Every founder I know lives and breathes traction. They obsess over their startup day and night, hunting for every growth tactic available to help them grow. The assumption is that if they can grow enough, they will be able to raise that next round of funding.
In reality, it's a little more complicated. The number of startups is increasing much faster than the number of investors. Over the last couple of years, less than 10% of seed-funded companies received Series-A follow-on. Even if you're crushing it in terms of traction, there are hundreds of other companies with better metrics pitching the same investors. So how do you stand out and get an edge?
Business is about relationships
As an investor, I learned that there are really only two reasons to invest in a startup. The first is demonstrable traction in terms of revenues or growth that beats anything else I'm looking at. The second reason is because I've known the founders for a long time, I trust them, and they occupy the position of 'terrifyingly talented' in my head.
It suddenly dawned on me. Why don't founders build better relationships with investors earlier on? If you're looking for money, any relationship building activities look very self-serving. However, if you don't need money, now might be the perfect time to start building those relationships.
How to build relationships with investors
There are many ways to build relationships with investors long before you need something from them. To do so requires you to think less like a founder and more like a marketer. What are the individual needs of the investors with whom you want to build relationships with? And how can you position yourself as someone that can help them?
Here's one approach that illustrates a creative way you might build relationships with multiple investors before you need any funding. There's just one huge caveat: if you aren't ready to build and maintain relationships with investors, the following practices could effectively destroy your chances of ever getting funding - so proceed with caution!
1. Build your target list of investors.
There are loads of places you can find relevant investors. My favorite approach is to use Google to find collaborative spreadsheets like this one from Techstars Europe. If you're approaching funds, visit the websites and look for the specific people for whom you can add the most value.
Pro tip: associates at Seed and VC funds might be easier to access than the partners.
2. Find out how you can help them
Before connecting, you need to understand if you have anything that could be of genuine value investors. Do you have access to valuable information they don't? Do you have deep expertise in an area they invest regularly in? Would they be interested in receiving your short and informative monthly company update with confidential data and insights? Figure this out before you reach out.
3. Get in touch
If you have a mutual connection, ask for an introduction. If not, you need to craft an irresistible intro email. It needs to be short, clear and straight-to-the-point. Whatever your spin is, make it something they can easily say 'yes' to.
Pro tip: bulk emails will instantly position you as spam and damage your reputation. Don't do it.
4. Follow-up regularly
This is the magic sauce. If you want to build a long lasting relationship, just follow up. I won't bore you with the psychological reasons why this works but it really does. Remember to keep thinking like a marketer. Keep it short and relevant and make it about them. Choose your words carefully so that you're perceived as someone going places.
Pro tip: people that are going places write very short emails.
5. Be patient
Relationships take time and investment. If you follow up consistently for 6 months to a year, eventually investors will remember you. Maybe they will invite you to one of their events. Maybe you can provide input into one of their other deals. Relationships are hard to predict but they usually pay off over the long-term.
Playing With Fire
Let's be honest -- there are a number of ways this could go badly wrong. If you're too aggressive, you'll put investors off. If your content is poorly written or irrelevant, you'll be seen as boring or useless. If you can't execute, it will shine through. I'm absolutely not recommending this for every founder.
But if there's one thing you take away from this article it's this. Follow up. Speaking as an entrepreneur and investor, I find it a shame when founders don't follow up after a meeting. I'm always interested to know what happens next.