One of the most vital and important aspects of growing your business to connect with investors. You’ll be setting yourself up for a great relationship if you choose the proper one. However, if you choose the wrong one, you’re in for a bumpy ride.
You might require a few thousand dollars from relatives and friends, or a large number from a venture capitalist at times. But have you evaluated the greatest alternative, the one that is most likely to lead to future success? This page will provide you with all of the necessary information on the various sorts of investors, as well as the basic guidelines for contacting them.
This places a premium on your investor networking abilities to connect with investors and your ability to form true bonds with the people who will eventually determine the fate of your startup. The good news is that networking to connect with investors doesn’t have to be so difficult if you’ve learned from previous failures.
In this post, we’ll go over 10 suggestions for connect with investors so you can figure out which blunders to avoid, which strategies to focus on, and how to get that funding check.
What do investors seek from a startup?
Take a step back before approaching investors and ask yourself what an investor is searching for. At the end of the day, every investor wants to earn a quick cash. They want to know how they can put your startup idea to work for them and make money. Demonstrate how your startup is progressing toward liquidity (the point at which your investor will see a return on their investment).
You and your startup will be judged on the following parameters by your investor:
- What is the size of the market you intend to enter?
- It must be huge enough to generate a lot of revenue.
- Is your concept scalable, and if so, how quickly?
- Do you have a distinct advantage over your competitors?
- Is it possible for you and your team to make the concept a success?
10 Tips To Connect With Investors
If your startup passes these requirements, you’re ready to consider approaching to connect with investors.
1. Don’t Limit Your Thoughts
Many company founders make the first error of networking primarily with investors who are a direct match for them right now. In the context of raising a pre-seed fundraising round, networking with venture capitalists who only fund Series A and beyond may appear to be a waste of time.
However, you must consider your company’s long-term success. You’ll be trying to fund a Series A round at some time in the hopefully not-too-distant future, right? Networking is all about putting in the effort to build relationships that will pay off in the long run. And, if you can establish a meaningful relationship with that investor today, they may be able to assist you further down the road, such as connecting you to someone in their network who is open to seed investment rounds.
2. It’s Not About The Transaction, It’s About The Relationship
The second error many entrepreneurs make is focusing too much on money. Isn’t it true that you’re wanting to network with investors in order to raise some capital? You’re shooting yourself in the foot if you make that desire the focal point of your conversations with the investor and focus on the transaction (rather than the connection). Take it from the 98% of salespeople who say that creating relationships is the most crucial aspect in completing deals. After all, that is essentially what raising funds is: a sales process.
3. Begin with your current network
The ideal place to begin your networking adventure is with the existing network you’ve developed. Start by going to LinkedIn (or, if you still have one, your Rolodex) and connecting with people. Make an announcement on social media that you’re looking for money and want to build investor ties.
Message friends or former coworkers who have previously gone through the funding process and inquire about their experience. Invite any investors you may already know out for a cup of coffee. The notion is that you’re announcing your interest in meeting and speaking with potential investors. Sharing this information is likely to result in at least a couple of recommendations, if not a warm introduction.
4. Boost Your Social Media Presence
LinkedIn and Twitter, for example, are gold mines for engaging with investors. The idea is to go about it in a natural way. Remember, you’re not the only founder looking to network with investors, and the majority of people’s strategy is to spam investors’ DMs with impersonal, templated messages.
5. Maintain a physical presence
The beautiful thing about social media networking is that it is quite easy to do. However, with accessibility comes saturation, making it difficult to cut through. You should enhance your internet networking efforts with some old-school, hands-on-the-ground hand-shaking. Attend conferences, trade exhibits, and gatherings where you can speak. Make a concerted effort to meet as many individuals as possible.
Consider renting a booth or arranging for a speaking slot (this can be a great way to get others to approach you to start conversations). Inquire about other industry experts and founders’ investing journeys when you meet them. You may be able to find opportunities for recommendations or introductions as a result of this procedure.
6. Make Use Of Already Existing Communities
Taking advantage of existing communities is one way to get your investor networking off to a good start. On Facebook, for example, there are several founder communities, as well as specialist sites like AngelList, CrunchBase, and FundersClub that try to connect investors and founders. Create a list of possible investors using systems like these, and then…
7. Create a list of potential investors
Networking entails more than just connect with investors; it also entails sustaining those ties over time. Taking a methodical approach, similar to that of a salesperson, is the best way to go about it. That is, you create a contact pipeline, develop a communication procedure, and then nurture each “lead” via it. How to Build Your Investor Pipeline (+ Free Template) explains more about investor pipelines.
8. Prepare your elevator pitch
Yes, they want to network with entrepreneurs (they need to in order to do their job well). But there are a thousand of you for every one of them. When an investor inquires about your startup, you want to get straight to the point as soon as possible. This is accomplished through your elevator pitch, a 30-second introduction to your company that includes the following information:
- In the marketplace, there is an issue.
- The service that your firm provides
- The primary value proposition and/or differentiator of your firm
9. Make Use Of The Principle Of Reciprocity
This is more of a networking suggestion in general, but it also applies to connect with investors.
The reciprocity principle is straightforward:
- People are compelled to give back what they receive from others in social situations.
- This can be seen in the form of favours and compliments, as well as in more beneficial situations such as social introductions.
- The reciprocal action, on the other hand, does not have to be an identical match.
Unknowing study volunteers who are offered a can of Coke by a stranger are more likely to respond favourably to a favour request from that stranger later, according to Robert Cialdini, author of Influence: The Psychology of Persuasion. favourSo, if you want to build a relationship with an investor, think about what you can do for them first, and then use that to leverage the reciprocity principle later when you ask for a meeting to pitch them.
10. Do Your Due Diligence On Investors
Our final piece of advice for connect with investors is to keep in mind that no two investors are same. True, they are people with a variety of hobbies and passions (which may help you to build a social relationship outside of the business sphere), but they also have certain investing interests or preferences. This includes preferences such as funding types and desired industries, as well as communication choices.
Some investors, for example, want to know what kind of fun ding figure you’re looking for up front. Others would rather you didn’t mention money in your first email at all. Spend a few hours digging up as much information as possible on a potential investor once you’ve made contact with them. Take a look at their previous investments and see if you can connect with investors of those businesses to ask them a few questions.
In any social setting, connect with investors may be a difficult task. This is particularly true when there is a financial goal in mind, such as when building ties with investors. The most important takeaway from all of the suggestions to connect with investors we’ve mentioned so far is to approach the process as a relationship-building exercise rather than a transactional effort in which the investor is merely a source of financing. Oh, and once you’ve gotten your foot in the door with an investor, make sure your financials are in order.