Startup Fundraising Guide - Ep. #3 - Meeting Investors

Hey everyone, I'm John Coogan and welcome to the third installment of my guide to startup fundraising. Last week I talked about the different types of investors and how to decide which ones might be ideal for you. Today I'm going to talk about how to manage a fundraising process and actually meet prospective investors. As always, the best way to raise money is to build a great business. And if your company is making its customers happy, growing the customer base significantly every month and and has a giant pool of potential customers, it'll be easy to meet investors and they will be fighting to get time on your calendar. Let's start with the founding team's role during fundraising. Since you're optimizing for growth, not strictly fundraising, it's important to avoid letting your whole team get sucked into the fundraising process. Designate one founder to lead the process and let the other founders stay focused on growth so the company doesn't stagnate while you're raising money. The quickest way to close an investor is to show big growth in between two meetings. The CEO should always lead the fundraising process, even if all founders are equal shareholders. This is because investors expect the CEO to set the vision for the company and they want to hear about that vision directly, but that doesn't mean that the other founders can't help out. Everyone should introduce any potential investors that they know to the CEO and be available for in person meetings with investors who plan on writing large checks and want to meet the whole team. Even though it might feel like you can make fundraising go faster by having every founder work on it full time, the cost of slower growth and the inevitable confusion around what allocations have been promised to what investors make the CEO led approach vastly preferable. Now that you have the CEO clearly leading fundraising, you need to focus on going as broad as possible with your outreach. Instead of finding one investor, having an introductory meeting, then a follow up meeting, then getting a decision, and then finding the next investor to talk to, aim to talk to all of your investor connections simultaneously. Inevitably, you will need to do some prioritization. So when it comes to prioritizing meetings during fundraising, you should think about the expected value associated with each investor. An angel investor who's very likely to move quickly but only writes small checks might have the same expected value as a VC who could lead the round but is less likely to do so. Ideally, you should spend your time with investors who move quickly and lead rounds. And always try and avoid small angels who require lots of meetings to get to a decision. That's a total red flag if you're having trouble assessing investors before you reach out to them, be sure to check references with other entrepreneurs that they've worked with in the past and get a feel for who would have the highest expected value for your round. I find that setting up a spreadsheet to track outreach is really helpful at this stage. You don't need anything fancy like a full CRM, just a list of everyone who you're in contact with and where they are in the pipeline. Here's a template that I like to use while fundraising Start by listing every investor you know, along with anyone who works with investors regularly. As you take meetings with investors, update the sheet to reflect whether or not they have committed and how much you expect to receive from them. Be sure to add notes and to track when you ask for additional intros Introductions are the best way to meet investors, and there are a few different varieties of intros. The best introduction is always one between a well known investor who is committed to your round and then a new potential investor after that. Getting an intro to an investor through a founder who has raised money from that investor before is great. The startup world also has a few different types of super connectors like lawyers and reporters, and they can connect you to investors too, although those referrals usually hold a little less weight. Angellist and other fundraising sites can help you connect with a broader set of investors, but it can be hard to get initial commitments there, and you'll have a much easier time on those platforms if you already have a big name investor attached to your round. Although it can be tempting to take every intro that's offered to you, you should avoid taking intros from investors who have passed on your round since that's a negative signal. If an investor passes and offers to make an introduction to someone, make a note of that person's name and then make a connection through a different channel. If you can't get an introduction or don't know any investors, cold outreach can work surprisingly well when done carefully. You never want to spam investors and send generic emails. Instead, focus on finding investors who are specifically interested in your industry and send them a thoughtful email. Tell them where your company stands today and why it's a fit with their most recent investment thesis. Most investors have blogs or Twitter accounts where they talk about what they're interested in and this is a great way to make sure that they can be valuable to your company and that they're worth your time to try and pitch. Investors are hoping to find amazing companies that no one knows about, so don't Be intimidated by cold emailing investors who you know would love what you're working on. Another way to increase the effectiveness of your cold outreach is to scale back what you're asking for. Your goal is to get a meeting scheduled where you can give a full pitch. But offering to start with a 15 minute phone call or even just a short back and forth over email is much easier for an investor to say yes to. Investors hear pitches all day and don't want to waste their time, so allowing them to start with a short call or exchange of questions reassures them that you can concisely describe your business. It can be super helpful to start developing relationships well before you plan on fundraising. One of the best ways to do this is to engage with investors and other experts in your field on social media sites like Twitter, Medium, Substack and Quora are all common publishing outlets for investors. While you shouldn't waste too much time browsing, it's great to stay on top of what the VC community is thinking about your industry. Since you're working on your startup every day, you'll often have additional context and be able to add to the conversation. Establishing yourself as an industry insider can help you connect with investors organically. It's a delicate balance though. You don't want to pick fights or come off as a cocky know it all, so stay positive and informative. In some cases, if no one is talking about your industry at all, it might make sense for you to start the conversation yourself. That's exactly what we did at Soylent in 2013. Silicon Valley wasn't talking about food, nutrition or even consumer packaged goods very much so. Our CEO Rob Reinhart started writing about our product on his personal blog. His writing did well on hacker news and he was able to gain a following. This made conversations with investors much easier because there was already a discussion about the industry going on and we were at the center of it. Once you've figured out how to connect to an investor, either through an introduction or cold outreach, you need to pitch your business in the most succinct way possible. This is typically called an elevator pitch and should cover the key points you want an investor to remember. You need to highlight what you do, how fast you're growing, what makes your company different from competitors, and how large the market is. Cold emails and warm intros should include at most a few sentences about your company, so you need to make them count. Avoid jargon heavy lingo and focus on describing your business in plain English. There are a few good ways to summarize what you do, and ultimately this will depend on your specific business. But here are a few templates that can be helpful. You can use an analogy to compare yourself to a popular business that everyone understands. This usually takes the form of X for Y, and there are a bunch of popular examples of this. YouTube was originally Flickr for video, Airbnb was Ebay for physical space, and Baidu was Google for China. Just make sure that investors actually know the companies that you are drawing comparisons with. If you use some obscure company that no one knows about, you'll just confuse everyone. Another common format is focusing on the problem and the solution. So the stripe founders might say we allow developers to integrate payments without headaches. Before stripe, it was common knowledge that payment integrations were notoriously difficult. So clearly describing the value headache free payments in relation to the users makes it easy to understand what the company does. In addition to your elevator pitch, you'll also want to include a link to your product or landing page, but you don't need to send a deck immediately. If an investor asks to see a deck after scheduling a meeting, it's fine to send one in advance so they can ask better questions. But avoid sending the deck before scheduling the meeting since you don't want them making the decision on whether or not to meet you based on your deck alone. Once you've got a meeting on the books, you'll need to be ready to share your vision for the company through a deck. Having a clear slide deck will make sure you hit all the key questions and have some extra data or examples that can be referenced by the investor. After the meeting in my next video, I'll go through how to build a great fundraising deck, so be sure to hit the subscribe button. Investor outreach is just the first step in pitching your company, so cast a wide net and network as broadly as possible. Preparing a long list of potential investors will make the rest of the process much easier. This allows you to run an efficient and competitive round, so really spend some time generating good leads. If you think I missed anything, please leave me a comment below. I try and respond to every question I get and if you enjoyed this video, a like rating is always appreciated. Thanks for watching.