Fundraising is a nightmare for most founders, but it can be a lifetime experience to cherish upon and learn so many new aspects of growing a startup when you have a proper investor outreach strategy to raise funds for your startup. When you know things strategically, you've better chances of maximising the results and getting the capital that your business needs. A proper framework involves an effective process to plan, reach out, track and learn during fundraising.
Make a list of potential investors.
You must have a list of investors that you think could potentially invest or add strategic value to your startup. Certain investors are industry-focused, and having an idea of their preferences could be meaningful to you and save time. Also, depending on the stage that you are in, the list of investors likely to invest would alter.
At the same time, it's only worthwhile chasing investors that have not invested in similar or competing companies. There are exceptions to this case like SoftBank, when they were trying to dominate the global ride-sharing industry by investing in competing startups. Well, that's a different story and is an exception, not the norm. Also, please look into the investor's critical focus areas, be it diversity, community, sustainability, etc.
Once you have such target lists, you'll find it much easier to convey your value proposition to the investors rather than shooting aimlessly in the sky with the hope of hitting the stars.
Understand the fundraising landscape
The founders must have an idea of the present fundraising landscape and thereby should have realistic expectations. Certain times specific sectors become the investor's favourite, and you'll see much money poured into them. For example, during the Covid-19 pandemic, we witnessed the immense growth of ed-tech startups and how investors oversubscribed these startup's rounds even when these young companies had struggling finances. The VCs and other angel investors bet on how ed-tech could be the new norm and everyday reality for students across the globe.
However, in the post-pandemic era, the Indian startup ecosystem saw how many flashy startups failed to close more rounds and how most were advised to focus on profitability rather than growth at all costs mentality. Hence, it has become slightly more difficult for the new ed-tech startups to gain funds. Similarly, understanding the fundraising landscape will save time and make your communications more effective.
At the same time, you need to understand the trends, types of terms that are common, the major players in your industry, and which type of investors are more likely to participate in your round(VCs, angels, corporate investors, accelerators, private equity, and more).
Have an executive summary and pitch deck ready for better communications
Your executive summary should include a brief description of the burning problem or the industry gap you are solving and how your solution can be a game changer. VCs and angel investors care about your startup's potential in the next 10 to 15 years and are in it for the long game. Hence, the founder's background and motivation to solve this problem become the real deal here.
Your summary must also include the team, revenue, how far you've come, revenue forecasts, funding requests and the big vision you hold for your startup.
The pitch deck is an enhanced version of your executive summary in which you would include your revenue model, business and marketing plan, road map, competitive advantage, usage of cash, any additional requests, and specifics about your product or service.
Also, when you have a well-planned email template in access, you'll find it much relieving when you'll need to send quick introductions to your potential investors. Making an introductory email about you and your company might be an excellent idea. Use this while introducing yourself to someone or passing it along when asking for an introduction.
Start Investor Outreach Campaign with our proven framework
Foundraisr team has helped several startups close meetings and funding rounds with a unique framework. First, create a new email with the founder’s name in domain and warm up this email for 1-2 weeks. The goal of email warm-up is to establish a solid reputation. ESPs like Gmail and Outlook will examine a sender's reputation before allowing the email to land in the recipient's inbox to ensure their users enjoy the best possible experience.
Now is the time to send hyper-personalised emails to the super relevant investor list with a max of 20 each day to ensure that you have a focus on quality and not quantity.
As you would be sending your pitch deck for the investors' reference, it is a good practice to upload the pitch deck on DocSend to monitor reading stats.
The purpose of this email must not be to put the investor into a zone of resistance(ZOR) by directly asking them for the funds; instead, you could use this opportunity to intrigue the interest of these prospects. It could be an excellent time to explain that with this cold email, you are simply trying to build a relationship and present your startup. In the call to action, you could ask for their permission to reach back again to them when you are raising funds to see if they are interested.
This practice works because you ask for the recipient's permission beforehand rather than directly sending them the pitch deck to ask for their funds. You could aim to get in around 20-50 opt-ins, and once you have interested potential investors, you must send them regular updates to be on top of their minds.
It would be helpful for you to remember that these investors are super busy, and many founders like you would be pitching to them almost daily. Hence, following up and keeping them updated would help you stand out in the crowd and get the attention of these investors at the right time.
Ensure that you regularly follow up with the potential investors
You must have a follow-up system in place and regularly be in touch with the investors who have opted-in for your company updates. As you are running this investor outreach process months before the actual fundraising, there is a significant probability that you could sell on most of these investors with your progress and ability to turn the tables around.
You also want to avoid spamming their inboxes by sending emails too often. Instead, plan for a monthly newsletter to discuss the product and feature updates, the present monthly recurring revenue(MRR) as compared to the last month and how users love your product. It is an excellent strategy to share your milestones, success, and other crucial metrics that could intrigue curiosity in the minds of these potential investors.
Track and Evaluate Your Performance
Being a founder means you wear multiple hats simultaneously, and with the number of challenges you have in the early days, you have to be practical and strategic in all your processes. Hence, it is necessary to have a system in place to manage all the contacts and progress that you have made. Also, you could run A/B campaigns for your email outreach and tweak pitch decks to see which version performs the best.
No matter how you decide to face the challenges, it is essential to have a CRM to manage the entries effectively and have the right system in place.
How to craft a strategic investor relations strategy?
A thoughtful and strategic investor relations strategy could be a game changer for your business, as it could help you elevate your company profile, have the right connections and enhance your overall credibility as a founder and your business.
Have a clear and compelling story, as nailing storytelling helps to relate and sell the vision. Your exciting story needs to be about the long-term goals involving the broader industry landscape and showcasing how your startup has the potential to be the industry leader. Your story should cover the burning problem you're trying to solve and why now is the right time to have the competitive edge.
Set a roadmap on how you would meet new investors or other key players
The investor relations strategy needs to be well planned and researched so that you have a clear set of actions to meet the fundamental analysts or investors and keep them engaged, including those already connected with your business and the others you want by your side. Conferences, on-site visits, conducting investor days, etc., are some ways to meet these key players formally, get their attention, and ask for an opt-in to follow up later.
Once you have started a conversation, most of these elites would rely on the internet, specifically your website, to know more about your business, team, product, and vision. Hence, it's vital that you have a proper and detailed website to win the first impression.
You could also opt for independent perception audits from analysts and former, current, or potential investors to get candid views from these experienced elites.
Deliver what you promise and be transparent with your investors
As a startup, it's crucial that you manage your reputation in the industry, and when you overdeliver, you get respect from and among the investors.
Be in touch with the current and potential investors about your essential milestones and ensure they know your victories to have confidence. If you miss the projections or feel that you won't deliver as expected, then it's time to be transparent with the investors and peers with genuine reasons to showcase your authenticity.
