July 28th, 2022 | By: The Startups Team | Tags: Funding
Congratulations! You've made it to the end of our four-part Funding Series:
Phase One - Structuring a Fundraise
Phase Two - Investor Selection
Phase Three - The Pitch
Phase Four - Investor Outreach
Part 1 - Investor Outreach
Part 3 - The Investor Email Pitch
Part 4 - How to Contact Investors ( ←YOU ARE HERE 😀)
Let’s dive in!
So you've got your list of angel investors, venture capitalists, random private investors, and even your rich Aunt and you're ready to blast all of them with your email pitch...
Please don't! Step.. away.. from.. the.. keyboard!
Most Founders (and we help thousands) wind up tanking their entire fundraising process the moment they hit the "send" button to potential investors. That's because we treat the fundraising process of engaging private investors as if it's some mass-marketing scheme — it's not. A well-run investment strategy for potential investors is a sniper approach, not a shotgun.
We'll assume you've already crafted a great email pitch, and you've already done your research across all possible angel investors, VC firms, individual investor candidates, and the like. If you're not comfortable that you're finding the right investor or feel like you're about to waste time going down a rabbit hole finding them, feel free to reach out to me — email@example.com (yes, I'm the Founder and that's my email and I do respond) and we'll help you out.
Managing your fundraise will certainly involve keeping track of all your angel investor and venture capital prospects along the way. The problem you run into as you begin to contact investors, disqualify particular investment funds, or get introduced to new potential investor contacts is that the list gets messy fast.
The most important aspect of raising capital is remaining incredibly active throughout the fundraising process. We're also big fans of adding a lot more detail to each contact as we begin to find investors we think we have our own "product market fit" with.
That may mean noting some particularly relevant Tweets from an angel investor we're targeting or a recent funding round that some venture capitalists we're targeting have done. All of these will help with our email pitch and introductions.
Our investor spreadsheet acts as a pseudo-CRM that will keep track of what angel investors are "in" and what firms are "out." At first, we'll have a couple of conversations with angel investors and this level of detail won't seem too valuable but after we begin to network a bit, this list will get unwieldy really fast!
Currently talking, you'll receive communications regularly, and there's some level of interest from the angel investor and/or venture capital firm.
Let's say you've reached out to a really good potential angel investor and you've yet to get a response — it's going to happen a lot. We want to track not only the status of "waiting" but also how many attempts we've made and on what dates so we can determine when we are simply going to waste time.
Maye we've pitched a few venture capitalists at some networking events, they "kinda like" our business model but just don't seem to be blowing up our inbox. We aren't going to risk giving these contacts a "hard no" just yet, but we also have to recognize they may fall into the "no interest" category.
Simply put, if an investor isn't chasing us down to invest, it's because they have no interest. We can't risk burning valuable time chasing a fund that doesn't want to chase us back.
Most entrepreneurs get by on refreshing list investor list once per week. It's an active process but it doesn't need to be overwhelming.
You're about to email a lot of funds, so we'll want some customizable email templates that we can easily modify for each investor.
Note this is definitely not the same as just carpet bombing potential investors with the same email! It’s designed to take some of the repetitive work out of creating lots of emails from scratch, but also to make sure what you do say in each email is consistent.
If you find that one part of your email style works better over time (it should with practice) you’ll then update your template first so that each successive email uses your best style.
The email that you would send to a potential Connector to ask for a mutual introduction. This would include the value you’d like to potentially offer the Investor (this could change, so this is a good place to add all the various value prospects you can think of).
In the event that you don’t have a mutual connection with any of these investment funds, you’ll want to work on an email that leads with a mutual interest that you both share.
If you have a mutual connection (even with other investors) and assuming they are not making the connection for you, you’ll want to lead with how you may know each other. “We both know Wil Schroter from Startups.com" for example.
This is the heart of your pitch, covering the company overview, the growth we're experiencing, key customers we've attracted, and the financing we will require.
Again, the important thing about these stock templates is that you constantly refine them as you learn more about how people are receiving your pitch and what types of communications work best.
The tendency amongst most Founders is to create a long list of cold emails, develop a pitch, carpet bomb the entire list, and just wait for “money” to call back. This works never.
The worst thing you can do — the absolute fastest way to ruin your chances — is to send the same blanket email to a list of investors. It’s as good as not sending anything at all. We can explain to you that investors can detect a stock generic email a mile away, but let’s take that off the table for a minute. What it really ruins is your opportunity to refine your outreach over and over, which is what makes it work.
The smart way to reach out to your contacts is in small batches. Let's say you've narrowed down your list of your top angel investor candidates to 20. Start with 5. Most entrepreneurs are thinking “Well I need to raise money yesterday, why would I wait even a single day?!” Here’s why.
Every email you send, especially in the early stages, is an opportunity to test whether or not people engage your deal — we're testing "interest" specifically. The probability that you got it all right the first time — the intro, the email pitch, the subject, and every other aspect (including your pitch deck, business plan, etc) is pretty much zero. These pieces become “perfect” when they are subject to tons of iterations of feedback to find what drove investors to become interested at all.
In order to do this, you need to send a few emails out, see who is interested, and then refine with whatever information you’ve received. If you send 5 emails out and don’t get a response at all (it happens a lot) then wait a few days and send a few more out. You want to avoid sending all 20 with the wrong message, blowing your chance to send them again.
This isn't like applying for some bank loan or small business grant where if we get it wrong the first time we can just keep applying for more money. The number of funds for a potential investment opportunity is tiny, and we're competing with thousands of other startup companies for those investments. We can't afford to lose a single opportunity.
We covered the details of your email pitch in another section but it’s important to note that whatever you send, brevity is your friend. The longer you make your email, the less likely you are to get a response. All an investor needs to know in this first exchange is “Is this interesting?” They don’t need all of the details about your business — that’s what your pitch materials are for.
We used an example of a pitch that you could arm a potential Connector with. Let’s take a second look at it here:
“Netflix helps consumers combat huge cable bills and limited entertainment choice by providing thousands of popular TV shows and Movies for less than $15 per month. Over 50 million U.S. households subscribe to cable TV with an average spend of $80 per month for a fraction of the choice. The company is in beta test with over 5,000 homes.”
Could you write another 3 paragraphs about all the progress you’ve made? Yes. Should you? No. Think of this like a movie trailer. You want this quick, punchy message to just pull the investor in — no more.
Once you’ve sent that email and your inbox is still empty with responses, you’re going to find yourself wanting to email out again — and maybe again. You need to be cool.
Investors are getting hundreds of pitches from every small business Founder with an idea. Their most important emails will be coming from people they are currently in the process of closing a deal with, or one of the companies they have already invested in. The least important emails will be coming from unknown potential startups like us.
If an investor isn’t answering your email, it means they are too busy or not interested. Neither of which is solved by you sending a barrage of follow-up emails.
That said, it’s definitely permissible to send a follow-up email — once. It’s possible that the first email just arrived at the wrong time, but not that likely. If you emailed and said “Hey this is Mark Zuckerberg and I’m thinking about doing a new startup, do you have time for coffee?” they would certainly find time in their calendar for you!
For those of us that didn’t start Facebook, our options are to send a follow-up email with the intention of providing a slightly different context for your pitch. If you send “did you get my message?” you may as well not send an email at all. You’ve added no new value, and if they got your message, what was the point of you sending another?
Instead, consider adding some new context so at least it’s worth taking a second look. Here’s an example:
Jane, just a quick update since I last mentioned MyCo to you – we just crossed 10,000 subscribers this weekend and we’re on track to surpass 100,000 over the new year. We’d love to find a capital partner who can help us to scale even faster.”
On that note, you’re not referring to why they didn’t contact you. You’re offering another reason to contact you! It’s another way to follow up without having to come across like a stalker.
As you learned in the “Pitch Process” section earlier, if an investor responds to your initial email, they typically ask for some additional materials about your company, which will either be your Pitch Deck or Executive Summary.
What you will learn as you get into this process is that those documents can and should change over time as you react to feedback and revise your documents. What this means is that over a long enough period of time, you’ll have different investors who have received different versions of your materials.
This isn’t a huge issue in most cases, but if you want to be extra nerdy about how you manage the pitch process, we’d recommend keeping track of who gets which version of the materials you send out. You’ll find this comes in handy as you move from the email introduction process to the in-person pitch process as some of the docs that said you were going to be a $100 million market 3 months ago now show that you’ll be in a $50 billion market today. It’d be helpful to know what people heard last.
Following up on every email, every meeting, and every action, is entirely your job. If you send a Pitch Deck to an investor and they don’t respond — that’s your challenge. That’s because of all the people in this process, you’re the one with the biggest stakes.
Often people will say they will follow-up and don’t. If you haven’t grown up in a business like sales, you’ll find this particularly odd. This is where your Prospect List comes in great handy. Every time you have an interaction with a potential prospect, you should be noting the date and the description of that follow-up. More importantly, you should be setting a date of your next follow-up regardless of when they said they will contact you.
Assume everyone is too busy to follow up properly. As such, if someone says “I’ll follow up with you next week” then put a note on your list to do your own follow-up a few days after their suggested date. You’ll find that you’re the one carrying the conversation a lot. Don’t be shy about that. Good, determined Founders keep the process alive no matter who says they have the ball.
You’re now ready to conquer the final frontier: actually engaging with potential investors. But how do you reach out? Who do you contact first? What details should you provide investors to generate a good response rate, let alone a response at all? We’ve helped demystify the investor outreach process at every turn so you can tackle this head-on in the wild with confidence.
Instead of blindly carpet bombing investors with cold emails, we see now that finding an inroad to investors through a personal connection and asking them to make a warm intro for you is hands down the most optimal route you can take.
If, like many Founders, you’ve ever wondered why you were hopelessly stuck in “0% email response rate limbo.” you now understand why firing off an email with a subject line like “Investment Opportunity” will almost always get relegated to the trash bin, whereas a hyper-personalized subject line will help you cut through the inbox noise.
We know the exact ingredients to work into the investor email: a highly-personalized lead-in; your elevator pitch; a few words on traction; details of your team most relevant to the success of the company; any social proof via endorsements from advisors, customers, the media, or other investors; and wrapping it all up with an ask.