How to Market Your Startup to Investors
Chapter Four Excerpt: Startup Muse available from Amazon
The other day I got an email update from an entrepreneur that pitched his startup to me a while back. Without mentioning the name of the company I thought I’d share my thoughts on how and why you should send out email updates to potential investors.
WHY? The first thing you should ask yourself before sending an email to an investor is WHY are you sending the email. Of course you want him to invest, but sending him an email asking for an investment isn’t typically the best strategy. Instead, you should have a specific goal — getting a meeting, getting a referral, getting advice, building rapport, or building confidence. Reread your email and make sure your “ask” or “goal” is very clear. Investors appreciate direct asks — be direct.
WHAT? I am a big fan of “drip marketing” when it comes to communicating with potential or future investors. I advise entrepreneurs raising their seed rounds to immediately determine the best investors for their Series A and begin a ongoing dialogue. Let the investor know that you realize your startup is too early for their fund, but that you were hoping they could give you feedback about your model and ask for referrals to angels who might be interested.
WHEN? Regardless of what happens you should follow up with a thank you email outlining a few of the things you’re planning to do over the next 30/ 60/ 90 days. Then every 30 days follow up and let them know if you met your plan — if not, why not — if so, what your next 30/ 60/ 90 day goals are. The idea is to build a history of doing what you say you’re going to do with an investor BEFORE you ask him for money. When you’re ready to raise your Series A at the very least you’re going to get a meeting.
HOW? You may be tempted to send out the same “update” template to all of the potential investors you’re hoping to work with, but the reality is that if you’re doing it right the “why” should be different for each investor. If you’re following up from a prior pitch you’ll have a good idea what the investor “hot buttons” were. For example, if he was frustrated with the strange way you presented your numbers cumulatively instead of month-over-month you might want to give him a different graph (assuming other potential investors like the cumulative approach). The reality is that you’re likely going to have up-to 30 potential investors that have a reasonable probability of close. Divide them into three groups A, B, and C based on probability of close — spend the most time with your A prospects, half as much time with your B prospects, and half as much as that with your C prospects.
It may seem obvious, but don’t send yourself the update and carbon copy each investor (seriously, entrepreneurs do this). There are a million reasons why you shouldn’t — I’ll give you two.
First, as I explained earlier the “why” should be different for each investor — their “hot buttons” will be different — your experience with them will be different. Building rapport with 50 + investors at the same time is basically impossible — by sending out a form template to everyone you actually negatively impact potential rapport. Personally I almost always never read emails that are clearly sent out to a big group — if someone isn’t speaking to me specifically it is very unlikely I’ll read past your subject line. The only exception is when you send the email to me with 50 + other investors in the CC field — I’m going to be curious who the other recipients are but I’m definitely not going to read your update.
Second, investors often have a couple of key concerns about your startup — usually you’ll be able to address these concerns and get the investor over the hump. If two or three prospective investors discuss your deal they’ll share their concerns with one another — by the end of the conversation the investors may have 2– 3X the number of concerns causing the hump to turn into a mountain. Take the time to send each investor a personalized email.
Always think first before pressing send. Make sure you know the why, what, when, and how before you do.