Raising Your Institutional Round: Chapter 4
This is the fourth chapter of my upcoming book, “Move the Needle Anyway(s): Raising Your Institutional Round.” There are a total of 16 chapters. The book is currently with the publishers, however, I wanted to start sharing the content in a form of a series of blog posts so the startup ecosystem can benefit immediately. I hope you enjoy :)
Chapter 4: Populate the List of Potential Investors
You will need to talk to numerous investors and VCs before getting a term sheet. For example, it can take up to 90 meetings to close your first round of Series A financing during an economic bear-run. However, it is futile to try to time the market environment to your advantage. Instead, treat it like a numbers game with numerous controllable variables you can control such as building a large top-of-funnel of potential investors.
First, leverage technologies to help you streamline your fundraising efforts—create your version of a simple Customer Relationships Management (CRM) system for the specific purpose of fundraising (e.g. Notion, Airtable, or even a Google Sheet). Having something like a CRM will help you build your investor list, engage them, and track your progress. Here are some key pieces of information you want to record and track:
Investment Firm: The name of the VC firm or family office. Make sure they are stage appropriate— this is just one of the most common mistakes we see. Check that the investor or fund makes similar or relevant investments to your company. Some investors focus on vertical SaaS, and others focus on real estate tech, for example. If you're a fashion tech company, it is unlikely that a real estate investor is going to invest in you. And if in doubt, leave them on the list— the worst thing that can happen is they reject you because you aren’t a fit. Don’t overthink it. Try and get as large a list of potential investors then you can organize them into sub-categories based on self-defined criteria:
Tier 1
Tier 2
Tier 3
Investor Name: The name of the partner whom you want to speak to directly. You will activate your 1st and 2nd degree networks to secure a first meeting. I cover this in more detail in Section III of this book. However, whenever possible, you want to secure a meeting with a partner, not an associate or principal (there are exceptions though).
Contact Details: The partner’s email, link to their LinkedIn, and their X profile. If they are a Tier 1 investor, it is worth scanning their content to get a feel for their worldview and criteria.
Referrer: The individual(s) in your network who will make a warm introduction to the investor/partner. This person will typically be an independent advisor, a founder, another investor, former colleague, or friend. You don’t want to approach the VC cold as they will defer you to someone with low-decision making power such as an associate or principal. You want the referrer to be the person in your network who has the strongest relationship with the investor/partner you want to reach— you can reach out to your existing networks, share your list of investors, and ask them to put their name next to the individual(s) they would be willing to make an introduction to. Recall what we covered in Chapter 1:
Small-world networks: most nodes in a network can be reached from each other by a small number of steps. You pay for these steps by using your existing social capital.
Networks form clusters: Social networks are not equally distributed. They form clusters of tightly knit groups who have strong links to one another— this is referred to as network density. You want to be connected to the individual(s) of these clusters as just one connection can open up a floodgate to VC connections.
Backchannel: Someone who knows the partner you want to reach, but doesn’t necessarily have the strongest relationship with the partner. They can be helpful in sending a note of support to the partner—you can use them to strengthen your credibility through social proof.
Deal Status: A section in your tracker where you can add notes about where a VC is in terms of the arc of an investment (the funnel)— first meeting, second meeting, diligence, partner meeting, IC, term sheet.