Investor Outreach Checklist
The Pre-Pitch Checklist
Investor Outreach checklist
Do your research: I know how difficult it is to know who to reach out to in the investor community as there isn’t exactly a Yellow Pages to pull up and go through when looking for investors. That being said, I can’t stress enough how important it is for you to perform a decent amount of research on any investor you’re thinking of reaching out to. You should dig through their fund’s website. Research their portfolio companies.
Have they invested in a competitor?
Do they have a specific investment thesis, if so does your company fit that thesis?
How many partners are at the firm?
If more than one, do their partners handle all of their deals collectively regardless of vertical, or do they filter deals to partners based on those verticals? (e.g. Sarah gets rockets, Thomas gets Ecom, Finn Esports…)
Do they invest at the same round as your company is raising at?
A large portion of deals that investors see are deals that they could never nor would ever invest in simply because the founder didn’t do their research. This may seem like an ego trip for investors to be angry at, but in reality, what you’re signaling is that not only do you not value the investors time, but you don’t even value your own time. This is a MASSIVE red flag. You never had a chance to raise from them in the first place, due to the investment criteria of the fund, but your laziness just killed any chance of that fund helping you out with intros or advice.
Start early and build rapport: Ever wonder why so many fundraising rounds go to founders that have already raised money from investors prior to their new company even if those prior companies were complete failures? Yeah you guessed it, they’re friends and have become so over years. They’ve seen these founders struggle through hardship. They know what they are like at their core. You however don’t have years to build a relationship, but you can still strive to build some form of rapport with potential investors. Reach out to a strong but relatively short list of potential investors early on. Keep them apprised of your building progress, lessons learned, issues, etc. Find people that are interested in the subject matter of what you’re building. Ask for help but be very thoughtful. Curate how you engage with these advisors and always show that you’re respectful of their time. Personal character is extremely difficult to judge in a short amount of time and investors are often left to rely on their investor network to vouch for founders that are sent their way. This is why the vast majority of funding rounds are put together via warm intros and not cold outreach. Investors can’t be blamed for relying on their close connections for choosing deals over vetting cold deals with founders that not only they’ve never heard of but their investor tribe hasn’t heard of either. It’s your job to find a way to engineer a bridge across the gap.
Know your shit: Never take a pitch with a potential investor if you don’t know your company’s numbers in and out. You should be able to speak to the history of your industry and company, lessons learned, how much you’ve raised, how many people are on the cap table, industry specific KPI’s, burn rate, competitive landscape, etc. While the first call/convo is often a “get to know each other” kind of meeting, if things go well, it can quickly drop into the weeds. If you can’t keep up, most investors will assume you never will. One investor I’ve known for many years used to get daily, DAILY, numbers from many of his portfolio companies. Most founders don’t take the time to be this detailed about their business, but if the investor you’re speaking with is willing to go to such lengths to stay involved with their portfolio companies, you better damn well make sure you’re willing to keep up.
Don’t be afraid to say “I don’t know”: While I’ll go into more detail in a later point, never be afraid to admit you don’t know something. Yes it’s always best to have a strong answer, but do not under any circumstance lie about something or fib the numbers. It’s a recipe for disaster if you choose to do so. Personally, I love to hear “I don’t know” as it’s a guaranteed signal that you’re displaying intellectual honesty with me.
Never harass: Seems obvious but if you’ve reached out to one partner at a firm and they said “not for us” do not by any means reach out to one of their other partners asking again. In so doing you’re basically committing professional suicide with that firm and will never be able to get any other form of help from them. No intros, no recommendations, nothing. EVER.
Don’t lie: You wouldn’t believe the capacity for “founders” to lie about their business. Whether it’s traction, KPI’s, customer feedback, development process, etc. many founders tend to “burn things hot” in their communication with potential investors (and even their current portfolio of investors) and this can immediately destroy any prospect of an investor joining your cap table. Seasoned investors are well versed in the reality of building businesses, and they know things are anything but all rainbows and roses. Intellectual honesty is enormously valuable when trying to raise capital. Own the bad but be proud of what you’ve learned or are learning. Investors want to see what you’ve unlocked since starting your business. What key takeaways were gained from previous experiments paid for with prior funding? Making mistakes is always fine so long as these mistakes were learned from, and the business is better for it. Trying to hide faults means you’re scared of failure and unwilling to embrace the pain of learning regardless of the potential long-term consequences for denying these lessons.
Know your place: Yeah, I said it. Whether you like it or not the start of the relationship between yourself and your investors is not a buddy buddy adventure. The simple fact is you’re selling something and they’re deciding whether or not to buy it. If you take this to heart you’ll begin to notice just how many founders shoot themselves in the foot before they even get started. Yes great investors will always treat you as an equal, but any signal from a founder that they aren’t willing the treat the investor with client like gloves can instantly turn a potentially strong investor into a never touch detractor. While it’s easy to assume this is entirely due to a pompous investor ego, it’s often far more related to what you’re signaling to the investor about how you’ll treat your own clients.
Desperation is your Kryptonite: It’s understandable that with limited resources and a quickly depleting magazine of capital, founders become desperate to get a yes from anyone who will sign on the dotted line. This desperation however oozes through both your body language and verbal written ques and sticks to investors mental frame of reference when analyzing your company as a potential investment. No matter how hard it may be, always attempt to remove as much emotion from your state of mind prior to communicating with an investor. This of course goes hand in hand with intellectual honesty. To be perfectly clear, never lie about the situation like how much capital you have, that you’re stressed, etc, just be willing to own it without shame. Building a successful company is extremely difficult and can take Olympic levels of mental toughness to make it through. So while you’re justified in your anxiety and stress, the manner in which you handle it can speak volumes to a potential investor about your ability to sustain a functioning and efficient team through future hardship (which will almost assuredly happen). Also, you’re very rarely if ever going to get an investor to hand over a term sheet during the first meeting or email, so relax, even if your financial needs are immediately approaching, they aren’t going to be solved in this meeting.
If you take these suggestions to heart you’ll be in a much better position to raise capital. Always remember to try and appreciate the process as very few people ever get the opportunity to try and build their own business. Regardless of the struggle, it’s always a gift.