The Fundraising Process Part 2: Building an Action Plan to Create Contact and Relationships with Potential Future Investors
Entrepreneur Toolkit – The Funding Process – Part 2 of our Fundraising Toolkit provides a deeper dive into “how-to” for a results-driving relationship strategy and success.
Read The Fundraising Process – Part 1: Creating an Investor List and Checking It (Many More Times Than) Twice.
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A properly structured and executed fundraising process can improve efficiency and lead to greater success for the company you are building. Rev1’s two-part toolkit provides a roadmap and tips. Part 1 discusses the “how-to” of creating a quality list of prioritized investors. Part 2 helps founders build an action plan.
Building a Qualified Investor List Specific to Your Company
Based on the prioritized qualifiers and characteristics you established in Part 1 of this toolkit, your next step is to search out the names and contact information of specific investors in your region who match those criteria.
- Refresh your understanding of capital sources from Rev1’s virtual library of capital topics here and here. This curated, easy-to-access-and-absorb material is streamlined, especially for time-stretched entrepreneurs.
- Your search: Start with the Internet to find early and later-stage investors in your geography. The Angel Capital Association (ACA) is an excellent source of information and education about angel investors and angel investing. Subscription services, such as Crunchbase and Pitchbook, offer detailed data about venture capital funds. Using Crunchbase, for example, you can search investors based on the industry and stage preferences stated in their profile, or you can base your search on the startups that an identified investor invested in.
- Information you need: Here’s a checklist of the information you will need about each investor. Create a spreadsheet to capture this information.
- Investor: Company name, headquarters, type (angel, VC, corporate, accelerator, etc.), description
- Primary Contact: Name, title, email address, phone and text number
- Funds: Size, when raised, dry powder
- Why this investor is a good fit for your company: Preferred investment type, industry, and verticals; typical deal size; recent investments; personal connections
- Degrees of Separation: Who do you know to facilitate a warm introduction?
- Save and Systematize Your Information: Create a spreadsheet or subscribe to a tool that makes it easy to record this information and keep it current. Make notes each time to speak with an investor. For as long as you are an entrepreneur or company leader (from the first to the nth contact) among “soft” assets, your investor contact list is second only to your customer CRM.
What’s Your Inroad?
When it comes to fundraising, your introduction determines where you enter an investor’s deal funnel. The spectrum of VC introductions ranges from strong (founders the VC invested in previously, trusted business partners, or attorneys) to neutral (direct or indirect outreach from “cold” sources) to weak (other VCs or angels who passed on your deal).
Strong introductions are more likely to receive a return phone call or email, a brief meeting, or a request for a business plan. Unconnected contacts will require well-drafted, compelling emails plus multiple follow-ups.
In the Midwest, it is okay to ask for introductions. That’s part of our region’s secret sauce. In fact, we even have a word for our propensity to connect. We call it our Backyard Effect. We first wrote about this phenomenon in TechCrunch and then more recently in Forbes.
In our startup ecosystem here at home, we put the Backyard Effect into practice every day. The Backyard Effect continues to drive huge benefits—and the process continues long past the celebratory day of a company’s first (or second, or even third) investment round close.
Within the personal relationships you already have) some people can casually offer business and investor connections (your own personal Backyard Effect). That’s a starting point, but relationship-building to support a successful fundraising process takes things to a different level.
Making Contact: The Nitty-Gritty
Begin developing these relationships with potential investors at least a year before you expect to need funds. Strengthen those relationships as you achieve the milestones of your business plan.
Keeping relationships with other startups will help you leverage their connections in the future and vice versa. Search LinkedIn to find people within your network with connections to investors you hope to reach. Update your spreadsheet and go to work. Reach out to those connections to build the relationship. (Tip: Export the emails for all your LinkedIn contacts.)
Use free email validator tools (Verifalia.com) or Seamless.AI to figure out investor emails. Ofttimes, firstname@company.com or firstinitialLastname@company.com will work. Or, when you find a phone number, use your iPhone and call.
Make it easy for investors to find you. People Google everything. SEO ensures that your company shows up when people are searching for you or companies associated with your key words. SEO is not only strategic in your searches of investor platforms; it is critical for your website, too.
On your website, present your company’s contact information, team, and product features/differentiation clearly. Develop your own list of key words to strengthen SEO on your site.
Invest in your company’s LinkedIn page. Ensure that your employees list your company as their employer on their personal LinkedIn pages. Update your Crunchbase profile based on keywords and industry so investors can find you.
Interpreting Investor Replies
Consider all the feedback you receive. You don’t have to act on everything. Not all feedback is relevant. Plus, VCs won’t always say what they think. An investor’s issues may be with the company, for example, lack of traction, lack of a coherent story, or a lack of direct experience or expertise. However, a VC may reject your deal for issues of their own. These could include lack of capital or dry powder for subsequent rounds, competitive investments or conflicts of interest, or even previous bad experiences in the sector. Listen, consider, and then act.
If an investor passes on your deal in the Midwest either because of geography or industry fit, ask for a referral. Additionally, in the Midwest (PA, IL, IN, and OH) there are state-based programs where geography is a priority. Tap into those opportunities.
The Bottom Line
The fundraising process begins with a detailed definition of the most desirable investors that evolves through connections and high-quality introductions to prioritized meetings and business plan presentation.
- Create a quality a list of investors upfront.
- Build relationships early and intentionally.
- Seek the highest quality introduction.
- Prioritize meetings with investors most able and likely to invest first.
Fundraising is an iterative process. You can’t get to yes without a series of nos. Every question, pushback, or objection is a moment to collect and gather feedback. Don’t be afraid to dig deeper into why your company isn’t a fit for an investor. Interpreting Investor Replies
When you don’t know the answer to a question, figure it out. If one person asked the question, the chances are that someone else will request it too. Consider all the feedback you receive. You don’t have to act on everything. Not all feedback is relevant. Plus, VCs won’t always say what they think.
