March 22nd 2024.
Choosing an investor is a lot like finding a life partner, minus the expensive wedding and luxurious honeymoon. And just like marriage, it's not easy to walk away from an investor if things don't work out. That's why it's crucial to choose the right partner from the start. But where do you even begin? In his book, The Secret of Raising Money, Michael Simpson delves into this topic extensively. Here are some of the top channels he believes every entrepreneur should know about.
One of the most effective ways to connect with an investor is through a warm introduction. This means being introduced by a mutual friend or acquaintance. When an investor is vouched for by someone they know and trust, they are much more likely to make time for a meeting. In fact, warm introductions are the primary way that venture capitalists meet new companies. With the overwhelming number of pitches they receive each year, they need a filter to help them narrow down their options. This is why VC websites typically don't list an email address for entrepreneurs to send their pitches to.
That's why it's important to focus your time and energy on building relationships with well-connected individuals, rather than reaching out to investors cold. However, not all warm introductions are created equal. If the investor doesn't have a strong connection with the person introducing you, it may not have the desired effect. The investor will likely associate you with the qualities of the person making the introduction.
Another powerful tool for connecting with investors is Wellfound, a matchmaking service for early-stage investors and entrepreneurs. This online platform allows you to search a vast database of investors and reach out to them directly. Its popularity has grown so much that many investors now look to Wellfound as their first source of information when learning about a potential investment opportunity.
Many investors also engage with social media and have their own blogs. They appreciate positive comments and may even discover new opportunities through them. One way to build a relationship with an investor is by regularly commenting on their posts. This shows your interest and knowledge in their field. While this may not be the best approach for immediate funding, it can be beneficial in the long run.
Unfortunately, cold emails are often the least effective method for connecting with investors. They can work, but they should be a last resort. Instead, focus on asking for introductions from mutual connections, as this is the most efficient way to network. However, if you do have to send a cold email, here are some tips to increase your chances of getting a response:
- Keep it short and to the point. Introduce yourself and state your request in the first few sentences.
- Do your research on the person you're emailing and personalize your message as much as possible. For example, mention recent achievements or projects they have been involved in.
- Avoid sending emails on Mondays, as VC firms often have partner meetings that day and may not have time to respond. Also, avoid sending emails after 12 p.m. on Fridays, as they may get lost in the chaos of the weekend.
- Offer specific meeting times and follow-up actions. This makes it easier for the investor to respond and increases the likelihood of a meeting.
These are just a few of the most important channels for connecting with potential investors. For those of you who have successfully raised VC funds, what other tips would you add to this list? Share your insights in the comments below!
Michael Simpson, co-author of The Secret of Raising Money, offers more valuable advice on raising capital in his book. Check it out for more tips and strategies!
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