SeedLegals CEO & Founder Anthony Rose’s Top 10 Investor Outreach Tips for Pre-Seed and Seed Startups
Are you ready to find investors?
What’s the best way to get yourself seen by investors?
What should and shouldn’t be mentioned in your pitch deck?
This week we were joined by Seed Sprint regular, founder and CEO of SeedLegals, Anthony Rose. He shared his insights on the do’s and don’ts of perfecting your investor outreach strategy, your pitch & pitch deck and answered our Sprinter’s burning questions. Read on for our favourite 10 tips:
1. Am I ready for investment?
When a lack of money stunts growth, it’s time to raise. Founders, on average, put around £26,000 of their own money into their business. While bootstrapping allows you to maintain ownership, there will come a time when your financial limit will stunt your business growth and you’ll need investor support.
2. I’m about to raise, how do I make an impression with investors?
Sometimes you’ll be going out cold, and sometimes you’ll have warm intros or serendipitous conversations. Either way, remember the Marketing Rule of 7: a prospect needs to “hear” your message at least 7 times before they’ll take action and buy into you, so get out there and make as much noise as possible! Write content for LinkedIn, Twitter, blog your growth progress. This either means investors will be exposed to your content before you reach out to them, or when you contact them cold and they look you up online there is plenty of content for them to see. Win/win.
3. When pitching, how practiced should I be?
Rather than memorising your pitch and delivering the same content over and over, remember investors have different personas and different agendas, and you need to sell the narrative that works for them.
A pitch is a conversation, and so yours should be dynamic. When you start the conversation, after introducing yourself, ask the investor to introduce themselves and talk about what they look for in a pitch, not only will it create empathy and get them to ‘pitch’ to you, it will help you work out the angle to take with your pitch.
Do they focus on metrics? Spend more time talking about metrics.
Do they like hearing about your vision? Focus on that.
Use the same slides, and prepare your deck so it covers all points, then adapt how much you focus on different elements when chatting - it’ll be worth it!
4. What should I include in my pitch deck?
A 3 minute deck tells the big picture, 5 minutes will add some meat and 10 minutes will really go into detail but the following slides are absolute musts:
The customer problem you’re addressing
Competitors (investors will test you so show you’ve done your homework)
Business plan - the metric slide - this is where all that good seed sprint data will come in, and the early growth indicators you can show
Meet the team
How much you want to raise (founders forget this too often!)
If you’re sharing the deck widely, then leave off valuation if you’d prefer more privacy
5. How long should I wait between raises?
Anthony suggests you raise 3 times, and each time give away roughly 15% equity. Each time you raise, you should be raising 3-5 times what you raised the time before, at 3-5 times your valuation. Getting enough traction to grow 3-5 times usually means you’ll need 12-18 months between rounds. After your third raise, you should be in a position to be profitable or exiting, and you should still maintain majority ownership.
6. When is the best time to raise?
There are two good times to raise investment…
Very early stage: Investors will be investing in a dream, an untested hypothesis and the founding team - this is high risk so investors will not usually invest more significant amounts of capital
After launch: You (hopefully) have traction, customers, growth and revenue - Investors will come to you
...and one dangerous time
At launch: Launches can be bumpy and you don’t want to scare off investors with each bump.
Tip: when raising pre-seed at the early stages, ensure you have enough money to get through launch, before needing to raise again.
7. How should I talk about my competitors?
Be wary of including lots of competitor logos as investors can lose sight of your own identity, not only that, but charts where you show a list of competitors and how your business has more features than the rest can be risky, if your competitor is a scaleup with a sizeable tech team, and your only difference is a few additional features, an investor will just think that competitors can easily add those features a lot faster than you can with their resource, which means your value proposition is lost.
8. Agh! I keep getting different feedback from different investors, what do I do?
Different investors will have different approaches, likes and dislikes, but the feedback can still be useful. Collect all of the data points and if you start noticing a trend, take note. For example, some investors prefer the competitor checklist versus the quadrant - try to research your investor beforehand and adapt to what they like (some investors will share their pitch preferences on their Twitter page). Remember, with your product, you are always A/B testing, and you can do this with your pitch deck too!
9. Cap table management: How many angels are too many angels?
The average amongst startups raising pre-seed on SeedLegals is about 10 angels on the cap table, investing on average £20k each. Logistically it doesn’t matter if there are more or less. The messiest part of cap tables isn’t the quantity of investors, but when there are different deal terms for different investors, non dilution clauses, agreements that investors can sell their shares at any time etc
10. Should my deck include plans for future raises?
The short answer is no. Do not signal fundraising plans up front, but have an answer ready incase investors ask. In a pitch deck, future and upcoming raises signal dilution to investors. Instead, look towards profitability and highlight a growth plan (and if you do mention a fundraise, showcase the valuation jump so they see how profitable this investment can be for them).