How to respond to investor emails? As a startup founder, what’s the right way to respond to investor emails?
For many, reaching out and connecting with investors appears to be the big hurdle. That takes up a lot of focus. Then what do you do once you actually get investors responding to you? What should you not do? How do you achieve the optimal outcome from these opportunities?
The Ultimate Guide To Pitch Decks
When Investors Email You
There are several scenarios in which investors may email you, call you, or reach out via LinkedIn.
After Your Pitch
One of the most exciting moments to get a message from investors is after you’ve delivered a pitch. That could be during a competition, pitch night event, appearing on a TV show, or something similar.
They’ve already seen your pitch deck and heard your verbal pitch. They are most likely to be interested in talking about moving the ball forward. Regardless of the reason that they did not take action when you delivered your pitch.
What you want is a term sheet in your inbox. At least as a starting point for discussions and negotiations. As well as to know they are truly serious about funding you.
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After Your Pitch Deck Submission
If you were running a cold outbound process, you probably blasted out links to your pitch deck hosted in Google Drive. This may have been via cold emails, Tweets, LinkedIn, or through VC firm websites, or competition websites.
Inbound emails you get at this stage are most likely to request more information. At this point, you should already have your virtual data room fully loaded and organized. Though, as we’ll address in a moment, this is a good time to switch the conversation around and begin more thoroughly screening them as a match first.
Unsolicited Inbound Investor Inquiries
If you’ve been making notable progress in building your business, and have made the right noise about it in the right circles on or offline, you are going to get on the radar of various investors.
Having them seek you out to try and sell you on taking their money is a good position to be in. The dynamics of negotiations can definitely be on your side.
Though, again, you will want to get to know them, their motivations, and intentions before rushing to take the money. This is why you should know how to respond to investor emails.
Keep in mind that in fundraising, storytelling is everything. In this regard, for a winning pitch deck to help you here, 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.
Screening Investors & Investor Interest
New, novice entrepreneurs are often intimidated by pitching investors, and feel there is a substantial amount of pressure and burden on them to please investors.
While you certainly have to learn to present and sell your company and the investment opportunity well and know how to put together an effective pitch deck, it is far more important for you to be vetting your potential financial partners.
In fact, you should be screening them even harder than they are evaluating you. You have a lot more to lose. They mostly just have some money on the line. A small part of one fund, which typically isn’t their own money either.
Your whole venture, mission, vision, and life purpose can be on the line here. Who you let into your business will greatly influence the decision made from here on out. What gets done, when, and how it is done.
You want to make sure that they are right for your business.
Is This Someone You Would Enjoy Working With For The Next 10+ Years?
While it is possible that you will enjoy a much earlier exit, or leave your company to go do something else sooner, any decision to launch a startup or enter a business relationship should be done with the expectation of working together for at least the next 10 years.
Note that according to Weinman Family Law in 2022, the average marriage in the US only lasted around seven to eight years.
Meaning you have to be even more certain you want to be committed and locked into this relationship than with a spouse. It can be a whole lot harder to divorce and separate from your business and financial partners too.
Don’t just pay attention to the big brand name of a venture capital firm or bank. Know exactly who will be on your board and will be involved in your business, and your direct contact on a monthly basis.
You need to enjoy working with them, not just be able to tolerate them. As some like Peter Theil have put it, you want people onboard that you can just enjoy having a beer with.
This can take time to figure out. Just like dating. It can take meetings over a long period of time, in different settings to really get a handle on this.
Everyone puts on their best game on a first date. What about the second, or tenth? So, take the time to understand how to respond to investor emails.
What Is Their Reputation?
What is this investor’s reputation?
Do they have a reputation for having invested in some really big success stories? Have they invested in some really terrible businesses that you wouldn’t want to be associated with?
Interviewing other founders and entrepreneurs that they’ve engaged with or invested in, what do they say about them? Try to get as a complete picture of the cycle as you can.
Everyone is going to rave about them right after they put a huge amount of capital in their bank account. Though what was the process of getting from the term sheet to closing like?
How did things change or not after they became embedded in the business? What were they like when times were tough, and growth was slow? How do they deal with exits?
Is this an investor that will continue to participate with more capital in future rounds? Or is this the limit of their help?
What additional value have they really brought to the table for others like you? Every investor is going to sell themselves and have their own sales pitches. How have they lived up to that?
Ask What Is Their Thesis
Why are they interested in investing in your business?
What is their strategy or thesis? What are their ideas for your company? Are they in line with your roadmap and values?
What is their timeline?
What insights are they pointing out about your business, and what it should be doing?
Does this all add up with the other data you have collected on this investor?
Why Are They The Best Choice?
The most famous VCs and celebrity angel investors are bombarded with pitches and funding requests. There are also numerous new investment funds that are competing for deal flow.
Why should you choose them? What is the advantage to you of choosing their term sheet over their competition?
How will this specifically help you in approaching your next round of funding, as well as in the long-term vision of your company?
Just sit back and listen intentionally. What they say and ask will tell you a lot about their real intentions.
Are they just trying to get info on your company? Are they looking for a takeover situation? Or are they serious about building your company into an amazing success with you? Knowing how to respond to investor emails will ensure that you get these questions answered.
What Not To Do
What are some of the things you don’t want to do when it comes to responding to investor emails?
Don’t Jump At The First Offer
Don’t just commit to the first offer you get or an investor’s first term sheet. Everything is negotiable. You may be able to turn that first offer into a bidding competition, and many more great offers.
Don’t Fall Over Backwards To Accommodate Them
You don’t want to be overly eager. They will be able to smell your desperation. The best time to raise money is when you don’t really need it.
Be respectful and mind their time, but don’t expend all of your resources on pleasing them. Especially not at the cost of your business, when you don’t even know if you have a deal that is going to close yet.
So, don’t put your customers and sales on hold to jump on the next flight for thousands of dollars across the country for just a preliminary meeting.
It’s okay to work them into your schedule, and not sacrifice your family to go meet a potential investor on your kid’s birthday, or when your wife is in labor in the hospital.
Knowing how to craft emails to investors and communicate effectively with them is just one facet of founding startups. If you need more information about the qualities of highly successful entrepreneurs, check out this video I have created. Use this guide to hone your skills to build a profitable, growth-oriented business.
Don’t Make An Immediate Decision Or Indication Of A Decision
If you already have cofounders, other investors, board members, and shareholders, you may not even have the authority to make this decision by yourself.
Saying that you’ll take this to them is a good way to avoid rushing into a decision or inferior terms. As well as a potential legal responsibility you may have.
Investors may also have their own requirements for how many of your shareholders agree to the deal.
Don’t Waste The Opportunity
Even though a lot of the above is about not rushing too fast, don’t waste the opportunity either.
You have a lot of competition seeking the same money. You don’t want to lose that capital or investor ally to a direct competitor.
Especially if they would be an important ally, or the capital markets may change to being less friendly soon. So, one of the first things you should learn is how to respond to investor emails.
Handling Requests For More Information
Before sending out any pitches or pitch decks, you should already be prepared to run the entire process. Especially when it comes to due diligence, and providing more detail to those who need it.
One of the most key parts of this (aside from having your contracts, corporate documents, and financials in order) is to have your virtual data room loaded and organized.
You may have two levels of this. One for those who want more general details, like your business plans, product roadmap, and latest data.
Then a more comprehensive level of access for those ready to dive into real due diligence and make a real transaction happen.
This should only be reserved for those investors you really know that you want to get into a relationship with, and will have more sensitive internal information that you don’t want to be general public knowledge.
It is wise to use a data room solution that allows you to track access and usage, and revoke it as prudent.
When it comes to investor meeting requests to follow up on your pitch deck, consider which setting is most beneficial for you.
Is it a better use of your resources to have them come to you? Are you going to present stronger on your own turf, in your own environment?
Or are there more advantages of going to see them in their office, and getting a better feel for what they are really like?
Get Expert Advisors Involved
You should also have your advisors teed up for this as well. Those you will lean on for advice and guidance through negotiating this transaction.
Or even those that will run the process for you, so that you get the best deal, and can focus more of your own energy on continuing to run your business.
For all of these investors, you can put them on your investor update list. Keep them in the loop, so they see the progress you make, and what they are missing out on. It will help motivate them to act in this round, and to be first in for future fundraising rounds.
Don’t forget to ask for referrals. Who else do they know that may be a good fit to invest in this round? Keep this information in mind when learning how to respond to investor emails.
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