When building a startup, like it or not, in most cases, you are going to have to raise external capital to give yourself some runway. There are, of course, companies that don't raise capital and bootstrap, and while that is recommended, it is not feasible for most companies who want to invest in growth. Once you decide that the time has come to raise that capital, the worst thing you can do is take the first check offered to you without doing your research. 

Here are five steps to take before approaching an investor for your startup:

Narrow down your search by stage and space.

This is a crucial step that so many entrepreneurs don't understand. Not every investor is right for every company. Some investors have an appetite for early stage companies, while others avoid them because of the high risk involved. Some investors avoid certain verticals and will never invest no matter how great the company is. 

As an entrepreneur, it is your job to have a target list of investors who are relevant for you, because approaching the wrong investor makes you look bad and wastes everyone's time.

Study the portfolio of that investor, mainly for competitors.

Once you have narrowed down your search and have a list of relevant investors, you are going to want to make sure that the investor you are targeting does not already invest in a competitor. The last thing you want is to send your confidential investor deck to someone who can give it to your biggest competitor.

Additionally, the chances of an investor deploying capital in two companies that are direct competitors are slim to none and it is your job to do that research and not pitch that investor.

Speak to entrepreneurs who have raised from that investor.

This might be the most important step of all. Once you have an investor in mind, speak to CEOs who have raised money from that investor in the past. Some of the questions you should ask are "Is the investor entrepreneur friendly?" "Does the investor provide value beyond a check?" "When the going gets tough, does that investor step up or give up?"

It is a very big mistake to take money from someone who will make your life more difficult. Being an entrepreneur is hard enough as it is, the last thing you want is an investor who will make it harder.

Research the investor using their social channels and search engines.

If the investor you have in mind passed all the above tests, now it's time to do some deeper research. Now, you don't have to agree with everything that investor tweets about, but it is recommended to read what he puts out there, just to make sure that there is a cultural fit. Remember, this person is not just an investor, they are going to be a partner for the whole journey of your startup, you are going to want to get along.

Find your mutual friends and ask for a warm introduction.

After you have done all that research and decided on an investor you would like to pitch, don't send a cold email, but rather, find someone who knows him and is willing to make a warm intro and maybe even put in a good word.

This sounds like an obvious point, but any investor will tell you that they get endless cold pitches every day and most of the pitches that end up with a meeting or even an investment come from warm intros made by people they trust.

We all read about these mega investment rounds and we glorify raising capital. Not enough attention is paid to the process of raising capital from the right person at the right time.