Investor Perspective: 5 Steps to Effective Networking for Fundraising Success

Introduction

Networking is a vital skill in the fundraising landscape, acting as a key catalyst that can significantly enhance fundraising outcomes. In the Club we have seen what miracles can be achieved when paying attention to building relationships and knowing how to use it right. A Harvard Business Review study highlights the profound impact of effective networking, indicating a potential 40% increase in fundraising success. Forbes echoes this, emphasizing that over 80% of investors view professional networks as a crucial factor in their investment decisions. But it is not the number of contacts that makes the difference, but the quality and depth of these relationships.

1. Engage Investors in More Complex Roles in Fundraising

There are two types of investors: hands-on and hands-off. In the realm of fundraising, the true value of hands-on investors goes beyond their financial input. The most effective investors are those who offer a composite package of capital, expertise and an expansive network. To truly leverage these assets, founders need to recognize their role in actively engaging and extracting value from their investor relationships. Founders’ proactive approach can transform passive financial contributions into dynamic, multifaceted partnerships achieving what is termed ‘ eigenvector centrality’.

* Eigenvector centrality defines a node’s importance based on the function of its neighboring nodes. In our case, a node is an investor that you can add to your network. Let’s call him Oswald. Examine all the people Oswald is connected to. If Oswald is linked to highly important decision-makers from various industries, investment leaders, officials, entrepreneurs, heads of venture capital (VC), single-family offices (SFOs), influencers, etc., he has a high eigenvector centrality score. And that is what makes Oswald an important part of the whole network. Relationships with high-scoring ‘Oswalds’ will bring more contribution to you than connections to people with low eigenvector centrality scores.

Investors at high-caliber investment gatherings are all well connected and have valuable networks. So, when meeting them focus on the quality and diversity of connections rather than sheer quantity or immediate financial gain. As per the National Venture Capital Association, investors with robust networks are key in unlocking further rounds of funding and connecting funds with potential co-investors and other useful connections. Moreover, investors like to help! It might surprise you, but being helpful is a big part of their job. Focused approach in asking them for help will not only enhance the capital pool but will also open up new avenues and strategic development.

Reinforcing this proactive mindset, a speaker at Private Investment Forum Worldwide, Ricky Tejapaibul, CEO at Tech Wildcatters, US, advocates for seeking investors who are not just financial contributors but active participants in your fund’s growth trajectory. “In fundraising,” he says, “look for partners who bring more than money to the table. Seek those who can guide, mentor, and connect, thereby enriching your fund’s journey beyond mere capital.”

* How To Implement It: All active investors are potential ‘Oswalds’ who can help you with what you need and provide useful connections if you see value in building relationships with them. In order to increase the likelihood of a positive response, send targeted, clear, and relevant requests to investors. Ensure your requests are directed to the right individuals, are concise, require minimal effort ( 2–3 minutes), and are specific in scope. Encourage their active involvement in decision-making processes, leveraging their wealth of experience. To further enhance your fundraising efforts and success, we invite you to explore our range of special offers.

To have access to more insights and detailed strategies on effective networking for fundraising success, be sure to read the full article here.