There are a few good reasons to talk to a VC.
The first and obvious one is that you are in the right place and time to raise capital for your startup. You have put together a great pitch deck demonstrating fantastic growth and potential and you are ready to present it. Another good reason is that you plan to start fundraising in the next 6-12 months and you want to establish some connection with the VC beforehand so that they follow your progress. Finally, some people might want to get insights from a VC or advice on a business situation they are in.
This article will provide some tips and tricks mostly relevant to people in the first two categories. For the latter, probably won’t make much sense as it’s a demanding process. The process that follows does not require any extreme skills or investment other than time. The larger your personal network is, the more chances are you will find the right introduction to the VC you want to reach. But, first things first, let’s build a list of the VCs that are more likely right for you.
The prospecting phase
Assuming you want to raise money in order to expand your operations in country X.
- Find a big enough directory of VCs. You can ask for such a list from other founders that have raised money before or look them up yourself from listing databases such as this one shared by Techstars.
- Group them by country of origin and start with the ones that are based in country X as they will be able to provide you with additional value in the local market. As country X might be different than your current location, keep in mind that some VCs only invest in companies that are based on specific countries.
- Fill up two columns with their Investment Stage (or typical ticket) and Industry. Filter out the ones that are non-compatible with your current stage and/or they have a very different scope than you. This information is usually displayed on their website. If not (or they say agnostic), leave this empty until the next step. Keep aside the ones that might be a good fit for the future.
- When you identify relevant funds go through their portfolio and find startups that are relevant to your startup. Investors are much more comfortable considering a startup when they already have experience in the respective industry. Try to make a case of how you could build a synergy with those startups. Use this information for step 5. Watch out for direct conflicts and past bad bets that might work against you.
- Do a lead scoring based on expertise and relevance to you. A simple way would be a score 1-3. Contact the top matches first. Chances are they will be the most interested to talk to you. Keep the rest of them as a backup plan.
- Go on CrunchBase and find which partner was on the deal with the startups you identified. If the information isn’t there, you can google for the Press Release announcing the round and see who provided the quote on the VC side. It’s usually this partner.
Another path could be by starting from relevant startups and working your way up to find their investors. Since there are thousands of startups, this would only work if you already had a compact list of them; startups that are complementary to you and could potentially be your future partners. Again, follow the same process (excluding step 4) for compiling the list of VCs, filtering out the ones that don’t fit and finding the right partner.
Before contacting them, check one last time if they have some specific criteria that you don’t meet. For example, they might want a minimum ARR which you don’t yet have. This will save time for both of you.
So now you have a collection of VCs that you fall into their investment sweet spot.
The contact phase
Let’s see a few ways you can reach out to them more effectively than a cold email.
- Ask your current VCs and angels if they know any of the shortlisted funds. They should be the first ones to help you in the next round if your common journey was positive so far.
- Find a connection to their current portfolio companies and politely ask for an intro.
- If you don’t have a direct connection to another founder who can make an intro you can tap on your LinkedIn network to find someone to introduce you. Other VCs, founders or service providers (agencies, lawyers, accountants) they have worked with are the best options. It usually works best for you if you prepare a two-line introductory about you and your company and provide it to the person who will be doing the intro for you.
- If you can’t find a warm intro, find out if they go to events and meet them there. Be prepared with your elevator pitch and note the questions they ask you on the spot. Send a follow-up email by the next day summarizing your discussion and attach your pitch deck there. Be prepared to also send your business/financial plan when they ask you for it. Avoid writing too much, keep it short, sweet, and to the point.
This is not rocket science, but rather a process that you can follow, optimize, and iterate. As soon as you have the list you will know how much time it will take you to do the lead scoring and end up with the shortlisted VCs to contact. You can expect a very high response rate for communication via the above-mentioned channels.
We ran a similar outreach process back when I was in a startup. We followed a much more aggressive technique, asking (nicely) founders who didn’t know us to introduce us to their investors. We had a great value proposition, we targeted founders who understood and valued it and we weren’t pushy about the intro (which worked in our favor), so it was ultimately successful.
The process of asking for a warm intro is also a good indicator of people’s willingness to introduce you. If they are not willing, you should consider it seriously and reflect on it. Maybe your idea or pitch or commitment to the project do not provide comfort to other people to make an intro. After all, an introduction comes with the credibility and subtle endorsement of the introducer.
Finally, don’t forget that founders and investors must have a two-way and honest relationship throughout their common path. Keep a quality score on the communication from the onset. Be clear, succinct and honest, and work on maintaining these qualities throughout your collaboration.