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
The Ultimate Guide To Pitch Decks
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?
Here is the content that we will cover in this post. Let’s get started.
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.
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
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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 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.
You may find interesting the video below where I cover in detail how to build a target list of investors which you may find interesting.
FULL TRANSCRIPTION OF THE VIDEO:
Hi, everyone. This is Alejandro Cremades, and today we’re going to be talking about how to build a target list of investors. Let’s face it; as an entrepreneur, when you’re raising capital, it’s all about timing. It’s all about optimizing for that time and for getting that money to the bank as fast as possible. In today’s video, we’re going to be covering what it takes and what are the different steps or phases to make it happen? So, with that being said, let’s get into it.
What is the importance of a target list? The minute that you say that you’re raising money, the clock starts to tick. If you have not been able to raise that round in three months from that time that you first said that you were raising money, then essentially, everyone that you’re going back to, they are going to think that everyone else rejected you, and for that reason, you’re going after them.
The importance of a target list: At the end of the day, a target list is going to give you the opportunity to reduce the amount of time that it takes from being out there to closing the round. You want to make sure that you don’t make the same mistake as all the founders do, which is they go out there; they say that they’re raising money; then, three months after, they’re still crickets.
With that being said, you really want to make sure that you understand that the people that you’re putting on that target list are people that you’re researching on websites like Crunchbase, PitchBook, or Mattermark, where essentially, they are able, or you come to the realization that those people that you’re putting on your target list are people that fit with you financing cycle, meaning if they are investing in a seed round, and you’re at a seed round, or they are investing in a Series A, and you’re at a Series A, that is supercritical.
You don’t want to go to people that are investing much later in the lifecycle of a business. Also, you want to make sure to go out to people that are investing in your location. Then, also, to people that are investing in your segment. For example, if you’re operating in healthcare, you’re not going to go to someone who is investing in fintech.
Really get people that are a fit that in their investment thesis, essentially you see a match with what you’re doing, and that is going to help you reduce the amount of time that you’re out there raising the money and doing the roadshow. So, you’ve got to be very targeted, and the more you optimize, the more that you will increase your chances, and the ROI for that essential time that you’re investing to get this to happen. Remember that your most limited resource is time. Time is not coming back, and the time that you’re out there is time that you’re not allocating to your own business for the execution.
The types of investors that you are going to add to your list is going to depend on where you’re at with your business. The types of investors that you’re going to go after are going to be the following:
- Friends and Family
- Angel Investors
- Angel Groups
- Venture Capital Firms
- Private Equity Firms
- Family Offices
- Corporate Investors
The next thing is, you want to take a look at their personality and also their vision. You want to go after people that are excited about your space, excited about your segment, and that have actively, perhaps, spoken on a press, on interviews, and things like that as to how incredible of, perhaps, market growth your segment is going to be experiencing over the course of the next few years. Go for people that have that excitement. Go for people that are already educated enough in your business or in your market so that you’re not wasting time educating someone that is a newbie. I think this will help you with reducing time.
As part of the target list, you want to also take a look at what can they do for you, and what is their network? Depending on where you’re at in the lifecycle of your business, you’re going to need different types of help, different types of networks, and you want to make sure that if you need distribution, you’re bringing investors that have access in distribution. If you need an acquisition, you’re going to be putting on that target list people that can help you with acquisitions. Maybe they know larger corporate strategics that come and buy you out.
If you need help with perhaps future rounds of financing, maybe you’re going to be putting on that target list investors that have a great network of institutional investors or angel investors. Again, you need to get clear as to what your company is going to need in the next 18-24 months and put on that target list people that can add value, and that can contribute to those 18-24 months with introductions that they bring from their network.
Next is the timeline. The last thing that you want is that you’re targeting investors – let’s say it could be funds, venture capital firms, or private equity firms – that are still in fundraising mode. You do not want to waste your time for those because essentially, they’re going to be using you as part of their fundraising efforts, and they don’t have dry powder, in this case, money, to invest in your business, and you want to optimize for time.
When you’re either doing the research or even if you have that first call with the investor, make sure that you ask them: 1) How big is their fund? 2) How much have they already allocated of their funds? Those types of questions are going to help you understand whether they are ready at this point and time to invest in your business or not. If they’re not, then you move on to the next investor.
As part of that list that you’re going to be putting together, you want to have their social media handles so that you can quickly scan and go on Twitter or on LinkedIn to see what they’re tweeting about or what groups they’re part of. You also want to have their email address, the type of investments that they’re doing. Those are different things that you’re going to have in that CRM that you’re going to be building with that key information that is going to help you to act fast on that information.
The next thing is to continue building on top of it. Like, tools that I was mentioning that you can use online like Crunchbase, but then also, there are great offline tools, like if you’re part of a startup accelerator program, they can help you. If you’re part of a group within your university, perhaps the business school side of things where they have all types of groups around this. Maybe you can help them to bring additional leads and additional connections. Those are all different ways that you can combine into that CRM to make it super powerful and to get out there and make it happen.
With that being said, hopefully, you liked this video, and if that was the case, make sure that you hit the Like button. Also, leave a comment and let me know what you’re up to. Then, as well, subscribe to the channel so that you don’t miss out on all the videos that we’re rolling out every week.
Then, check out the fundraising training, which is the program where we help founders every step of the way in the fundraising journey. There, you’re going to find live Q&A sessions, agreements, templates, and a community of founders all over the world helping each other. I think that you will find tremendous value in it. Thank you so much for watching.