The best way to approach investors: four tips

When you’re on the hunt for funding, it’s natural that you want to get things moving as quickly as possible. However, identifying and approaching the right investor should be a measured process. Blasting the same quick email to a dozen investors will never work in your favor.

The average investor receives hundreds of pitches each month – making your approach all the more critical. In my experience, there are four key ways to improve your chances when approaching investors:

1. Get a warm introduction from a trusted source

Identify the strongest “in” to the particular investor. This often means not jumping on the first person who can introduce you. The best introductions come from people who have brought good deal flows to investors in the past. Savvy entrepreneurs put in the time doing their due diligence on potential connections and then ask the strongest connector for the introduction.

Speaking of referrals, you don’t want to be introduced by an investor who has passed on you. Whenever one investor gets a referral from another investor, their very first question will be “are you investing?” As the entrepreneur, you need the answer to help, not hurt, your case. The one exception to this rule is if the investor making the introduction has a completely different investment focus than your company and there’s a clear reason why he/she is not investing.

2. Build a relationship over time

If your network isn’t strong enough to provide a warm introduction from a strong source, you’ll need to build your own relationship with the investor over time. Interact with the investor through social media: follow them on Twitter, read their blog and make thoughtful comments. However, never comment on a blog post just for the sake of getting your name out there. Only comment when you’ll be adding value and relevance to the conversation.

3. Ask for advice, rather than money

Most investors are not looking to write a check right away, so you should get in touch with them well before you are raising a round. Initially, you can approach an investor soliciting advice on something specific, such as feedback on your marketing & sales approach, business model, or long-term product vision. Then, if it makes sense, execute on the investor’s feedback and circle back after, always showing your appreciation for their guidance.

4. Be personal

The most important rule is to only target investors when your company fits their specific area(s) of focus. Otherwise, you’ll be wasting your time (and theirs). Research a potential investor’s current portfolio. Read their blog posts and Twitter stream. And, when you do reach out, be specific in your communications. Just like in the job search, generic emails that could be sent to anyone are ineffective. Show how you understand each investor’s areas of interest, strategic vision, etc.

Final thoughts

If you choose to seek funding, remember that it takes patience, and lots of preparation. There’s rarely a shortcut to easy money, so be ready to develop your strategy and put in the time.

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  • Amit Bhaskar

    Good advice and points noted. Just a quick question as how to identity people who bring deal flow to an investor. In our course at stanford, we were encouraged to contact junior partners in a firm and get a feel from them or ask the course professor to provide an introduction stating why it is good for both the investor and the entrepreneur and is there any value added. Is that the way to go when you don’t know anybody in the firm or anybody who know’s them ??

    I thought it was not polite to ask someone for an intro if you do not them properply so have never done so even if have had a few useful introduction from them. Besides I believe that my venture should be good enough to be talked about. For me the knowledge of an investor is far more valuable and I would rather stick to that and get some traction. Not sure how people will react to when asked for advice when they do not even have time for themselves being bombarded by pitches day in, day out.

    My today’s take away from this post is that Never ask one investor to introduce you to another investor for reasons you rightly stated. And when contact an investor “Show how you understand each investor’s areas of interest, strategic vision, etc.”

  • bwertz

    Hard to identify people that bring deal flow to certain investors so you need to do some digging, e.g. what entrepreneurs has a fund invested in in the past and which are now angel investors.

  • http://kalv.co.uk/ Kalvir Sandhu

    Amit, I’ve found it useful to network within the community. Starting with the right types of events that would attract those that know investors well. Those people being founders who have taken investment recently or successful entrepreneurs that might be lurking around.

    Then in every discussion dropping in a polite ask masked as a reason for being at the event (to find x or y) or in the pitch describing the stage of the company and what we are looking for.

    As an example, locally in Vancouver I have attended every side event for the last couple of months which has led to building some fantastic relationships who started providing mentorship, advice and then eventually introductions to investors they knew.

    Always remember when asking for advice to ask if they need anything in return. If at an event if you ask for something, ask about what they are looking for too. Give as well as take.

  • Amit Bhaskar

    You are very right Kalvir about networking and about how to approach people for help and advice. Giving more than you get and most importantly without the notion that you will even get anything back in return, is the best way to go.

    In fact, when I started my first business in the UK 7 yrs ago, I went through the same process you have mentioned. Became the member of local chamber of commerce, university networks, alumni network, professional network (BCS), morning networking, even our local incubator had these events which I started to go regularly. You name it and I was there. Only in one of these events I found an investor and we got together to get to know each other. Finally got funded twice by the same investor. I am going to stick to the same process as it has worked so far and I am glad to know from a Vancouverite, that the process is same in Vancouver too.

    The trouble is that I am not in vancouver right now and I have no contacts there. All I am doing is going through the department of investment of local bodies, contacting the concerned person looking after inward investment and getting to know the place which sometimes just becomes a data crunching exercise. Unfortunately I cannot even apply for an accelerator as I am not a Canadian or I do not have a canadian in my team even if my idea is worth being considered. The good thing though is that atleast I know nearly every good accelarator programme in Canada, be it Toronto, Montreal, Waterloo region or Vancouver.

    Ideally I would like to see the market in operation and most importantly the reaction of my potential customer first hand so that I can check my hypothesis and change them according to the reactions. For now only my twitter connections are my eyes and ears to Vancouver and whatever I see is through them. It is to be seen in future though that how far I manage to go.

    BTW, Visited the Website of Caliper and I think what you guys are doing is cool. May be I would like to try it when our app or for that matter mobile site is ready as we will need specific intelligence from the interactions with NFC tags.

  • http://www.socialnerdia.com/ Esteban Contreras

    Good stuff. Thanks for sharing Boris.