Are you wondering how to build relationships with investors? Winning at startup fundraising is all about building relationships with investors. How do you do it?
In fact, building relationships with a variety of investors won’t just pave the way to winning in round after round of raising funds, it will open the doors to a great exit and resources, and will make navigating everyday business easier. Especially when it comes to working with your board of directors.
So, how, where and when do you start building powerful relationships with these key players in the industry?
The Ultimate Guide To Pitch Decks
The best path to getting funded, and on the best terms is to start building relationships with investors far before you need them. This is equally true from angel investors and friends to fund your pre-seed round through strategics and private equity funds in a Series D round.
Many have found attending great colleges one of the best ways to build this network early. It is some of the best value they have gained from the university.
At a minimum, you want to be building strategic relationships for at least 12 months in advance. Even earlier than that is better.
So, if you are still brainstorming a startup now, and may not launch or need funding for another year or two, this is the time to begin prioritizing meeting and nurturing connections with angel investors, founders of startup accelerators, and fundraising consultants.
Do What You Say
No matter what it is, do what you say. The number one problem facing investors is finding entrepreneurs they can trust and who will deliver. Not just for being confident in returning their own money, but for protecting their own credibility and relationships if they refer you to others.
So, whether it is meeting up for coffee, sending them an update, or taking the next step in your venture, do what you say. They’ll notice.
Add Value First
Don’t sell. Focus on them. Find a way to offer and give them value long before you have an ask.
This is how you’ll earn their trust and friendship. Just make sure you are doing it authentically.
Focus the conversation on them, and listen. What are they passionate about? What pain are they dealing with? What pleasure do they seek?
How can you add value to their life and business? Don’t give to get. Just give. Even if that feeling of helping someone else is all you get, it is more than worth it.
Get To Know Them
Get to know investors as people and business professionals, over time and in a variety of situations.
Investor-founder relationships are definitely like a marriage. People can be vastly different from casual dating to moving in together and getting married. It can be totally different when you are together every day, up in each others’ business, are going through the daily grind, and so on. There is no way you can grasp this with a couple of dates where both sides are putting on their best front.
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Do coffee, do dinners, go to games together, see each other in a business atmosphere. How do they treat others? How do they react when there is friction? What details of their personality and ways of operating good really grind on you after 10 years together?
Investors are a lot like cofounders. They should make the highs twice as high, and the lows only half as low. Strengthen your relationship by celebrating things together. Maybe it is a game, a small milestone in their or your business. Or maybe it is their birthday or their kids’ birthday or a holiday or special event.
Champion Hard Things Together
It’s not in the easy times that the strongest relationships are forged. It is in the toughest times. The truth is that most days of being a startup entrepreneur are going to be tough. So, you had better make sure you can work well together through them, and as a team.
Many say that team-building exercises are too fluffy and not as important as being in the business trenches together. Yet, in order to get to that point, it can help to champion hard things together.
It can be small fun wins and challenges. What passions do you share? Go learn to surf in Costa Rica for the weekend. Or climb a mountain, participate in an endurance race, go camping and build a fire (without lighter and lighter fluid), lift heavy things at the gym, or brainstorm hard projects together.
You’ll forge a new level of bond, and see how well you do as a team when things aren’t easy.
Send Regular Updates
It’s not always easy or practical to do all of the above, especially with many different investors. Especially not when you are laser-focused on building the basic foundation of a startup or are managing a hyper-growth company to scale to the next level.
At a minimum, you should be sending regular investor updates. These are typically in the form of corporate emails. Though, you can go outside the box to send warmer and more personal updates too. You can use mail, social media (the best being Linkedin), and other methods.
Remember The Most Important Data
Remember that the most important word to anyone is their own name. Remember names. Remember important dates and other names. Their spouse and kids, their anniversaries, and more.
Get Warmer Introductions
Getting started connecting with investors can be challenging. Especially, breaking through from the expectation you are just selling them to their guard being down and willing to build a real relationship. Getting warm introductions from people they already trust can make all the difference here. Who do you know that knows investors?
Remember that storytelling plays a key role in fundraising and you will need capital to scale things up. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
FULL TRANSCRIPTION OF THE VIDEO:
Hello, everyone. This is Alejandro Cremades, and today we’re going to be talking about how to build relationships with investors. Building relationships with investors is everything because fundraising is all about trust. In today’s video, we’re going to be breaking it down for you so that you can get good insights as to how to do it with success. With that being said, let’s get into it.
The first thing is, you want to start early. I find that most of the entrepreneurs that I find, they wait until the last moment where they actually need the money. You need to start early. As an entrepreneur, if you’re building a meaningful business and if you want to build a billion-dollar business, you want to start very early. You’re going to be fundraising 24/7 – sometimes more active and sometimes less active, but essentially, you are always fundraising because what you’re doing is building relationships with the people that may be jumping in to invest in you.
With this being said, even as early as having an idea on a napkin, you want to get out there, and you want to build those relationships. You want to create that trust. Whenever you’re ready, is this going to be a smooth transition? Is this going to be a very simple call or meeting where it’s coming up?
Even 12 months earlier – if you think that in 12 months from now you’re going to need to raise a round of financing, then you start building that relationship with those investors as they are entrepreneurs, entrepreneurs that have received financing from them in the last 6 to 12 months for an introduction so that you can start building the rapport, that relationship, and to get the door open by someone that is already in that circle of trust, which, in this case, would be an entrepreneur of a portfolio company of that investor. Again, start early, as soon as you think you may need that money from that investor in the future.
Do what you say. That’s a really big one because on day one, you’re going to be meeting with that investor, and you’re going to tell them, “We are thinking about being here. We’re thinking about, and we’re making the promise of being here.” So, over the course of time, they’re going to see how you’re delivering. The last thing that you want is for that follow-up meeting to happen where you are essentially confirming that you did not deliver on your promises.
I cover this in detail in the video how to build relationships with investors below which you may find interesting.
With investors, you always want to under promise and over deliver because if you meet on day one, and you tell them that you’re here and that in three months, you’re going to be there. Then in three months when you’re meeting with them, not only you tell them that you accomplished this, but you actually double or triple what you promised them. I think that’s when they’re going to get excited and they’re going to be like, “By the way, are you looking for money? Are you looking to raise money?” That’s essentially how you build that trust by doing what you say you’re going to do; by having that integrity of your word and really delivering. Again, do what you are saying.
Then you also want to add value first rather than taking and taking and taking, which is what everyone does. Do it differently. Go with adding and adding and adding. Maybe what you can do is get to know each other and understand what they need. Maybe you can introduce them to other entrepreneurs that are also a fit with their theses. Maybe you can send articles to things that are relevant with some of the discussions that you’ve had that have to do with the way that they’re seeing things about their operation or where they’re heading.
Maybe you want to give them tickets to perhaps a game. Maybe you have tickets to a game, and you’re not planning to go. Maybe you know that investor likes that game. Maybe you give them the tickets. Again, it’s all about adding value. Whenever you can give such value, you should do that because they’re going to appreciate that.
This is also going to help to build that sense of friendship, which I think is very critical because ultimately, investors in startups, specifically, invest in people. They invest in people that they like and that they see themselves spending time with because ultimately, these people that are going to spend a lot of time with you, especially at a board level, helping you with defining the strategy and so forth. That’s why they really want to make sure that they get along with the people that they’re investing in.
Then, you want to get to know them first. Before you even take the money from that investor, remember, it’s going to be much harder to divorce from your investor than to divorce from your husband or wife. So, you want to make sure that during this dating phase, you’re getting to know them, and you get to see how they are and how they behave. Maybe you take them for a coffee; you take them for lunch; you can ask the waiter to bring the wrong order on purpose so that you can see how they behave during difficult and challenging times because that’s what you’re going to get when your business is not performing.
And believe it or not, entrepreneurship is not a straight line. It’s always going to be full of ups and downs. So, during the downs is where you get to see the real human being. You really want to try to understand how that individual is during the difficult times because when you’re on the right side of the mountain, everything is beautiful. But when you’re on the other side of the mountain is where you get to see the real human being.
You need to have people that are going to jump in, that are going to help you, that are going to roll up their sleeves, and that they’re going to do whatever it takes to turn things around rather than treating you as a write-off because remember, that if they treat you as a write-off, that’s going to send a negative signal to the market. A write-off basically is that they’re not going to reinvest in your business.
Even if you need the money, they would not reinvest because they don’t see a future, and that’s a signal that they’re sending to the market, and others are going to see that. Then they will be like, “Hold on. This is an existing investor. They’re not investing. There’s something wrong with the business.” At that point is when they leave your business to die.
So, with that being said, make sure that you’re getting someone onboard that you get to know first, that you get to see during tough times, as well. You can even ask them to make an introduction to an entrepreneur that has failed that they have invested in so that that can tell you how they were during those difficult times. Then, if you’re comfortable with what you’re hearing and what you’re seeing, then you go ahead, and you proceed.
Celebrate together with the investor. Maybe you’re hitting a milestone. Maybe you’re on the press. Maybe you get a new hire on the team. You want to be up to speed catching up with the investor, take them out for a drink, whatever that is so that you are building that friendship, that trust, that they get to be part of your business because, at the end of the day, that investor is not only investing in you, they are investing to help you in building the business. So you want them to be part of those celebrations of those victories. Then, again, you’re pushing it smoothly toward their making an investment.
You also need to be ready to share the tough things. Part of building that trust and that relationship is not just sharing how beautiful everything is. Especially with people that are investing for the first time or that are already existing investors, you always want to be upfront about some of the challenges that you’re doing. Ask them for their advice; ask them for their feedback because investors are not stupid. They know that there are good things and bad things always.
But if you go out, and you seek their advice, and they see that you’re coachable and that you’re listening, that’s going to be an absolute plus for them to say, “You know what? This entrepreneur is listening. They’re coachable. I would feel completely comfortable and excited about helping them to build the business, and that’s where you want to take it. So, always be authentic. Don’t be superficial. Don’t be fake. Don’t tell lies because those are going to always come out.
Next, you want to build or send regular updates because by sending regular updates, you’re going to be keeping them up to speed. It depends on where you’re at with the business, so the later that you are on the lifecycle of the business, the less updates you’re going to send. It could be quarterly updates. But the earlier that you are, it could be monthly updates. It could be weekly updates, but you want to keep them up to speed.
Especially when you’re in the fundraising mode, you want to send them, maybe every couple of weeks, so that they’re up to speed with everything exciting that is happening around the business. That way, when you really need the money or when you need to close that round of financing, it’s not like a new thing to them. They already heard about it, and they know that this is coming. That’s something that you want to keep them up to speed with, with regular updates.
A big thing of developing those relationships with investors is by establishing trust right off the bat. The way to do that is by getting warm introductions from people that are already in the circle of trust of that investor. This could be accountants; it could be founders; it could be lawyers; it could be investors that they are sitting on boards with, but essentially people that are already working with that investor, and they know that investor well.
The best source, in my opinion, is the founders that have received an investment from that investor that you’re looking to target in the last 6 to 12 months because those people are already in that circle of trust. Ideally, they’re working at a board level together. At that point, you’re going to get that founder to make the intro, and for that, you’re going to be able to reduce the amount of time that it takes from the first touchpoint to money in the bank. That’s going to help you so that you don’t have to go for a long time with follow-ups and things like that because it’s instant background relatedness, and you want to always shoot for that.
I’d love to hear on the comment section below how you’re thinking about developing the relationship with your own investors or with future investors. Also, Like this video and subscribe to the channel so that you don’t miss out on all the videos that we’re rolling out every week.
And take a look at the fundraising training, which is the training where we help entrepreneurs with fundraising all the way from A to Z with live Q&As, templates, agreements, a community of founders all over the world helping each other, and I think that you’ll see great value in the fundraising training. With that being said, thank you so much for watching.