). An investor is considerably more likely to carve out time and talk to you if you are already vetted and approved by somebody he or she knows. In fact, warm introductions are the default channel through which venture capitalists (VCs) meet new companies.
Investors receive far more pitches every year than they could ever evaluate (e.g. Sequoia receives over 3,000 annually). Hence, they need filters. This is why email addresses are not readily published on VC websites. As a result, it is crucial that you spend time and energy searching out and making requests to well-connected folks, rather than reaching out cold.
However, not all warm introductions are created equal. If an investor does not really know, like, or respect the individual connecting the two of you, your chances of a meeting may be hindered rather than improved. By nature, an investor will naturally project onto you whatever qualities he associates with the introducing party.
Create an AngelList Profile
AngelList, a matchmaking service for early-stage investors and entrepreneurs, is the most powerful online tool available to meet investors. It allows you to search a huge database, filter as you please and then reach out.
AngelList’s popularity has grown so significantly that your startup’s AngelList profile is frequently the first place an investor or candidate will look when they are ready to learn about your business. Don’t take it from me. Take it from Fred Wilson, when he says: “If you’re working in tech and you’re trying to raise an angel round, you have to be on AngelList. You just have to be there.”
Follow Investors On Their Blogs
Many investors write personal blogs. Some notable examples are Fred Wilson, Mark Suster and Brad Feld. Bloggers, no matter how big, love receiving valuable and thoughtful comments. Some investors even discover deals through comments shared on their blogs. One way to take advantage of this is to build a relationship over time via commenting. Soon after a post is released, write a response that is thoughtful and of reasonable length (e.g. 6-7 sentences). Do this enough and you will get noticed. However, if you need to raise startup capital immediately, this is not the best approach, but it can be fruitful if you have adequate lead time.
If You Must, Here’s How to Nail a Cold Email
Out of all the methods of investment outreach, cold emails are one of the poorest uses of your time. They can work, but asking for introductions to investors is the highest ROI networking activity in which you can engage. That said, if you have to write a cold email, here are five tips to ensure your email is answered:
Make it short and direct.
Introduce yourself and explicitly state the ask in the first couple of sentences. The first question the investor will be trying to answer is: Who is this person and what does he or she want?
Research your contact.
Do your research on the person to whom you’re sending the message, and customize the email as much as possible. For example, compliment the recipient on some recent achievement (e.g., a funding round, product launch etc.). Never–ever–send mass cold emails with multiple people on BCC.
Get to the point.
Ensure the subject line is very specific and stands out (e.g., “My startup,” “Investment” or “Introduction” are all poor subject lines). This helps to avoid an email getting lost in an inbox.
On Monday’s VCs typically hold day-long partner meetings, and hence accumulate a lot of email over the course of the day. Don’t send after 12 p.m. on Friday either — if the investor doesn’t get to it before the weekend, it may be lost forever.
Suggest meeting times and follow-up actions. For example: “I am in San Francisco January 5th-7th, and could meet between 1 p.m. and 5 p.m. on any of those days.” Offering specific options removes friction and increases the likelihood of a response.
These are just a few of the most important channels for meeting your next investor. For those of you who’ve successfully raised VC funds, what would you add to this list?
This article has been edited and condensed.
Michael Simpson is the co-author of The Secret of Raising Money, which teaches entrepreneurs how to raise money, and co-founder of DJZ. His co-author Seth Goldstein, who has raised $100m+ across a dozen companies, co-founded DJZ and Turntable.fm. Connect with @michaelgsimpson on Twitter.
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