Venture capitalists and angel investors typically invest in less than 1 in 100 of the companies they look at, so they spend their days saying ‘no’ to companies..
They also have to have a quick filter to decide no. They can’t waste a lot of brain cycles thinking deeply about every reject: they need to focus on the winners. So rejections come fast and furious.
Getting an introduction means the entrepreneur convinced someone other than themselves that what they do is interesting. So, from an investor perspective, it’s worth turning on a few more of those brain cycles and taking a deeper look, to see what the other person saw. As a result, investors are MUCH more likely to meet you if you approach them through an introduction, as opposed to through cold calling and emailing.
Instead of a shotgun approach, you need a targeted, personalised and strategic plan of action. So, we’ve laid out 5 things you can do to increase your chances of getting that introduction and propelling your company to success. Good luck!
Pick the right investor to approach
Even before approaching someone for an introduction, picking the right investor multiplies the chances that you’ll get it. Your ideal investor should be as excited to meet you as you are to meet them. You make this happen by finding an investor who has a history of investing in similar companies to yours, at a similar stage to yours. You need to niche down your investors exactly the way you niche down your market. Use resources like TheFunded, or AngelList to identify the right investors and then dive deeper into their particular interests through their websites, their social media profiles (Twitter in particular), and their blogs. By doing so, you immediately elevate yourself above the majority of people who bombard the investor.
Refine your introductory pitch
Put yourself in the shoes of the person making the introduction. When they refer you, their reputation is on the line, because an unproductive interaction between you and the investor could reflect poorly on them. So you need to give them the confidence that the meeting will be productive, and it makes sense for you to meet, even in the event the relationship between you and the investor doesn’t progress any further. You can do this by framing the discussion in terms of how YOU can help the investor. This means you need to have both a solid understanding of your business offering and capabilities, and an understanding of what the investor is looking for. A sample email or introductory conversation could go something like this.
“I noticed that you’re connected to Mr. Elon Gates, and I saw that he’s particularly interested in startups that combine social impact with behaviour change. Well, i’ve been working on an app that cuts household energy costs by 50% through xyz. Do you think it makes sense for us to talk?”
Notice that the tone is gentle, yet focussed. You’re not obligating your connection to do anything, but if you’ve done your homework, it’s very likely that they will help.
Leverage your existing network
Some of your most powerful resources are at your fingertips, namely your personal network. It’s shocking how often people forget to explore their existing connections, and we’ve listed a couple of ways you can leverage them.
- Use LinkedIn – To discover who can help, go to an investor’s profile and see who you have in common. If an investor is a 2nd degree connection, then great! You have a direct link to them through your connection. If the investor is a 3rd degree connection, you’ll have to make a more compelling case for why a person who’s not directly connected to you should provide that introduction, making the research phase even more important. Depending on whether your connection is a strong connection or a weak connection (ie. an acquaintance or someone you meet a few times a year), tailor your message accordingly. Never discount the power of your weak connections! There’s a significant amount of research indicating that these “weak ties” can be the most helpful as they open you up to opportunities and communities outside your regular network. So don’t hesitate to get in touch!
- Ask your lawyers and/or accountant – Under-utilised but effective resources. Both groups have a network of clients that you may be able to tap into. Since you already have a relationship, it’s much more likely that they’ll help you.
Leverage organisations, programs or networks with ties to investors
Apart from your personal network, there are numerous other entities with ties to investors. Approach them, and your task becomes much easier.
- Join an incubator program – This can be a particularly effective strategy because it does two things. First, you gain access to the network of mentors and advisors hosted by the incubator. Second, during the course of the program, you have an invaluable opportunity to showcase why you’re worth investing in. If you don’t want to join a program, you can contact the incubator to ask them if it makes sense for you to talk to the investors they deal with. Of course, as you’re approaching them without doing the program, there’s a lower chance they’ll help you.
- Approach employees of institutional investors – Institutional investors are constantly on the look-out for good deals, and you can put yourself on their radar approaching one of their employees (through LinkedIn, their website or people you know). Again, the communication should not come off as transactional, but a value-add for both parties. Your mindset should be to understand what they’re looking for, and whether your background fits their need.
Build your own network
If none of these strategies work, then it’s time to start building your own network. Twitter in particular has broken down many barriers to entry. A significant proportion of investors tweet regularly, with many having blogs. Both channels allow you to take a peek inside the mind of an investor and understand “What drives this person? What topics interest them? What types of companies do they invest in?”. These insights let you communicate with them in their language. Start engaging them by posting insightful comments on their blogs, and interesting responses to their tweets. Join their mailing lists, and email them responses to their posts.
Connecting with an investor can seem daunting, but as we’ve shown you, there are multiple approaches you can take to make it happen. Often, it’s just about leveraging resources that are already available to you, and even if they’re not, there are still many ways to get what you need.