This three-part series on investor outreach will discuss recommended investor outreach strategies by looking for common recommendations across 41 expert resources. Part 1 of this series discusses the study’s methodology and a general overview of our findings.
Figuring out the most effective way to raise funds for a startup is a daunting task.
Apart from creating a compelling pitch deck, startups also have to worry about investor outreach.
If founders don’t have anyone to pitch to, what’s the point, right?
Unfortunately, for first time founders, it’s difficult to figure out which outreach strategies work best.
Should founders fire off hundreds of cold emails?
Or, should they reach out to investors on social media?
Or, do they just need one great conversation with the right investor at a networking event?
Obviously a Google search, or a book purchase is in order – but even then, opinions vary greatly across these sorts of resources.
Fundraising often takes months before an agreement is made between startups and potential investors. According to startup consultant and investor, Alejandro Cremades the fundraising timeline takes approximately 6 months; sometimes longer if the startup doesn’t have a solid outreach strategy in place.
In a previous study that we’ve conducted, we found that a lack of an investor outreach strategy is the #1 mistake that first time founders make when fundraising.
But, what does ‘good’ look like in terms of an outreach strategy?
To find out, we scoured the internet looking for the most effective investor outreach strategies out there. We found hundreds of opinions online.
Some say founders can never go wrong with good ol’ cold email outreach.
Others say that cold emails should be a last resort.
On the other hand, some believe networking is crucial.
While others suggest founders do cold outreach through social media instead.
To find common ground across dozens and dozens of online resources, we analyzed credible articles and tallied up all their opinions.
Here’s how we did it:
As always, we started digging around for effective investor outreach strategies through a targeted search for online content. We then narrowed our search to investors, consultants, and credible content creators to ensure only high quality opinions were in our data pool.
After gathering enough resources for our study, we reviewed and analyzed each article and took note of all the strategies mentioned.
There were a lot, so we bucketed them down into a manageable few.
We found that each investor outreach strategy fell into two main categories:
RESEARCH NOTE: We tallied all recommendations across all resources. From this, we can infer that the most popular suggestions (the ones mentioned more often) are such because they are effective. However, just because something was mentioned less often doesn’t mean it’s less important. Remember, less popular strategies can still work when done within a carefully strategized outreach plan.
All content was further broken down into several sub-categories.
Here’s the rundown.
Before actually reaching out to investors, startups need to have something for them to read.
Enter: pitch collateral.
Pitch collateral includes necessary documents for the fundraising process. Apart from the infamous pitch deck, founders also usually need to prepare outreach email copy, a full-scale business plan, and a financial model. These documents can also be translated into the pitch deck in the form of the business model slide and the financial slide.
These documents can’t be created overnight. So, investors and consultants in our study encouraged founders to take their time in perfecting these documents.
This category received 103 unique recommendations from our data pool. So, we segmented each opinion into these five sub-categories:
Needless to say, basing large capital investment decisions on opinions or emotions is a huge risk. This is why investors and consultants in our study highly advised that pitch messaging should always be grounded in data and facts. This sub-category had 38% of mentions making it the most popular recommendation for preparing pitch collateral.
We’ve occasionally stressed the importance of clarity and brevity as potential investors need to understand what a startup is all about as quickly as possible. This comes from simple communication of sometimes complex ideas. This sub-category received 36% of mentions making it the second most popular recommendation in its category.
Investors and consultants in our study advised against a one-size-fits-all approach when creating pitch collateral. This recommendation ranked third in our study with 17% of mentions. The big deal? Investors are all unique, and each have differing goals and motivations. Therefore, adjusting a pitch to align with those goals and motivations will resonate most.
Research is an essential first step to investor outreach. According to the resources in our study, it’s important for founders to know their industry, customers, and competitors. This sub-category garnered 10% of mentions, making it the fourth most popular recommendation in preparing pitch collateral.
Alignment is the fifth and final recommendation sub-category under Preparing Outreach Collateral. This sub-category gained 9% of mentions from investors and consultants. Despite ranking last, alignment shouldn’t be easily dismissed. Our study reveals that a startup’s messaging and branding should be consistent across all pieces of collateral; from websites to emails.
We will further break down these subcategories in Part 2 of this three-part series.
Once collateral is more or less finished, it’s time for startups to gear their efforts towards actual outreach.
Investor outreach can come in many forms. Sometimes founders conduct cold email outreach while others ask a colleague for an introduction to an investor.
But, where to start?
Before deciding which outreach strategy to use, founders must understand that investor outreach is a process. This process includes researching and qualifying investors, as well as reviewing and optimizing outreach strategies.
In our study, we uncovered 268 unique opinions for how to land a meeting from consultants and investors. Again, we segmented the bulk of these opinions into six sub-categories:
Investor trust comes quickest from personal interactions or referrals. However, this can be difficult if a founder lacks connections within their industry. So, investors and consultants reiterate the importance of networking. This recommendation garnered 33% of mentions, making it the most popular strategy for Landing the Meeting. Under this sub-category, founders are encouraged to join business functions and build meaningful relationships which could lead to a sweet referral or a meeting.
How do founders know which investors to reach out to? What roles will team members play within this process? What are the key performance indicators for the strategies in place? These are some of the questions that need to be answered under this sub-category. Establishing internal processes and roles is the second most popular recommendation with 22% of mentions.
Are the goals of this potential investor similar to the startup in question? Does the investor fund startups within my industry? If the answer is no, chances are there won’t be much interest. Investors and consultants in our study highly recommend researching and qualifying potential investors to increase the chances of landing a meeting and getting funded. This sub-category is the third most popular recommendation with 22% of mentions.
According to investors and consultants, investors conduct their own research on startups that may be of interest to them. They will likely find the startup’s website and other marketing collateral across the digital landscape. This collateral needs to be optimized to establish credibility among potential investors. This sub-category is the fourth most popular recommendation which received 8% of mentions in our study.
Today, connecting with investors through social is just a click away. However, this recommendation was tied for last in terms of it’s popularity. Why? To be frank, investors are busy and rarely spend time hanging out on social media. So, take this recommendation with a grain of salt.
Cold outreach ranks dead last. This recommendation received 7% of mentions, and is often suggested as a last resort. However, cold outreach can still be effective if done with a well planned and executed outreach process— the same goes for social outreach.
The tools and tactics a founder uses to connect with investors determine the success of the fundraising process. To boost the chances of getting funded, startups need to:
We will further discuss both in Parts 2 and 3 of this three-part series. Read part two to get a deeper understanding of how to prepare pitch collateral.
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