Justin's Journal: How to Find Investors (Part 1 - Things to Avoid)
The key to finding and meeting VCs isn’t cold emails or playing a high-volume game — it’s all in the introductions; and anyone can get them.
We are back with another entry, deep from the archives of Justin’s Journal. In this segment, you’ll learn the do’s and don’ts of meeting investors and how to build your network from zero. This is Part One - you’ll firstly learn what to avoid. Make sure you’re subscribed for Part 2 - Steps to finding and meeting investors, releasing next week.
May 1, 2018
I’ve been fortunate enough to have success in building technology businesses and have established great connections. This made our Series A process for Atrium much more straightforward.
To be clear, establishing yourself in Silicon Valley makes it much easier to meet investors.
But it’s also beside the point.
All too many founders say ‘I’m not connected in Silicon Valley, I’m not successful, so I’ll never be able to raise money for my business’.
Of all the common questions I get, “How do I meet investors?” ranks at or near the top. As a founder who went through an exit, and later invested in companies myself, I have experience from both sides of the table.
There are two critical factors to consider when you want to fundraise for your startup:
Almost everyone who has been successful in Silicon Valley had no network when they arrived and just figured it out.
Meeting investors is like a sales funnel. Success is predicated on a repeatable process of building and leveraging connections. It’s nothing special and anyone can do it. There are millions of successful sales people around the globe today.
It’s not who you know: it’s who your network knows. Building and leveraging your network to get intros is the tried and true way to meet investors and get funding.
I’m going to show you the process and explain how I was able to raise a Series A with zero investors in my contact list.
How NOT to meet investors
It’s important to precede a list of suggestions with a stern warning of how you can shoot yourself in the foot before you begin.
1. The Cold Email
When I was a YC partner, I would get emails every day from random people saying “Invest in my startup.”
Not even a good explanation of what they do or what’s in it for me.
Have empathy and think about your audience (this applies to all aspects of business communication, not exclusively to investors).
For 99.99% of those inquiries, I just didn’t have time to actually respond to them. Otherwise, I would spend my entire day talking to random people.
Cold emailing is almost never going to work and is a subpar use of your time — which is the single-most valuable asset for a startup founder. We’ll get more into the opposite of this in the how-to section.
I wish this went without saying, but unfortunately it doesn’t. One of my partners at YC had a founder show up outside his house.
Not cool and very, very, weird.
Don’t track someone through social media, or show up at an investor’s house and expect that to not creep them out (yes, this has happened to me before).
Even if you identified the right investor, this is simply the wrong way to go about it. Investors don’t respond to this — it’s a perverse incentive. Rewarding this type of behavior will lead to its proliferation, even if you found a great fit.
3. Not targeting your search
Don’t waste your time on investors who don’t look at your space, or haven’t shown a propensity for investing at your current stage.
What’s the point?
Investors typically have a focus for both:
a) Industry (e.g. biotech, health, enterprise SaaS)
b) Funding round (seed, growth, Series A)
When you contact an investor who doesn’t meet both of your criteria, you may be ruining an opportunity for future consideration.
The importance of networks means your reputation is of utmost importance. If word gets around that you are aimlessly sending cold emails, you might miss out on a future opportunity.
4. Too many (or few)
There’s a delicate balance between highly personalized/targeted outreach, and acknowledging that it’s ultimately a numbers game.
The funnel metaphor couldn’t be more apt.
You’re only going to convert so many, so you need to get enough in the top (the “volume”).
But identifying too many prospects can — intentionally or not — detract from the quality of each individual relationship, thereby limiting your chances of closing a deal. Find the sweet spot of just enough, but not too many.
5. Favoring partners over associates exclusively
A lot of very smart people I really respect say “don’t talk to associates.” I actually disagree with this.
Per the point above about cold email, connections are king — and better than not getting in touch at all. Obviously talking directly to a partner is preferable, but it’s realistically not always an option. Take what you can get. If you have an “in” with an associate, you’re only one level removed from the investor.
Make sure you’re subscribed for Part 2 - Steps to Finding and Meeting investors releasing next week!