How And Where To Start The Investor Search Process
Startup investing is shrouded in a lot of mystery for those who have never raised investment before. There’s a lot of conflicting information and advice that is dispensed on this topic, making it confusing to gain a solid grasp on what an entrepreneur needs to know in order to start the investor search journey.
The most common questions I’m approached with on this topic are:
Where do you find investors?
How do you find investors?
Will I be able to get investors for my startup idea?
If you’re interested in starting the process of finding investors for your business, here’s my best advice on how you should start.
Do Not Rely On Cold Outreach
Investors do not give money to strangers. Investing with the goal of receiving a return on investment is not a task taken lightly, and requires due diligence and research from the investor to ensure that their investment is a sound one.
Getting to know a stranger (to name a few data points: their character, competence, and trustworthiness) and their startup is a tremendous and long undertaking, which is why warm introductions are an important lever for a lot of investors. Relying on a friend or colleague to provide that character and historical reference for a startup founder is much more reliable and speeds up the get-to-know-you process.
No matter how good your startup idea is or how killer your investment strategy is, every investment needs a reliable and trustworthy entrepreneur behind it.
A common misstep that I see a lot of entrepreneurs take is performing cold outreach to investors and expecting a substantial response. For the aforementioned reasons, cold outreach does not work consistently. It may work now and then, but it’s absolutely not a reliable strategy. The fundraisers who thrive in raising a substantial amount of investment are those that take the time to tap into their existing network of connections and leverage them.
No matter how dry you believe your network is of investment capital, it’s usually not the case. If you take the time to list out everyone you know in a spreadsheet and perform some light research on their personal or outer network, you’ll uncover a lot of promising information. The majority of entrepreneurs that I grill on this topic usually come to the realization that they know someone who knows someone, or discover that they do have connections to investors after they take the time to have a conversation with people in their network about it.
Your network is at the heart of a successful investment strategy and without this, there’s no possibility of raising investment (which is why individuals who come from wealthy families or social circles usually do incredibly well when raising capital).
To add a real-world layer here, keep in mind that investors usually have industries that they focus their investments in. The reasoning behind this is that making an informed investment requires some knowledge and experience of the industry being invested in (not possessing an existing awareness of an industry poses knowledge gaps that may compromise the investor’s investment).
So if you find an investor in your network who invests in a completely different industry from your startup, do not try to fit a square into a circle. Instead, ask that individual for any referrals of investors they may know that do invest in your industry.
Accelerate Your Reach With A Board
A great way to accelerate the investor search process is to build a group of advisors or board members who are intense supporters of the startup’s mission.
Build this group of advisors or board members and have them tap into their networks to help you raise capital. If it sounds good to have multiple yous fundraising at the same time as you, this is essentially the benefit of fundraising with a board behind you.
It’s a sound practice to simultaneously increase your network while also looking for investors within your network.
Be strategic in how you network. Networking with other startup founders probably isn’t the best use of your time, but getting to know your friend’s cousin who’s looking for her next investment opportunity probably is.
If you don’t have any hot leads, socializing in circles where a potential investor opportunity may rise is your next best bet. Attend pitch events where there’ll be investors in the audience, attend conferences and keynotes with influential attendees, and go on retreats attended by a diverse pool of startup players. Put your socializing hat on and think about opportunities where you can connect with investors at the events and places where they convene.