As much as it is an integral part of building a successful startup, fundraising can also be a fairly tricky matter. The wrong move could adversely affect your company long-term. However, by complying with some simple guidelines, you can significantly improve the outcome of your financing round.
In the previous article in this Fundraising Etiquette series, we outlined how to efficiently prepare for a fundraising process. Below, we share insights on how to build a strong investor pipeline, which is the final step before actually stepping out into the market.
Building your ‘investor pipeline’
Create an investor track sheet
It is immensely important to manage the fundraising process in a structured manner. Part of this is tracking the contact details of people whom you have already spoken to, to understand the status of the conversation, and to consider next steps. An investor track sheet can help with this. It should be populated with all investors who are relevant for the current state of fundraising. Add investors in accordance with your:
- Round size
Based on the criteria and the reputation of the investors, you can now assign priorities as to whom you want to speak to first. Generally, it makes sense to initially focus on funds that are able to lead your round.
You should also be familiar with the investment hypothesis of the different funds. If your business model is in line with the hypothesis of a VC, it is naturally a good fit. In this context, it is also crucial to find the right person at the VC firm to talk to, as the choice of the individual person you talk to is almost as relevant as the choice of which VC to approach. You should also prioritize VCs that have already shown interest during earlier discussions or because they actively approached you and requested a conversation.
Overall, you have to manage a balance between efficiency of the raise and optimizing for probability of success when deciding how many investors to approach. It is definitely preferable to be on the safe side and have a sufficiently filled investor pipeline.
Strategise your outreach
Once you have a good overview of all the VCs you want to talk to, ensure to get as many friendly introductions as possible. It will substantially increase your chances at getting into a conversation.
In order to facilitate the intros efficiently, prepare an outreach template and a teaser deck and share it with your existing investors as well as other notable people from your network. Best case scenario, your existing investors can teaser your financing round at almost all VCs on your list. However, introductions by people who are not yet involved in your venture but highly regarded in the venture ecosystem – e.g. unicorn founders – are most powerful. This is because existing investors are naturally “biased” when introducing you to potential new investors, as they have a strong interest in a successful financing round themselves. Therefore, do not only share the list with your existing investors but also discuss with your network to decide on who can introduce you to whom. Whenever you get an intro to a relevant investor, reply quickly and schedule a call with them soon after. You can use a tool such as Calendly to make scheduling easier.
Now you are ready to kick-off the actual fundraising and go out into the field. In the next chapter of our Fundraising Etiquette series, we outline how to run a competitive process that leads to an optimal outcome.