Is there any other instance you can think of where the first time you meet someone it is to ask for them to enter into a long-term relationship with you and to take a significant risk on you with their hard-earned money?
An often overlooked part of any fundraising is the time spent prepping for it. The most crucial prep work is discovering the angels and VC partners that you might be able to work with, getting a warm introduction to them, and laying the groundwork for going back with a fundraise ask.
There are tons of benefits to this process. You'll get early feedback, benefit from their networks, and of course speed up the round when you go into full raise-mode.
So, what are the best practices for this?
Qualify Potential Future Investors
First stop is identifying investors whom you think are a good fit. The most obvious way to do this is to look at investors who have invested in similar startups to yours. Eliminate any that invested in a direct competitor. Keep in mind sector, location, round size and frequency (are they investing lately, how often do they invest, and so on). Our Navigator Search feature does that, based on the parameters you provide. Of course, we also suggest looking around at other databases too, and you can add them all into your Track pipeline.
Another route, mainly if you are at the angel stage, is to identify people who are in a similar space as your startup who have held positions in large corporates. They will both have the money to invest as well as some knowledge about the sector (more on that later). So, if you are an insurance technology business, looking around for senior VPs at large insurance companies. Getting a warm introduction to them is an excellent route to building a fruitful relationship.
An additional thing to consider when approaching VCs is identifying the right partner to try and meet. Larger VCs especially may have partners with specific sector/technology focus, for example. So if you are a SaaS business don't try and approach the MedTech person.
Research The Human Element
Now that you've qualified them from a potential investor perspective, now you want to qualify them from a human perspective. What makes them tick? What are their interests? Read their blog posts on Medium. Follow them on Twitter. Listen to podcasts they've been on. All this research will come in handy for the ask and the meeting (see below0, where you can show that you've prepped.
Find a mutual connection
We have an article on this already here for more info, but a quick overview:
The ideal way to connect with a potential investor is a warm introduction from someone they trust. Founders in an investor's portfolio are ideal as you know the investor trusts them; they invested in them. If you hit on a mutual connection here try and capitalise. LinkedIn is, of course, a useful tool for combing mutual connections.
A cold email or message on LinkedIn should be your last recourse. Avoid this at all costs. If you are starting your prep well ahead of time, your network will grow the more meetings you take, so a potential investor that you don't have a warm intro to may get warmer. Hold off on the cold email until all other options are exhausted.
Navigator has a feature that helps you crowdsource intros with a few clicks. Any potential investor you add into the 'Needs Intro' column goes into a list that you can share with your network with an ask for intros. Check it out.
Remember - you aren't in fundraising mode yet, so the ask isn't for a big check. Instead, what you are looking for is advice. Since you've done your research, you hopefully know a bit of what makes them tick, where their expertise lies, and where they can genuinely add value from a non-capital perspective. Identify that shared interest area, and use this in your ask.
You've identified who can make the intro, and what the ask is. Now, write up a quick (couple sentence) intro for the introducer to share with the potential investor.
We think the best way to do this is an opt-in intro. The introducer will send off the paragraph intro/ask to the targeted investor without you cc'd. Optionally, include an introductory (not fundraise) one-pager or deck. The introducer will conclude the email by asking the investor if they would be interested in an introduction.
Optionally, you can include an *introductory* one-pager or deck (not a fundraise deck) in that intro email.
An opt-in intro ensures there is mutual interest for a meeting, allows the introducer not to burn a relationship on an unwanted introduction, and for you to spend less time on meetings with disinterested investors.
As mentioned, the preface of the meeting is feedback and advice. If you are only interested in the potential for future investment, then you are doing it wrong. Use this opportunity to learn, get feedback and engage. Make sure you also ask a bit more about them as well. What are they working on? What is their recent focus? Why? The data you collect here will provide insight down the line on whether they might invest. It will also give you insight into the market more generally.
At the end, make sure you ask a couple of questions. First, based on the conversation you just had, is there anyone else the investor thinks you should be speaking to? Second, can you stay in touch, and if so would the investor mind being added to your monthly investor update? Finally, is there anything you can help them with?
Add to the Update List
One of the more critical outcomes of the meeting is being able to add the investor to your monthly update. Regular emails will hopefully keep the relationship fresh in a light touch way, and if your numbers are trending in the right direction, and the ideal outcome would be that they contact you to discuss an upcoming round. The investor update is an excellent placeholder for potential future investors, and make sure you are utilising it.
Never Stop Researching and Qualifying
Keep in mind that pre-fundraise (and then even during) you will be doing all the various parts of this relationship building. So don't go stage by stage; you'll need to be doing this regularly.