- Quality not quantity - Just because there are thousands of investors out there, does not mean you should reach out to every one of them. You should only need to contact 20-30 investors, maybe a maximum of 50.
- Build an investor profile - Create the profile of your ideal investor. Think about their fit relative to your company and whether they offer the type of relationship you want.
- Do your research - Spend time researching what investors are out there. Putting in the legwork now can save you valuable time later in your fundraising journey.
Quality not quantity
In line with the old adage of casting your net as far and wide as possible, when trying to raise capital, it can be tempting to reach out to as many investors as possible.
However, in the fundraising ecosystem, doing this is more likely than not going to be a waste of your time. You may succeed in obtaining more meetings, but more meetings do not equate to more money.
Quality over quantity is the aim of the game here.
On average, you will likely only need to contact 20-30 investors, not the hundreds a lot of founders think. You should therefore strive to make sure these introductions are of a high quality with investors that are the right fit for you and your startup.
To begin with, you should form an investor profile. This should be based on what your ideal investor looks like as determined by whether they are a good fit relative to your company and whether they offer the type of relationship you want.
For the former, consider what vertical your startup operates in? How big is your startup? What similar companies exist and who have they received investment from?
For the latter, ask yourself, what do you want out of a relationship with an investor. Do you solely want financial support or support beyond money? Is an investor with a diverse portfolio appealing or unappealing? Do you want a heavy handed investor involved in helping you run your company or would you prefer an investor that observes from afar? Do you want an investor with experience investing in, and/or expertise of, the space in which your startup operates?
Other traits to keep in mind when building your ideal investor persona is their current portfolio and location, you want to avoid investors who have already invested in your competitors and you need to consider whether you want local investors or investors in strategic geographies.
Once you’ve formed an investor profile, outline the goals of your round. How much are you looking to raise? Do you want your round to be Angel-led or institutionally-led? How many investors do you want? Typically a Pre-Seed/Seed round will lean towards being more Angel heavy and later stage rounds institutionally heavy.
When beginning your search for an investor, it is sensible to narrow down your pool of options as much as possible. There are thousands upon thousands of investors and, as mentioned, you only need to contact about 20-30 of them to successfully close a round.
Therefore, putting aside the time to research which investors fit your investor profile is important. Compile a list of 50 or so investors you think are a good fit for your startup as determined by the criteria you outlined and begin reaching out to them and/or start asking for introductions.
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