Cold letter to a venture investor: 5 common mistakes
Someone has a tradition to go to the baths once a year, but we have another: we answer all the letters in our inbox. So every week, the email of LETA Capital venture fund necessarily surprises us in the form of an unusual application for investment. This is fine but for one thing: there are too many typical mistakes. We have identified five types of them, and now we will tell you about the common mistakes of cold emails to the investor.
Someone may advise you not to take such applications seriously, but we are driven either by the hope of improving the overall level of skillfulness in the fundraising approach, or by a selfish desire not to miss a decent project in the future because of poor-quality letter. We’ve decided not only to do the analysis, but also create a letter based on it, that will be at least a good start for communication with a venture investor.
Disclaimer! All emails are real, the names of people or companies are hidden in order to avoid trolling the authors. We ask those especially sensitive to get away from the screens of smartphones and laptops. Sometimes it can be really hurtful.
Mistake 1. Lack of specifics
Letter:
Greetings!
Would you like to get acquainted with our team and our startup?
Maybe we can work together somehow.
Here’s our pitch deck — *link*
Comment:
No way. Such a completely empty email will never prompt a desire to click on the link or reply to the sender. The letter should be specific immediately: what the project is about and how the entrepreneur sees the subject of conversation. Appreciate your time and the time of the interlocutor.
Or this one:
Letter:
Good afternoon, Leta Capital team!
We are a team of professionals working on a digital platform that connects career and life coaches with clients. The service operates in two directions: B2C and B2B, on a subscription basis.
We solve business and corporate tasks, such as unlocking the maximum potential of employees, creating highly effective teams, and providing career advice.
At the moment, we are at the pre-seed stage. We already have a fund in our team that invests 30% of the sought investments.
We will be happy to tell you everything about the project and even more in person!
Thanks in advance,
We are looking forward to your feedback.
Comment:
We don’t want ‘everything and even more’, but at least a little bit and that it is on the case. We’d rather see the numbers, pitch deck, understand what the point is.
Mistake 2. Mistake in the name/title
Letter:
Dear Alexander and Leto cap team,
Let me introduce you to…
Comment:
Can an entrepreneur build a global profitable business, if he addresses his partners with misspelled names?
Mistake 3. Unfounded bragging
Letter:
Good day!
We have a cool development, which is in great demand, especially in India and China (there are interest and pre-orders).
The solution is much better than the others’ (there is a working prototype), especially than XXX’s.
One of our team members is a former chief engineer of XXX (he developed their main solutions).
Unfortunately, we don’t have enough funds to finish the remaining 20% and start mass production.
Find a brief presentation attached.
The video is here on our channel (it is really interesting): XXX
We need a little money and the solution will be ready (for sales) in 6–7 months.
We have all the figures and reports ready.
Comment:
Let’s see the color of your money first, they say. The development is cool, the demand is high, there are pre-orders, but the most important thing is missing — the product. If you apply to a fund that invests on the growth stages, you should already have both: the product and the traction. Or if you write just to get on their radar, you shouldn’t indicate a request for investment in the letter. If you want to get acquainted and send updates in the future, then clearly write about it.
Mistake 4. Pitching two projects at once
Letter:
Good afternoon!
We are working on two projects, one of them is about outdoor advertising and internet (the link is below, the program is unfolding, but still is very raw), and the second — medical (where the patient receives a consultation for free, but the doctor earns the more money the longer the consultation lasts, we plan to do it in different languages). If you are interested, the link to the medical project will be a little later. It is tied to work with bitcoin and is still under development.
The ad aggregator will be one of several similar projects in the principle of their operation.
The principle in this project and those arising from it (sale-purchase of cars, apartments, rental of construction equipment) is as follows (if we put it in simple language) — when a fisherman throws a feeler on a pond, he doesn’t know, is there a fish or not. In this case, the fish itself says what it is and which size it is. It lets the fisherman know that it is there and what it offers. The fishermen themselves decide to catch it or ignore it and make their suggestions at the moment. This isn’t a filter! In any business, it is either dense or empty at a certain point in time. We are looking for those moments when the manufacturer or the customer is ready to offer favorable terms (and it doesn’t mean the lowest price!).
If you are interested, call us.
Comment:
Well, what can we say… A fisherman always sees another from afar. That seems to be all. I wouldn’t pitch two projects at once. And strange metaphors are also out of place.
Mistake 5. Making the investor work
Format: ”I will consider your suggestions”
Letter:
Please take some time for me.
I offer you to participate in an interesting and promising project.
The project implementation requires 8 million rubles.
Form — entry into a startup.
I will answer all your questions and consider your suggestions for joining the project.
Comment:
No, no and no. Well, all of this does not work, no investor will make any proposals.
Format: ”I give you an idea, you make it work”
Letter:
Hello! I have an interesting idea that concerns marketplaces. Today’s format is already boring for people; everyone wants something new, new sensations. I came up with an interesting new format for a marketplace. If you are interested in such projects, I will be happy to share my idea.
Maybe you can use it.
Comment:
Venture investors, of course, are interested in breakthrough ideas, but still it is when entrepreneurs implement them, and not just share them.
Example of a successful cold letter to an investor
If you hit us on the general mail, then the structure of the cold letter can be as follows.
Good afternoon!
We found your fund in the list of investors / read about you in the media / are acquainted with the portfolio company’s founder.
My name is XXX, I’m the founder of the XXX. My experience is previous XXX’s startup / job in XXX / PhD degree of XXX university. My co-founder is XXX, who used to work for a startpup XXX / worked in a corporation and has experience and expertise in the field of XXX.
The startup I am currently developing is dedicated to *the essence of the project in one sentence*. Our monthly revenue is about $XXX thousand, we are growing XX% month by month, our CAC $XXX, LTV $XXX. Most of our clients are located in the USA / Germany / Singapore / CIS. [If this is a B2B project, specify the largest customers].
Our main advantage is that we make something better / faster / cheaper / of higher quality than our main competitors XXX and XXX. At the moment, we are working on improving / attracting / scaling.
Previously, we attracted investments from XXX / didn’t attract any investments. Now we are looking for investments to grow faster. We have an understanding of how we can reach an annual revenue of $XXX million with an investment of $XXX million. According to our team’s calculations, the XXX market can be estimated at $XXX billion, with growth rates of XXX year to year.
We attach a presentation with more details.
If you are interested in our startup, I suggest a 30-minute call next week. Does Tuesday, 18:00 (GMT+3) sound good to you?
Best regards,
Name, founder of XXX
These are the basic formulations, the minimum necessary for the investor to have a correct understanding of the project. Of course, if a startup has some undeniable advantage in the form of $3M ARP or Elon Musk as the project’s advisor, this should be highlighted in the very beginning, and the rest would fade into the background. In any case, remember that the first impression is very important, especially if your letter is a “cold” one.
Attracting investment is a routine business process, and it needs to be done efficiently from the beginning to the end.
We hope our material was useful for you. We invest in B2B and B2C startups of Eastern-European entrepreneurs at the Late Seed / Series A / Early B stages, and we are looking forward to your applications, which you can submit by filling out the form.
