Identifying and Engaging the Right Investors

One of the most frequently asked questions members of JumpStart’s Services and Investing Team receives is about how to obtain funding. This question is understandable. Growing a technology-based business at scale requires capital. To address capital needs, entrepreneurs often look to pitch investors.

The entrepreneurs who are the most successful in both obtaining and leveraging investor capital for growth understand that investing is really about building the right relationships to grow your business. As an entrepreneur, you need a plan for your business, capital, connections, insights, thought partnership, and accountability partners. Investors want to obtain a return on their financial investment in you-which means they have a vested interest in your success. The right investor should be able to provide support to address the needs of your business on its growth journey. Thus, it is critical to be clear about your value proposition to an investor. Concurrently, you need to understand the value that an investor brings to your business.

For these reasons, before you even think about researching, targeting, and conducting any outreach regarding investors, it is very critical that you do the following things:

  • Validate your business idea
  • Determine business milestones and goals
  • Create a game plan to accomplish these milestones
  • Figure out how much funding your business needs to achieve these milestones
  • Determine if taking outside investment is the right strategy for your business

If you fail to cover these bases, an experienced investor will not commit to investing in your business. This lack of commitment is due to no justification provided to them that there is an evidence-driven case for them to provide their money and time into you and your venture.

Assuming you have done these three things, the way to identify and build the right investor relationships to grow your business starts with conducting research. In starting your initial research, here are some the questions one should ask:

  • Who is investing in your industry?
  • Who is investing in companies at your stage of development?
  • Which investors are providing capital amounts that are within the range of your target fundraise?
  • Which investors are either located in your geographic region or willing to invest in companies from your geographic area?
  • If you are part of a historically underestimated community group, which investors are focusing on supporting members of your community?

These questions should help you identify a shortlist of potential investors to conduct follow up research. As you work through the shortlist, here are some questions to consider:

  • What is this investor’s experience with prior startups?
  • What is this investor’s knowledge of your venture’s target industry?
  • What is this investor’s investment thesis and evaluation criteria?
  • What is this investor’s bottom line?
    • Financially
    • Social impact
  • Does the investor have other investments that either complement or compete with your venture?
  • In addition to capital, what other types of assistance do they provide to their portfolio companies?
  • Are they either a passive or active investor?
  • Given your venture will, probably, need co-investors and follow-on investors…
    • How connected are they to the investment community?
    • What is the track record of their portfolio companies raising additional capital?
    • Are they good at making deals happen?
  • Do they have a good track record with help businesses scale and exit?
  • How diverse is their investing team? How diverse is the investor’s investment portfolio? What is their track record with working historically underestimated founders? How do they promote diversity on their corporate boards?
  • What are the investor’s expectations on how often the investor wants updates on company progress?
  • Does the investor expect board governance or observer rights?

With this information, an entrepreneur is ready to fine-tune their investment materials and begin connecting with investors. By investment materials, one means their oral elevator pitch, written elevator pitch, executive summary to submit to investors, pitch deck to present to investors, and follow up information for the due-diligence process.

In terms of connecting with investors, here are three ways to do it:

  • Go to networking events. The goal here is to meet investors, have conversations about your business, and get a warm invitation to follow up with them.
  • Leverage your network. From experience, investors are more likely to connect and engage with entrepreneurs who are referred to them by people they trust. Examples of people to leverage include:
    • Business Advisors
    • Accountants
    • Lawyers
    • Other Entrepreneurs
  • If the previous two options are not possible, prepare an introductory email.

When sending either a cold email or an email from a warm connection, please send a short elevator pitch highlighting the key things investors want to know about your company. Additionally, make sure to understand if an investor wants you to submit either a pitch deck, an executive summary, or both in an outreach email.

To assist you in your journey, below are some research and ESP resources for you to leverage in your efforts to find the right investors for your company.

Research Resources
National Venture Capital Association Member’s Directory, Angel Capital Association Member’s Directory, CrunchBase, AngelList, TechCrunch

JumpStart Resources
Business Assistance Programs, Entrepreneur’s Toolkit, Funds Overview, Workshop Series, Mentoring Program

Posted in Launch Stage, Access To Capital, Entrepreneur Roadmap