I came across an article recently on Forbes.com written by Alison Johnston. Alison is the CEO and co-founder of InstaEDU, an online education business that helps students get high-quality, one-on-one academic support, on-call. Alison talked about 5 tricks for finding investors for a startup. The article was written based on her personal experience raising capital for InstaEDU. I thought it would be useful to adapt the article for Australian start-ups.
Alison made a good point early on that even when you’re ready to start talking to investors, one of the most challenging parts can be just that: actually talking to investors. Most venture capitalists and angel investors see dozens of pitches every month and simply don’t have time to meet with everyone. To make it more difficult, it’s not uncommon for first-time entrepreneurs to need to speak with 50+ investors before closing a round of funding. The good news is that there are now more resources than ever to help you source investors. Here are five tricks that Alison used to get meetings with the right investors for InstaEDU.
1. Build a profile of your company and list it
Services like the Australian Investment Network cater for entrepreneurs looking for startup funding in their business. A site like this is a good way to both learn about investors and for them to learn about you. Creating a profile—including specific info about your company, product, and team members—makes it easy for people who are interested in your space to find you.
Another good site is Angel List. There a number of Aussie startups on this site. Once you’ve completed your listing on Angel List, share your profile with your friends and professional acquaintances and request references. Send a personal note to your followers to try and start a dialogue with them.
2. Create a list of investors you would like to meet with
If you are fortunate enough to get some followers for your business via a lisiting or other method then you want to focus on those investors who are going to be a good fit for your business. The chances of raising equity funding via a single meeting are pretty slim so being to restrictive on those that you meet with is not recommended. Cast the net wide.
On sites like AngelList you can make a list of people who have invested in the sector which you operate. You can take this to list other entrepreneurs and ask for their thoughts on who you should add or remove from the list, based on their experiences. Entrepreneurs who’ve been there/done that are an invaluable resource for helping you identify potential investors. They can also flag investors known for being difficult to work with or who aren’t actively investing. Put a list of people into a spreadsheet and include their sector of expertise (when applicable), mutual connections, relevant investments, location, and any other notes (e.g. has a wife and 3 kids).
3. Crawl your networks
Investors see hundreds upon hundreds of pitches. If you can get a warm introduction via a common contact then you will be in a much better position to raise capital. Once you have a list of investors you’d like to meet with, go through it one-by-one and see if you have any mutual connections. If so, bonus. Send a 3-4 sentence pitch on your company for use in your matchmakers introduction email.
4. Manufacture your own introduction
Of course, there will likely be some investors who you can’t get an introduction with. Here you need to be more thoughtful and selective about who you reach out to. You want to show that you’re not just sending out hundreds of cold emails to investors. For example: “Hi John Smith. Between your investment in Company A and your involvement with Project B, I couldn’t help but reach out and introduce myself.” Have a very specific reason for reaching out to an investor when using a cold email. You could end up looking like a turkey if not.
5. Give investors a reason to reach out to you
Never forget that investors also want to find great companies. So this process goes both ways. Make sure you spend some time putting yourself out there. Even if your product isn’t live, you can still generate attention for your team and your mission via thought leadership. Writing some guest posts for industry blogs or getting involved with local networking clubs is a good start. Don’t forget your own personal blog.
Take a leaf from the Stoics
Alison makes another good point at the end of her article: YOU ARE going to hear a lot of “NOs”. Be prepared to get turned down by investors or not hear back at all. At the same time, don’t be afraid to follow up in a professional manner. If you don’t hear back in a week, send a quick follow up. After that, continue following up if and when when you have news to share (e.g. a product launch, key metric that you hit, commitment from a notable investor). This also applies to investors you’ve met with but haven’t heard from since. Just remember thought that each NO gets you one step closer to a YES! Happy capital raising and thanks to Alison Johnston for the insight.