How do I find a VC or Angel Investor for my startup?
1. You have a great product or idea,
2. Your test group of customers is happy,
3. You've even made a few sales.
But, in order to take your company to the next level, you need more money for product development and marketing.
You've tapped-out your network of close friends and family, and are now looking for outside, private equity investors – investors with deep pockets, but more importantly, can help build connections, open doors, and grow your business.
This question comes up all too often among the startup community.
As someone who's both built and invested in new companies, here's my 3-step recommendation to raise private equity funding by getting the attention and respect of potential angel investors and VC's.
STEP 0: BEFORE YOU BEGIN PITCHING
Avoid straight cold-calling or cold-emailing.
Private Equity investors and VC’s are incredibly busy and get dozens of pitches each week. In order to get through the door, your pitch must stand out from the competition.
A spray-and-pray cold pitch will simply land you in spam folders or on blocked caller lists.
STEP 1: DO YOUR RESEARCH
Instead of cold-calling, first, do some research on the investor.
It's reasonable to assume they would complete their own due diligence before investing in you, so why not do the same?
Find out what their main interests are, what they’re currently working on, and most importantly, what pain-points or hurdles might they be facing in their current work.
Once you’ve done a little research, you can build a basic needs profile for the prospective angel investor.
STEP 2: IS YOUR PRODUCT RELEVANT?
Next, determine if your product or service can help solve the investor’s current pain-point(s).
If your product or service is related to their current line of work, you stand a much better chance at getting noticed.
Private Equity investors typically prefer to invest in company’s/products they understand. They also prefer to work with companies which offer a product or service that is related to their own industry, experience, and core values.
This also bodes well for your success since the best type of investor is one who understands your product, can leverage their network, and open new doors.
So, focus your prospecting on investors who have preexisting knowledge and experience in your industry.
STEP 3: PROVIDE VALUE
Once you’ve established a basic needs profile for the prospective investor, and determined their suitability to your industry, again, don’t simply reach out with a cold pitch.
Instead, reach out by providing value.
Offer them a solution to a problem you know they’re likely struggling with – a solution your product can help provide.
For example, imagine you’re the developer of a new app which connects high-level, C-suit professionals, for the purpose of networking (similar to LinkedIn).
If you know your prospective investor currently sits on the board of a local charitable organization, it’s likely they are on the look-out for additional donors and fundraisers.
You now have the opportunity to approach your prospective investor with a valuable solution to their problem:
I noticed you’re in the process of raising funds for your annual charity dinner and silent auction.
My partners and I have recently developed a platform which connects high-level executives and C-suite professionals for the purpose of networking.
We’d love to help you reach your fundraising goal by providing you with some free advertising on our platform. We strongly feel this could be a great opportunity to open doors and connect with new prospective donors.
Are you free Tuesday at 10 AM for a quick call?
Thank you for your time,
If the investor agrees to speak with you, don't simply flip the conversation into an investment pitch once you're on the phone.
Instead, follow through with the value you promised to provide, then, make them come to you.
Always play the long game
If you've done a good job at providing value or a solution to their problem you’ll stand a much greater chance at converting them into an investor down the road.
If things go well, and they gain a benefit from your product, they will likely be open to a conversation about becoming an investor in your company, or at least make introductions to other potential investors.
By providing value, you also give them the opportunity to become familiar with your product, and as we know, people like to invest in things they understand.
If at the end of the day, they don’t understand your product or aren’t excited about it, they simply aren’t the optimal investor for you, and you should move on.
However, don’t just take “no” for an answer.
If a prospective investor turns you down, you can still maximize the situation and get something out of it by asking for a referral, endorsement or testimonial.
Powerful people have powerful friends - leverage this to your advantage.
Ultimately, the best private equity investors are those who absolutely love your product and want to tell everyone about it.