As a founder or entrepreneur, you wear several hats at once. I know this, as I’ve worn them many times myself. The key to managing your work life is efficiency through making decisions fast rather than going through long planning cycles. The only exception you make in this sense is when it comes to strategics, on which you do spend time over and over again.
However, in some cases less is more, or rather more is less. In my experience as a serial founder, as well as mentoring, coaching and just talking with over 4000 startups over many years, many startups, if not most, can actually gain time and efficiency through planning a little more, especially in their investment lead funnels. When it comes to attracting VC money most startups still waste time and nerves. Their own time, and the time of potential investors. Their own nerves, getting frustrated by being turned down 9 out of 10 times, and the nerves of VCs, annoying them with inappropriate offers.
Knowing both sides, as an entrepreneur myself but now engaged with Kavedon Kapital, enables me to provide insights on what to do and what to avoid when it comes to attracting VC leads.
This is basically my 5-step approach
1. Setup your Key Parameters first
As mentioned above, most investment offensives by startups end up in frustration. A clear “NO” would at least be an answer, but awaiting an answer keeps you putting time into attracting investors that are not suited in the first place. Instead, start investing more time in preparations and planning. This means that you start by asking “why do I need an investment” in the first place. The answer to this will also allow you to draw conclusions on the state or stage you’re in. Taking that answer together with some basic facts about your company, your main industry and the tech you use for your product or service, will help determine the 5 main parameters to start your investor search:
- Your industry e.g., “mobility”
- Your tech stack e.g., “software”, “AI” & “electronics”
- Your stage e.g., “pre-seed” or “seed”
- Your location e.g., “Europe” or “Spain”
- Your round size e.g., “€500k” or “€1M“
Round size may, when divided by the number of investors, also be displayed as ticket size, since that allows better targeting, as you will see in the next step.
Notice: no investors, leads or contacts are involved at this stage. The first step is all about you.
2. Search & Funnel
With the above parameters defined you can start a very superficial search. Use databases like Crunchbase and others to find ONLY investors matching these criteria. Do NOT include well known investors just because you know their names, or include investors just because they have invested in competitors. If an investor doesn’t do investment rounds at the size you’re looking for, then obviously it doesn’t make sense to include them either. Especially including investors wanting to invest but not being capable, can rob a lot of your time.
From here on your planning should look similar to a B2B sales funnel. The list of results is your list of suspects: Investors that you have identified to be suited for an investment. These can be just names of companies or actual individuals. The next step would be to turn them into prospects. This means you do not only have a hint, but you also know exactly who they are, what they do and how he or she can leverage your investment proposal. This way you can address your proposal to a specific person. Using CRM tools like Pipedrive, or tools like Hubspot in combination with mailing tools like Mailchimp works fine. This way you can track and trace who reads your messages, and even do A-B-testing.
3. Have data prepared
Before you start sending mails to investors, make sure you are able to offer them what they love: data. The mailing or investor newsletter you send, should include data on your progress and links to more information. The data on your progress is what they need to determine your growth. They want to know where on the hockey stick you are at this moment and how fast you’re moving forward. If this meets their expectations, they will start looking into you deeper, for which they will need further information. Therefore, provide a link to a cloud storage file with everything they need. This storage will obviously contain your deck and preferably, but not necessarily, a business plan. From these documents you link to other documents in the storage, like studies you mention, monthly reports you generated and more.
4. Get Personal
As soon as a VC has shown interest, get personal. Get in contact with him or her to introduce yourself and try to get an appointment. The aim is to build that relationship, as far as possible. A useful way of feeding into the relationship is by acknowledging that a single investor within a VC hardly ever takes the investment decision on his or her own. Rather there will be a board taking the decision. So, feed your contact with relevant information that he or she needs for the decision making process within the VC. If you don’t know which information that is, then ask before sending irrelevant information. Being able to ask is part of building a relationship.
At the same time as you are building that relationship, also use the time to assess the actual VC. Is this the right VC for you? Are they able to help you beyond mere finance? Can they prove that? How successful are their portfolio companies? And so on. Remember: you are trying to establish a partnership type relation, so if the VC is not willing to answer your questions, or the answers do not fit your expectations then they are probably not the right partner for you. In this respect it might also be helpful to assess their team. Do they have entrepreneurial experience included, or just legal skills? Fresh out of business school or with hands-on practical experience. In other words, have they been in your situation?
5 . Don’t sell
Last but not least: Investors believe in your product, but invest in your team. So, please do NOT sell your product at every occasion. It just shows you’re in love with your tech, but not capable of handling the business side of things, for example. What you can emphasize is the progress you make, either in development or business. Reaching critical milestones in business or releasing features that allow you to make more turnover are all good signs to an investor.
Throughout all of these steps, in the end, you will also need trust: if your idea or business is good enough the right investor will definitely be able to recognize and acknowledge that.
He has immersed himself in supporting young tech companies across Europe. Designing and operating accelerator programs and VC solutions, he recently led the accelerator at 360 Lab in Graz.
Jasper combines his interdisciplinary thinking, efficient approach and vast network, to focus on bringing his knowledge to growing companies. Jasper regularly writes, speaks and presents to Start Up companies and Investors across Europe.