Once you've spent time collecting engagement metrics, working on your customer acquisition and nailing your pricing and valuation, it’s time to think about pulling all this data together and approaching investors.
When it comes to investor outreach, Drew O'Sullivan knows his stuff. Drew is a startup advisor and mentor, and has over 20 years fundraising experience as a VC, deploying capital alongside the European Investment Fund, and running accelerator programmes for founders.
Looking for some tips for angel and VC cold outreach, the do’s and don’t of a first meeting with an investor, and how to tackle market size and financial forecasts? Read Drew’s top tips,
Prequalify people in your own network for initial raises. A lot of successful businesses don’t raise from angels or VCs ever, and build on friends and family money. Your personal network knows you, your capabilities, how you work, and how you deal in crisis. If you are reaching out to angel’s and VC’s and you have on your deck that you are a professional with industry experience, investors will ask why you haven’t got any funds committed from your personal network given the above, so always go to your personal network first, and top up with angel / VC money if necessary.
About to meet an investor? Be prepared. It seems obvious, but are you prepared for the meeting? Do you have a one liner ready for if they offer a quick intro to their network? Do you have a clean exec summary they can read on their phone if they don’t have their laptop? Do you have multiple decks? One to go through with the investor and one to send over that doesn’t require a commentary? Do you have a demo or a visual representation of what you do?
Set up your data room. If an investor asks, you want to have your data room set up. This means legal contracts supplier contracts, founder agreements, shareholder agreements, management accounts, cap table, bank statements, access to analytics to website, financial assumptions models, etc
Be consistent across social media. Is your LinkedIn profile, Twitter profile, website, etc investor friendly prior to you going into a meeting? Investors will often check social media ahead of meetings, so take the time to have social pages set up and acting as a showroom for the work you’re doing.
Begin a cold outreach campaign to pre-qualified VCs. As with the majority of early stage startups, if you’re fundraising, you’re going to be talking to a lot of investors. Given the numbers you'll be reaching out to, the likelihood is, even with a network, only a limited amount will come from warm intros, and you’re going to have to do a cold outreach campaign too. Whilst pre-qualifying, do your homework on stage and sector and target specific investors that are a good fit.
Check whether the VC fund actually has money to deploy. If you’re going down the VC route, it’s worth noting that most of their funds are 10 year funds, and they mostly deploy in the first 5 years. If you don’t see any announcement of a new fund, the likelihood is they don’t have fresh money to deploy. They might be taking meetings to build their own pipeline in order to raise another round, but do your own diligence and check whether it’s likely they have capital, and make a call on how much time to invest in them based on this.
Know what you are going to achieve with your investment. A lot of startups will end their deck with the amount they are raising and what they are going to spend it on, marketing, product build etc. What the investor really wants to know is what you are expecting to achieve with the money. Tip: the answer to this question should align to an increased valuation for your business, and an increased attractiveness of your business for future rounds, as that’s what will make these investors sit up and listen.
Think about what you want investors to remember one you’ve left the meeting. There can be a lot in a deck, but the most important points to drive home are,
Your target customer. Not the TAM, but specifically who. Investors like niches and ‘mini monopoly’s’ so you want to communicate that you’re the only people that deliver this product (in this way) to these people.
What your value proposition is for these target customer(s)
The market opportunity
Financial forecasting? Communicate your average revenue per customer. This is often missed in decks, yet it provides a simple representation of how your model works for investors. If investors understand how many customers you need to get to £1m in revenue and beyond, they can ascertain what you need to achieve in the next 6-12 months to achieve this in terms of product build, sales structure, etc
Communicate the market winner's story. At pre-seed and seed, investors want to understand the opportunity. Spend time outlining the market winner’s story, then what steps you’ll take and milestones you’ll achieve with the pre seed or seed money in the next 12 months so that you will become the market winner in year 3, 4, 5.