Are you at the point where you are thinking about fundraising and wondering how to create a target list of investors?
There are endless investors, capital, and financing sources out there right now. Startup fundraising can be a full-time job at the best of times. So, how do you narrow that down? Who should be on your list to pitch?
The Importance Of An Investor Target List
Success as a founder and startup is all about focus and efficiency. This is especially true for raising funding. You also need incredibly good time management.
You may still need to speak with 200 or 300 investors to get a couple of yeses. Being targeted will help make sure it isn’t 1,000s, across many months and meetings with each of them.
So, a target list saves an enormous amount of time and money. It also preserves your energy for presenting to the best investors. You don’t want to be burned out and blow it.
This also aids in being sure you are connecting with the investors which really fit best for right now, getting to the next milestone and creating a sustainable business. Not to mention ensuring a far more enjoyable ride.
So, how do you filter this target list of investors?
Why Are You Raising Money?
As Simon Sinek says, always start with the why. Be very clear on why you are raising this round, why you are doing it now, and what it should do for you, the world, and your investors.
Know this, and everything else will fall into place more easily.
When wondering how to create a target list of investors, make sure this is included clearly on your materials. In this regard, you are going to need a powerful pitch deck to get people excited.
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.
ACCESS THE PITCH DECK TEMPLATE
What Are Your Values & Who Shares Them?
When you get to the point of thinking about how to create a target list of investors know your values. Knowing them, owning them, and building them into the DNA of your company will make all the difference in whether you are proud of how this turns out or not. That can be far more important than money.
There is a lot of focus on building values into company culture today. Especially with employees. Know this, the culture and values actually start with your investors. They will drive much of this, and how well you can actually work within the boundaries of your values or not.
Short list investors who share those values.
Vision & Mission
Vision and mission are a part of this too. They don’t just need to be onboard with doing things well and ethically. You want them headed in the same direction and to be heavy believers in your mission. This will make pitching far easier and result in much higher conversion rates. They will already want to help you. You won’t have to sell them on the idea. It is just a matter of how much capital they will commit.
Type Of Business
Investors either favor or dislike various types of businesses and business models. These trends change over time too. So, are they into marketplace businesses, hardware, SaaS, or the next generation of that? Are they still in love with freemium businesses or are now only looking for cash flowing and profitable businesses with a certain profit margin cushion?
Who Has The Money?
The first question when you are thinking about how to create a target list of investors is who has the liquid capital to invest right now? Who will be well served by investing their money with you?
More importantly, who is actively investing and looking for more investments to make? Your job will be much easier if they already have a sense of urgency about putting money to work.
This changes a lot over time too.
Who Has This Type Of Money?
- Which investors are excited about and want to deploy capital for a startup at this stage? Which investors like writing the size of the check you are looking for?
- Which investors like to invest in the types of things you want to spend these funds on?
- Is this patient or short term capital?
- Are they comfortable weathering the storm with you, or are they going to panic tomorrow?
What Other Value Will They Bring To The Table?
Right now you may only be focused on getting money in the bank to make payroll. It happens. Be careful. This is going to be a long marriage.
If you are going to raise money from angel investors or Venture Capital firms and give up equity and take on this risk, get as much value as you can. This goes well beyond valuations and terms.
Who has experience in areas where you have needs? Do they have industry experience? Maybe an operational experience that you may lack? Knowledge of foreign markets and scaling at a specific range?
What resources can they offer? Do they have teams at your disposal? Space to use? What about connections for distribution?
How will this investor elevate your brand to improve your ability to attract the best talent to hire?
Who Will Be A Positive Pick For Your Reputation?
Keep in mind when wondering how to create a target list of investors that who you put on your board and have invested in your company will directly impact who you can raise from in the future and the partners and clients you can attract.
Is it going to make others run, or draw them to you?
Are they respected in your space, and will instantly add a lot of credibility and visibility for your company?
Hopefully, this provided some perspective around how to create a target list of investors. Creating a target list of investors to pitch is very important. Use this list to make your shortlist, and filter out incoming offers.
Then ask who you know that matches this profile. Or who do you know that knows them?
Fundraising relies a lot on network and relationships. If you don’t have them, find a way to hack them through a good fundraising advisor. Also I cover in detail how to find investors on the video below which you may find interesting.