Startup founders, going all-in to the process of raising money from angel and VC investors, can increase their chances of success by having an organized and focused plan. I offered my thoughts on this, based on my experience on the angel side of the table, in my “Get Serious” post.
I talk about drawing up a list of target investors by using tools like AngelList and Crunchbase to help with discovery side, and then other tools, LinkedIn and Conspire for example, to work out who you know who in turn knows those targets.
But I didn’t take on the: “Okay I have names, but now how do I work the intro?” question. Having had a fair number of founders come back to me about that question after my “Get Serious” post, here are some approaches that I think are some obvious entry points. They’re listed in increasing order of effectiveness.
- Comes in Cold = #FAIL
So AngelList and LinkedIn might be good ways to triangulate on your targets, but they are pretty much useless when it comes to connecting with any active investor – well, this one at least. In my case this is for two reasons: a) I get enough referrals or meet enough founders at in-person events, that I simply have no bandwidth to review cold incoming inquires. I suspect I am not alone in that. But also b) sorry: you just failed a test. If you can’t find a way to get a warm intro, or otherwise make a creative connection to me then my assumption is that you aren’t what Paul Graham calls a “formidable founder,” and that is what any investor is looking for.
- From a Non-Investor (so an investor … just not in your company)
So you identify an active investor who seems to know me, and after validating that, you ask them if they will make an introduction for you. So now you are making progress. Assuming the person is someone I know/respect, then I will pay attention to the intro and at least review the materials. However, this route can suffer the obvious credibility challenge – “Thanks for referring Joanne to me. But her business isn’t something you wanted to invest in. Errr…so why should I?”
That’s less of an issue where Joanne is not in a space the referrer is active in, so the “not an investor” part is less of a red flag. Still option two is a heck of a lot better than option one. Also introductions from service providers fall into this “tier” – so better to get an intro from a known startup attorney for example, than a cold call. But you get more traction if the intro comes…
- From an Investor in your company
Now you are making real progress, because you have an investor in your company who knows me, the potential investor. Maybe they even offer to make an introduction without you asking them, or you do ask them and they say “Sure, will do.” I am definitely listening now. I know that, because the person making the referral has skin in the game, they aren’t objective. But…they have skin in the game. They believe. I assume they did due diligence and, assuming I trust their judgement, this is something I want to hear about. I made an investment end last year through a chain exactly like this – thank you Jerry Neumann.
- From an Entrepreneur
Statement of the blindingly obvious: Founders are busy people – but they know what it takes to do what they do. So when a founder I know recommends another entrepreneur I pretty much always “take the call.” By spooky coincidence just as I was writing this paragraph I got an email from Gillian Morris of Hitlist with a “would you be interested in meeting this founder?” message. I replied “yes” – immediately. Why? Because I know Gillian won’t waste my time, I know when she infrequently makes an intro like this it is for a good reason, and I am pretty sure she is a damn good judge of other founders.
- From an Investee Entrepreneur
An introduction comes from the founder of a company I am invested in. So the answer “yes” is easy, and in this case there is a higher level of commitment. Part of my role as an investor, as I see it, is to make value added intros that could benefit my investee founders. And in return if they make an intro for me, I feel pretty much obligated to respond positively and return the favor. Of course, if the investee founder that pings me has a business that is rocking, then the fingers typing the reply message work even faster – this isn’t just a recommendation from just any entrepreneur, this is one who is making me money.
- They find you
The connection nirvana is of course where investors contact you. Much lower IAC (investor acquisition cost) than endless pitch meetings. As leads for your cap table build out plan, they come in pre-qualified, at least in the sense of having demonstrable interest. And the way they find you can be multifaceted. Having a glowing write up across tech media can obvious generate interest. And you can proactively work to generate that sort of earned advertising, but being visible and engaged through social media in the normal course can do it for you too. So blogging interesting content on your space and pushing out there. A specific example: I invested in Snaps a while back after I saw something founder and then CEO Vivian Rosenthal put out on Twitter. I think we got into a Twitter conversation which promoted me to look into the business some more. Then an in person meeting when I got more interested, and I wrote a check. It happens.
Image Credit: CC by 401(k) 2012