Fundraising - 8 Step Process to Build a List of 200 Investors

The Blackroom Team
The Blackroom Team

When soliciting capital for their company, startup founders sometimes present to more than two hundred investors. This article will provide you with eight tools, strategies, and approaches that you can use to establish a list of investors who are likely to buy into your company.

We have come to view fund raising as a concentrated sales process, one that starts with building your pipeline with qualified investors and concludes with you securing a transaction for your company. 

Building — and vetting — an investor list is the first stage in the process, and this hands-on book will teach entrepreneurs how to expedite an essential procedure by breaking it down into manageable steps.

The methodical approach that is taken in order to compile a list of pertinent target investors

Building a network of potential investors is a numbers game, so let's get that out of the way first.

When chatting with founders who have successfully raised cash, it has been observed that they pitch more than 200 investors before receiving cheques from one venture capital firm and ten angel investors.

Doing the necessary calculations will reveal that this represents a conversion rate of 5%, which indicates that they were unsuccessful 95% of the time. This is quite normal across the business, which highlights how critical it is to construct a robust top-of-funnel list. Despite how discouraging that may sound, it is true. How exactly do you go about doing that?

The next article will provide you with eight different places to discover investors for your startup, as well as some recommendations on how to qualify these prospects.

Databases for investors and other web resources

1. Crunchbase is another database that may be searched that has information on investors. One helpful strategy to make use of this platform is to search for 10–12 businesses that are analogous to your own but that are not direct competitors. Investigate the individuals who were willing to put money into them in the stage you are currently in and add their names to your list. Crunchbase will also show you whether investors are interested in co-investing with other companies, which will allow you to widen your funnel.

2. Dealroom is a European data provider for startups, investors and corporates. You can use the same approach as in Crunchbase. 

3. Suscribe to fundraising newsletters which are great resources for keeping up to date with the latest trends. European most valuable newsletter are Sifted Funding Weekly, European Tech Investment (by Dealroom), Tech.eu, EU-Startups or VentureBeat Europe. On the US side, you can go for newsletters such as PEHub, Inside Venture Capital, Venture Pulse, and Strictly VC which provide regular updates on new fund announcements, which firms are getting funded, and who is backing them.

TIP: If you are going to pitch a venture capital fund, choose one that has recently raised a new fund. Keep up with the announcements of new funds to ensure you get in during the first year or two.

4. Speakers at conferences are in high demand by investors who want to build their own brands by participating in events and conferences. Look at the schedules of events hosted by startups and venture capitalists, and try to locate speakers who are active in your field.

5. Quora, TechCrunch, and Medium are three online platforms that, along with a number of other websites, have excellent investor list resources. Try to find a list of the "top investors" in your industry or in your area.

6. Twitter: An increasing number of investors and founders are active on Twitter, and you can garner a great deal of information simply by following some of your favorite venture capitalists on the platform.

Exploiting the resources of your private network

The best method to turn cold leads into warm ones is to look for investors who are already connected to your personal network.

7. LinkedIn: Use the search tool on LinkedIn to go through the thousands of possible connections.

Start by giving the search engine a broad query such as "angel list," which should produce more than 100,000 results.

Applying filters can help you narrow it down; begin with connections of the second degree, and then add some geographical and industry criteria.

As you go down the list, if you come across any profiles that look interesting, you should open them in a new tab.

When you have between 50 and 100 tabs open, spend between 20 and 30 seconds quickly scanning each individual's profile. If the potential investor seems like they would be a good fit for your business, add them to your list and make a note of the top connection you two share.

TIP: Use a light CRM such as folk to store all the relevant profiles you will find. They have an integration with Linkedin, so it literally takes 1 second to send a profile from Linkedin to folk.

8. Advisors: If you have advisors that you are relying on to help you with fundraising introductions, invite them to take a look at your pipeline, add any investors that they would be willing to introduce you to, and skim over your research list for any insights or mutual connections. You could end up with fifty to sixty warm introductions if you repeat this process with four to five advisors.

Putting your list through its paces

After you have utilized the aforementioned eight sources, you should have a highly robust top of funnel, ideally including between 200 and 400 names. But this is not the end of the effort; the next step is to narrow that list down to the people who have the most relevant qualifications.

Why? Because the process of fundraising is really a sale, and successful salespeople always hunt for leads that are likely to make a purchase, They go through the applicants, rank them in order of priority, and concentrate their efforts on the most qualified individuals who would be the "best fit." The ability to do so is transferable to our fund-raising efforts.

Investigate each of your targets in depth, which means that you should visit their websites, read their LinkedIn profiles, and follow them on Twitter. Eliminate any of your targets who meet the following criteria:

  • They have made an investment in a direct rival of theirs. An ethical investor will decline to meet with you, while an unethical investor will provide your pitch deck to a rival company.
  • A venture capital fund that has not brought in fresh capital in the past two to three years. It's possible that this group is concentrating on follow-on business deals. Setting up a meeting to rehearse your presentation may be worthwhile, but you shouldn't spend too much time pitching funds that aren't executing new transactions.
  • An angel investor who has not participated in a transaction in more than five years. You can look at their previous work on Angel Technologies or LinkedIn. If it has been some time, it's likely that they are taking a break from making new business arrangements.
  • The investor is focusing their attention on the wrong industry or stage. Figure out how to decipher the hints. For instance, a corporation that specializes in providing "growth capital" to entrepreneurs during their later stages will not be interested in your seed round pitch.
  • The investor is either present in the incorrect geographic place or has money invested there. Although this has become significantly less important over the years, it is still important enough to warrant a brief check.
  • They have a reputation for being dishonest. Do your due diligence: talk to other founders and rely on any group insights that are accessible to you through an incubator, accelerator, or network because you will be married to this investor for the next five to eight years of your life.

This should not be the end of the screening process. Set aside some time during the due diligence process to conduct some background study on your potential investors to ensure that they would be beneficial to both you and your business.

You may save yourself time, energy, and at least a few dozen rejections along the way by using these filters to exclude 25-30% of the names on your list. This will leave you with just well-qualified investors to pursue.

If you follow this procedure, your fundraising efforts will proceed by an order of magnitude faster.

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