Raising money. Part 2 - Reaching out to VCs
Photo: Man writing a letter
This is a 5 post series to prepare you to raise venture capital:
- Part 1 - How VCs work
- Part 2 (this post) - Reaching out to VCs
- Part 3 - Short story about the pitch
- Part 4 - Questions to ask VCs
- Part 5 - 50 shades of VC No
In a previous post, we covered the business model of Venture capital. The next step is to get to an actual VC.
You have got an idea, an MVP and the time has come to get some boost with outside capital. Where to start?
The best way to get to investors is through a personal introduction! Introductions have this additional layer of trust. The person making an introduction also has checked that there might be mutual value. Personal introductions are a very important source of deals for VCs and that is part of the reason why they build their network.
Open your LinkedIn, look up VCs, and angels, check common connections and ask for introductions. Done. The end.
Of course, this works if you do have the right network. Unfortunately, it is not always the case. Bad news, you should have built your network years ago. Good news, pay attention and build your network onwards. The startup ecosystem is well connected and you should tap into this network. When you meet someone, follow up with a Linkedin connection request, and add a note that you would like to stay in touch.
Don't fake your network by connecting with everyone. Yes, you will get a bunch of connections but what for? Your aim should be to have 100 valuable connections who can make an intro and not 1000 connections with no value whatsoever.
Your network works in both directions. It is not only that you now have a network with connections you can ask for an intro. Also, you have become a 2nd-degree connection for people who might ask for an intro with you.
Business angel networks
If you don't have a strong network, you can tap into existing networks. Particularly, if you are just starting and have an idea or an MVP. You can reach out to Business angel networks. Here is a list of European Business angel networks - https://www.eban.org/membership-directory/. They usually host regular pitch sessions and in the post-covid world, you don't necessarily have to travel to one. Said that angels do prefer to invest in closer geographies so start with ones in your country or close neighbors.
Events and meetups
Startup events are the key place where you can grow your network and get exposed to VCs.
Across Europe, there are a bunch of startup events happening throughout the year. Ranging from big ones like Web Summit or Slush with tens of thousands of participants to smaller ones like TechChill, Latitude59, Arctic15, TechBBQ, and Pirate Summit. Depending on your agenda, you should pick events you attend. Smaller ones tend to have a more focused crowd and people are more approachable. Meeting someone from e.g. Balderton at Web Summit or Slush will be hard. Not so hard at Pirate Summit or TechChill because you both are in a queue for a beer. Of course, if they are attending. There are also dedicated events for SaaS (SaaStock), E-commerce (ShopTalk), and AI (The European AI Summit 2022) companies.
At events, you also can participate in a pitching competition. The list of pitching companies is shared with VCs and can end up in various databases which in turn is a source for other VCs. Journalists who attend the event might go through the list of pitching companies and include your name in an article. And, of course, if you win the competition you get exposure through various channels.
Check out side events. Particularly for big events, there are dozens of smaller side events that gather a smaller but more focused crowd and you can meet investors and founders who are interested in your field.
Finally, follow your local startup ecosystem and meetups. In every community, some people know everyone and can connect you to anyone (like universal business adapters). Get to know them, connect with them on Linkedin.
There is nothing bad if you reach out directly by email to a particular partner at a fund. There is a reason why a lot of them will have a public email address on the Team page.
There are some best practices and No-no's:
- Know your target. Do research. Check their website, portfolio, partners, ticket size, and fund size.
- Write a personalized email with a name and why you are reaching out to this particular person and firm. You will be ahead of 90% of cold emails VCs receive who are copy/paste spray and pray material.
- Be short. Your goal is not to tell everything about your company in 4 paragraphs and add a 20Mb pitch deck. Have a paragraph about your company and that you would like to have a chat. Short and to the point. Maybe add a link to your pitch deck. If VC has an interest, they will ask for additional questions, redirect to their startup question form or make an internal intro to partner/associate.
- Follow-up. A couple of days later, next week but you have to follow up. Emails get lost, read on mobile, and then forgotten. Follow-up and most of the time you will have some response.
This is a number game with a certain conversion rate. Set your goal to reach out to 20 VCs and then measure how many respond. At Starwatcher we have built a database of VCs and it should be pretty easy to come up with a hitlist.
Being out there
Do your homework and be discoverable. Create your Linkedin page. Some VCs will use Linkedin tools like Sales Navigator to discover new companies. A lot of data aggregators use Linkedin as their source of data and some VCs are purchasing this data.
Create a Crunchbase profile. Crunchbase in general is not used for company discovery purposes (Pre-seed). It is the database of startups and is used by VCs to research similar companies before making an investment in later rounds (Series-A). Your profile can come up and raise some indirect interest.
Create your profile on Starwatcher.io. The very reason we created this platform is to help startups and VCs find each other.
As we discussed in a previous article, VCs have strong FOMO. The biggest fear they have is to discover that some unicorn reached out to them and they even didn't have a chat. Getting to a VC is not that hard. Delivering a compelling story is. That's the topic for the next post.
Some additional materials:
- How to get warm introductions to angel investors and VCs? Guide + email examples
- How to write a top 1% cold email to VCs
- Top 5 tips to hustle startup conferences