I remember when I first started fundraising for my first company, my investor network was pretty weak. Not only did I not know many investors, I also didn't really know how to pitch them.
I'd basically take any meeting I could with any investor at any time. I figured this was what it took to succeed. This was hustle.
The Cold Shoulder
One day, I met a prominent VC at a conference. I started my elevator pitch. In a rare moment of candidness, he told me that he doesn't go to conferences to meet new start-ups. "By the time they get here, they're already picked over," he said.
Here I had thought this man with deep pockets full of other people's money was evaluating me and my pitch. But he was there to build relationships with the most successful founders--so that they would introduce them to other start-ups they liked. I'd been wasting my time.
Getting an In
Investors don't want to meet you. They wanted to be introduced to you. There's a huge difference. Another top tier VC once told me that out of the thousands of business pitches he receives in his office every year, his firm has never funded one that came in completely cold. In other words, the only way to get an investment was through an introduction.
It makes sense. The job of a venture capitalist is finding a needle in the haystack. So investors rely on their network to do the first round of vetting. This little insight should dramatically change how you raise money. Instead of trying to build a network of investors, you should be building a network of introducers. And not all introducers are created equal. Here are four tips to help you:
1. Get introductions to your friends' investors. If you're working in any kind of start-up hub, you almost certainly have friends who are working on their own start-ups. Ask them to help you. The first question should be, "Am I ready to fundraise?" This question will help you gauge just how warm your friends' introductions will be. If they like you but don't believe in your start-up yet, then it will be impossible for them to hide that perspective from their own investors. But once you get the go-ahead, you should absolutely ask them for introductions.
Then, send your friend a fresh email requesting an introduction to a specific investor. The email should have enough information that it can be forwarded by your friend without further editing and short enough that the investor can read it on his or her mobile phone. Assume that no attachments will be opened and that no links will be clicked.
2. Get introductions from entrepreneurs who aren't friends. Even if you are not yet friends with everyone in the PayPal Mafia or the Y Combinator alumni crew, your friends list may not reach as far as you need to go. That's not a problem, because most founders are willing to help out other founders when approached in the right way. I regularly introduce other start-ups to my own investors, and it's a win-win for both sides.
When you are approaching another entrepreneur for an intro, you need to really sell them on your start-up, because an entrepreneur will only make an introduction to his or her investors if the entrepreneur believes there is high likelihood that that introduction will result in an investment. (It affects the entrepreneur's own credibility when it doesn't.) That said, it's much easier to get a meeting with another founder than it is to get a meeting with a prominent venture capitalist. The trick is you have to ask first for fundraising advice, and not for introductions. When you go to another founder for advice--especially if you approach a non-famous founder who doesn't get this request too often--he or she will love playing the role of teacher and giving you helpful feedback. And if that entrepreneur gets excited about what you're doing, he or she will offer to make that introduction for you.
3. Get intros from your early investors. As soon as the wire comes through, you need to turn your early investors into evangelists. They are now your best source of warm introductions. But you have to help them be helpful. They don't know to whom you've already spoken and where you need help.
When I was seed-stage fundraising, I kept an investor wish-list on a Google doc. It was a list of 20 investors I wanted to meet in order of general priority. Every time I got new angel investors, I would show them that list, and they would tell me which people they knew. Immediately, I would send the investors a fresh email for each new intro. Suddenly, I had three to five more investors in the pipeline.
4. Stay organized. You need a well-organized investor pipeline. This is where you keep track of each investor that you've approached as well as those that you would like to approach. This document should not only keep track of your status with each VC, but also which acquaintances you have in common with each person. (I like to check each investor name on both LinkedIn and Facebook to see what possible introduction I have available to me.) I then try to balance things out so that the people who can provide the best introductions are evenly distributed. Asking for three introductions is totally fine, but five is probably pushing it, unless the introducer is a very close friend or already an investor.
Your goal is to have 40 to 60 introductions. For my first company, it took about 50 meetings to get VC funding. Same with my current company, 42floors. (If you raise your round of funding in the first 10, then kudos to you.)
Once you do get funding, be generous with your time and pay it forward to other entrepreneurs.
And if I personally can be helpful to you, ping me on Twitter. I'll do whatever I can.