Every other startup event is about pitching, and the ones in between are about exact fundraising details. But we’re often talking about subject matter that doesn’t actually matter yet in most entrepreneur’s journeys…most entrepreneurs don’t get to the valuation conversation.
Before you pitch and long before you get to a valuation conversation, you have to be able to secure a meeting with an investor. Do you know how to do that?
Around the web, you’ll hear founders spend 70–95% of their time on fundraising when they are in active pursuit. Do you know what this tells me? It tells me that the prevailing advice out there is not working. It’s too time-consuming.
The standard instructions look like this:
- Create a Spreadsheet
- Make a list of 50–250 investors
- Do research on all of them so you can say something relevant
- Cold email them
- Apply to every startup accelerator and angel group you can find
Now, I worked for a well-known angel investing platform for 18 months, so I can tell you the spreadsheet has an incredible role in fundraising. I can also tell you this:
The majority of an investor’s deal flow comes from their network and networking activities. Very few (more like zero) are sourcing startups from any popular platforms, and
Most investors are not publicly listed as investors so that spreadsheet of yours has only those investors that everyone else is going to find.
Cold email isn’t going to cut it. Targeting only the investors you can identify narrows your potential pool and puts you in competition with everyone else.
Your opportunities lie in your networks.
Frame Your Fundraising Approach
The approach you take to fundraising should have (at least) two-prongs. One prong can start with two handfuls of investors that you can identify as ideal. Another prong should cast a wider net to your network with the goal of finding those investors that are unlisted.
Starting with a small list of investors you can identify allows you to do some research: look at their previous investments and determine their interests. I suggest a small list because you can easily get distracted researching 50+ investors without ever reaching out. What I want for you is to start having conversations, which is why the second prong is super important.
The reason you want to cast a wider net beyond the investors you want to identify is to find the secret, unlisted investors.
For instance, one startup I evaluated for an angel group had early funding from a guy that owned a metal scrap yard. He was two or three steps removed from the founder. The founder queried his own relationships and did not rest on only contacting investors he could find on LinkedIn, Gust, AngelList or others.
When you go to people in your network, you let them know you’re looking for a variety of help: customers, partners, developers, designers, and investors. Afterall, (1) you need funding to help with these other pieces of your business, and (2) you still need to run your business while you’re fundraising.
By querying your network for all of the things you need, not just funding, you’re likely to get introductions to people that can offer partnerships, support, referrals, and opportunities.
I like to offer my audience solutions that help them kill as many birds with one stone. Using this two-pronged approach to fundraising will help you capture the maximum number of opportunities and set you apart from your competition.