Creating and Managing Your Investor Pipeline
By Joyce Chen
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Finding investors is a big task, but it doesn’t have to feel like one. Breaking down your investor pipeline into pieces can make it less overwhelming and more manageable. We’ve broken things down and created an investor pipeline template to help you stay organized as you start compiling your prospects and reaching out to dozens (yes, dozens) of potential investors.
As a quick note, before you get started on building your investor pipeline, you’re going to hear a lot of no’s, and that’s okay! Realistically, many investors will turn you down, and many more will ignore you. Getting the right investor takes time, patience, and a little bit of luck. To maximize your chance of success, do your research first and be thoughtful about who you’re reaching out to.
If you’re not sure what type of investor you’re looking for yet, check out our article Introduction to Funding Types to learn more about the different types of funding available to startups. In general, the three main types of investors that you’ll be reaching out to individually are angel investors, venture capitalists, and friends & family.
To filter potential investors, consider these different factors:
Most investors will have a specific industry or vertical that they like to invest in, usually in relation to their own areas of expertise or passions, since knowledge of the existing landscape helps them to make smart investment decisions. Finding an investor with a background in your industry is beneficial to you too, since they can give you valuable advice and help you navigate the waters. Aside from general industry, it can also be useful to take a look at the market and type of product/service the investor is interested in, such as consumer products or cloud-based services for enterprises.
The stage of your startup can be a key indicator of your investment risk, as later stage startups typically have more traction to back up their claims. Some investors are more prepared to take risks than others, so look into the investor’s current portfolio to see which funding round or at which stage of a startup they tend to invest in.
Some investors like to invest locally, and some investors like to invest globally. Find out where the investor is located and where they like to invest in. An added benefit of local investors is that you can meet and pitch to them in person more easily, but it’s not always necessary.
Typical Funding Size/Total Fund Size
Researching an investor’s typical funding size and total fund size can help you better understand if they are the right investor for you. Bigger is not always better here. If you’d like a closer and more involved relationship with your investor, it may actually be better to search for smaller total fund sizes, so their attention isn’t diluted with other companies. Understanding the typical funding size can also help you to better hone your pitch for a reasonable ask.
Startup Tip: Most venture capital firms will post their team members’ contact information on their websites so you know who to reach out to. However, if you can’t find specific contacts from a firm you’re interested in or don’t know where to start, use LinkedIn’s advanced search function with keywords like your industry, “venture capital,” or “angel investor.”
Having a mutual connection between you and a potential investor is the best way to get a foot in the door. Investors get a multitude of emails a day from founders (read: strangers) trying to catch their attention, so it’s easy to get lost in the sea. However, if you have someone who can make a warm introduction for you, your likelihood of securing a meeting with them increases dramatically.
Ask your network for any recommendations on potential investors who may be interested in what you have to offer. If you know other startups in your industry, you can ask them who some of their most helpful investors have been as a great starting point. Again, make the most of LinkedIn, checking to see if you have any mutual connections with any of the investors you’re researching. As you begin to ask for warm introductions, keep the following in mind:
Pitch to Your Connection
Make sure your connection knows what your startup is about and is a strong advocate for your work. explain to them why you think that investor would be a good fit for your company. Get them excited and personally involved in making the introduction a success for both sides!
Expertise of Your Connection
The strongest introduction happens when your connection is an expert in your industry too and can attest to your company’s work, building your credibility.
Make It Easy
A great way to maximize your chance of getting an introduction is to make it easy for your connection. Send a forwardable email that already includes the relevant information so that if they agree, all they need to do is forward it to the investor. (You can ask for the introduction separately and offer to send the forwardable email once they agree to help.)
Keep Them Updated
Once you’ve received the introduction, thank your connection and keep them updated. Don’t leave them wondering; be proactive about keeping them in the loop on how everything goes, and whether or not the introduction ends in a successful investment.
Startup Tip: If you want to create a connection with a potential investor or get a better understanding of how the investor likes to work, try looking for startups that have successfully fundraised 1-2 rounds from them. Reach out to the founders from those startups for insight and advice, and even a possible introduction later down the line.
Investor Pipeline Template
To help you stay organized as you build your list of potential investors and reach out to them, we’ve created an investor pipeline template for you. This tool is designed not only for you to manage your outreach progress, but also for keeping your co-founders or team up-to-date. Sign up for a free Passport account to access the template.
Ready to start your investor pipeline? Access our template and the entire library of fundraising best practices with a free Passport account.