There’s no question that finding the right investors and building relationships with them early on is one of the key components of successfully raising capital and building your business. But where do you even start? How can you pinpoint the right investors and convince them you’re worth spending time with if you can’t even find them? Take it step by step.
First, You Need to Do Your Research
You should research investors just like you do your customers. Consider these five questions:
· What do they care about? Specifically, do they have an investment thesis or a relevant geographic, social, or industry-related mission?
· What stage do they invest in? Do they look to be first money in, or is their game late-stage?
· What does their portfolio look like? Who have they invested in before? After how long and for how much?
· Who are the decision makers? Namely, who has the check-writing authority, or the final say when it comes to closing a round? Know their names and what they care about (i.e. personal investment thesis, impact goals, quick exits, etc.).
· Where do the decision makers like to spend their time? Are they regulars on the pitch circuit? Do they have special relationships with accelerators, incubators, co-working spaces, or other organizations that have social hours and events? Are they a sight for sore eyes at events, but an ever-present voice on social media? Do they spend a lot of one-on-one time with their portfolio company founders?
These questions clearly build off each other. The first three questions tell you if they’re worth pursuing for the goals you have in mind, and the last two how to target them.
Then You Can Start Making Connections
Once you know the investors you want to meet, or at the very least, the type of investors you want to meet, you can actually go out and find them. Naturally, there are a number of ways to make these connections. However, leveraging relationships — either yours or the investors’ connections — will breed better results than cold emails or even networking at events. But remember, no matter the circumstances, asking for money upfront with little to no lead up is not going to serve you well.
You have three groups of people who can serve as connections to your target investors:
· Your Personal Connections: This category may include portfolio company CEO’s and your clients…or not. What matters is that someone in your network knows the investors you want to connect with and is willing to make an introduction.
· Portfolio Company CEO’s: Entrepreneurs are often more than willing to help each other out and meet with one another. Whether you target them through email, social media, or at events, you might get an opportunity for more than a connection. A company in a similar industry or at a similar stage may have advice, feedback on their own investors, and ideas for strategic partnerships. By building relationships with CEOs, you can also determine if their investors are even right for you, and if you are, leverage your relationship with them to get a warm introduction.
· Clients: If your company already has clients, especially corporate clients who are active in the entrepreneurial ecosystem, leveraging them to connect with investors is another way to get warm leads.
If you successfully get an introduction that turns into an investor meeting, it’s your responsibility to be extremely prepared and give your pitch very quickly and effectively. The people who made the introductions used their social capital to support you. In addition to making sure you don’t blow a chance at a funding opportunity, you also don’t want to burn any bridges.
This post is part of the Hyde Park Angels Entrepreneurial Education Series, which brings together successful, influential entrepreneurs and investors to teach entrepreneurs everything they need to know about early-stage investment through events, articles, videos, and more. If you are interested in learning more about similar topics, save the date for “Connecting Corporations and Startups” on September 24.