In case you are an entrepreneur, you’re certainly acquainted with the painful due diligence course of that’s a part of the fundraising ordeal. Any good investor goes to do due diligence in your product, your crew, your go-to-market technique, and more. What you may not be acquainted with is the due diligence that an entrepreneur does when choosing the proper investor.
It has been stated many occasions earlier than that taking cash from an investor is like marrying them since they are going to be your accomplice for the foreseeable future and similar to you would not marry simply anybody, you should not take investor cash from simply anybody.
So how do you select the precise investor and as soon as you have chosen them, how do you provoke the primary contact?
Right here is the place a aggressive panorama is available in.
Selecting an investor entails inspecting your aggressive panorama, which it’s best to have already created, and seeing which traders are concerned about your sector. Nonetheless, it is a very delicate steadiness between an investor that likes your area and one that’s already invested in a direct competitor.
You’re going to wish to discover somebody who invests in your area, your stage, and never already invested in a direct competitor. There are infinite databases on the market of traders however probably the most environment friendly approach to discover an investor is to see who invested within the different firms in your panorama that aren’t direct rivals.
When you establish a related investor that has invested in your area, now it is time to go to that investor’s web site and see what they are saying about what their consolation zone is in the case of stage. Do they make investments early? Late?
Upon getting remoted that related investor, now it is time to go somewhat deeper.
Communicate to founders who already raised cash from that investor.
Keep in mind, it is like a wedding. Nobody can let you know what that investor is like higher than a founder who took that investor’s cash up to now.
Listed here are some questions you would possibly wish to ask that founder: How lengthy was the due diligence course of? Did that investor drag it for longer than it wanted to be? What occurred the day after? Was that investor useful? Did the investor make calls for of any form that you just did not count on? When issues bought tough, did that investor step up?
These are just some examples of questions you would possibly contemplate asking, however you need to be asking as many questions as potential so you can also make a extra knowledgeable choice about whether or not to take that investor’s cash.
Now comes the enjoyable of getting on the radar of that investor.
So you have executed your analysis and now you will have a listing of three related traders. Now it is time to get in contact with them, however this stage needs to be executed proper similar to the earlier phases. In the event you do not make a great first impression, it may destroy your possibilities of elevating capital from that investor.
So what’s one of the best ways to get in contact with an investor? In two phrases: Heat intro. In different phrases, don’t ever chilly pitch an investor, not over the cellphone and never even by e-mail.
Discover a mutual contact, ideally somebody the investor respects, and have them intro you and add a pleasant phrase about you.
Who’s the best mutual contact? That very same founder you spoke to earlier than. There isn’t a higher particular person to introduce you to an investor than a CEO who that investor already backed, assuming in fact it was a profitable funding.
By the way in which, it is essential to say that this is applicable not solely to traders however to journalists, potential companions, and just about everybody else you are going to interact with. All the time goal to get a heat intro.
So you bought a founder who agreed to make the intro, now what?
You’ve got made it this far, and now you simply must seal the deal. You discovered the investor you wish to pitch, you discovered the CEO who agreed to introduce you, now what?
Like all enterprise intro that you’re asking for, do not make the particular person doing you that favor do all of the work. You do the work for them. As an alternative of asking them to write down all the e-mail intro, save them that point and do it for them.
As an instance the investor’s identify is Michelle and the particular person introducing you is David. Ship David an e-mail that reads one thing like “Hello David, I do know you are shut with Michelle and I believe she’d be the right investor for my firm. My deck is connected and I would actually recognize an intro. Would you have the ability to facilitate that?”
Why is that this so essential? As a result of now David can click on Ahead, add one line about you, and hit Ship. You simply saved David the time he would have invested writing that e-mail with all of the context. He is doing you a favor. Attempt to make his life as straightforward as potential.
In the event you comply with the above directions, you’ll have recognized the precise investor, discovered the particular person to introduce you, and gotten that introduction by drafting the e-mail the particular person can ahead.
Now it is time to prepare for that first assembly with the investor.