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How to Start Fundraising Without Asking For Money

fundraising pre-revenue Mar 06, 2019

If you’re reaching out to investors only when you need their money, you’re reaching out too late. Here’s how to start building relationships with investors before you need them.

Every founder I know lives and breathes traction. They obsess over their startup day and night, hunting for every growth tactic they can find. The assumption is that if they can grow enough, they will be able to raise that next round of funding.

In reality, it’s a little more complicated. The number of startups is increasing much faster than the number of investors. Over the last couple of years, less than 10% of seed-funded companies received Series-A follow-on. Even if you have loads of traction, there are hundreds of other companies with better metrics pitching the same investors.

So, how do you stand out from the crowd?

Build relationships earlier

As an investor, I learned that there are really only two reasons to invest in a startup. The first is demonstrable traction; I’m going to be interested in revenues or growth that beat anything else I’m looking at.

The second reason is when I’ve known the founders for a long time, I trust them, and they occupy the position of ‘terrifyingly talented’ in my head.

And one day, it suddenly dawned on me: why don’t founders build better relationships with investors earlier? If you’re looking for money, any relationship-building activities look very self-serving, but if you don’tcurrently need their cash, now might be the perfect time to start building those relationships.

How to start a relationship with an investor

Building relationships with investors before you need something from them requires you to think like a marketer. What are the individual needs of the investors with whom you want to build relationships? And how can you position yourself as someone who can help them?

Here’s one approach that illustrates the point. However, there’s one huge caveat: if you aren’t ready to build and maintain relationships with investors, the following practice could effectively destroy your chances of ever getting funding — so proceed with caution!

1. Build your target list of investors

There are loads of places you can find relevant investors. My favourite approach is to use Google to find collaborative spreadsheets like this one from Techstars Europe. If you’re approaching funds, visit the websites and look for specific people for whom you can add the most value. You might that associates are a good option to reach out to since they tend to be easier to access than the partners.

2. Find out how you can help them

Before connecting, you need to have something of genuine value for investors. Do you have access to valuable information they don’t? Do you have deep expertise in an area they invest regularly in? Would they be interested in receiving your short and informative monthly company update, with confidential data and insights?

3. Get in touch

If you have a mutual connection, ask for an introduction. If not, you need to craft an irresistible intro email. It needs to be short, clear and straight-to-the-point. Whatever your spin is, make it something they can easily say ‘yes’ to. Never send bulk emails since this will instantly position you as spam and damage your reputation.

4. Follow-up regularly

This is the magic sauce. If you want to build a long-lasting relationship, just follow up. I won’t bore you with the psychological reasons why this works, but it really does. Remember to keep thinking like a marketer. Keep it short and relevant and make it about the investor. Choose your words carefully so that you’re perceived as someone who’s going places.

5. Be patient

Relationships take time and investment. If you follow up consistently for six months to a year, eventually investors will remember you. Maybe they will invite you to one of their events. Maybe you can provide input into one of their other deals. Relationships are hard to predict but they usually pay off over the long term.

Playing With Fire

If you’re too aggressive, you’ll put investors off. If your content is poorly written, or irrelevant, you’ll be seen as boring or useless. If you can’t execute, it will shine through. I’m absolutely not recommending this for every founder.

But if there’s one thing you take away from this article make it this: follow up. Speaking as an entrepreneur and investor, I think it’s a shame when founders don’t follow up after a meeting — I like knowing what happens next.

 

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