Every entrepreneur who is raising capital has imagined the scenario of meeting and pitching an investor in person. Whether this is an informal coffee meeting or a full-on presentation in the board room, these meetings don’t magically happen. Getting the “meeting” that ultimately leads to capital can be tricky, because in today’s funding world, the process is still largely driven by relationships. What if you just don’t know anyone? The relationship component makes getting a VC introduction challenging.
Put yourself in the investors’ shoes. Can you blame them for demanding a referral or introduction? The reality is, equity investors are constantly getting solicited: a dozen of pitchdecks a week, 5 or 6 phone calls a day, and lots of emails. If you’re being sold to all the time, it’s only natural to prioritize your inquiries by relying on referrals from personal network.
When an investor hands over the check, they are committed to financial risk—and they’ll be part owners of your company. Having someone vouch for you is vitally important to build trust. Plus, every investor looks for a specific funding profile, and often the criteria is not always presented clearly in the pitch. Referrals separate the wheat from the chaff.
While getting initial referrals may seem daunting, remember that it’s actually much more effective to reach out this way than soliciting potential investors cold. So really think about crafting a strategy that will get your foot in the door of the right investors.
Here are five ways you can build, expand and leverage your network to increase your chances of getting investors referrals.
1. You know more people than you think
To get a personal referral to a potential investor, start with your existing network. The good news is your existing network is likely much bigger than you realize. Step back and do an inventory of everyone you know—friends, family, neighbors, former schoolmates and coworkers, the parents of the kids on your kids’ soccer team. Whenever possible, add these people to your social networks like LinkedIn and Facebook. Proactively browse the lists of “people you may know.” Think about who might be valuable to invite out for coffee—then propose a short (30 to 60 minute) coffee date.
Once you’ve reached out to everyone you know, take a look at their networks. A great way to expand your sphere of influence is to spend time meeting and talking with people that are second degree to your immediate network.
2. Leverage social media
Social media has fundamentally changed how people interact with each other, creating a platform where strangers can become friends and profiles are the equivalent of resumes. If you want to cast the widest net when building your network, be sure to have a strong social media presence, both personally and professionally. Create profiles that accurately portray you and your company, then use these profiles to push out valuable content and participate in relevant conversations. Leveraging these tools will help build trust within your existing network and give new contacts a chance to better understand the work you’re doing and the value you bring.
3. Plug into the local community
It’s easy to get caught in the daily grind of running your business and courting potential investors. The risk is that you narrow your field of vision and influence. Try to get out whenever you can and make new face-to-face contacts. Attend local meet-ups, offer to be a mentor or volunteer at a local university, and seek out events that bring the startup community together. We often meet entrepreneurs at local events and it always surprises me how many old and new faces we see every time.
You’ll likely interact with a whole new group of people this way, and you never know when or how these new connections might lead you to the perfect investor for your company.
4. Be thoughtful when you reach out
Sometimes it can feel awkward to ask someone you don’t know well for referrals or introductions. The truth is that many people are willing to help—but you need to make it easy for them. Be specific about your goals, respectful of their time, and considerate about what’s a reasonable ask. For example, if you want to ask for an introduction, don’t send a 10-page business plan with no explanation and expect them to forward it on. Do the legwork. Be personable. Make it easy for people.
5. Reciprocate and have gratitude
Asking for favors all the time is no fun, so when networking, always think about what you can do to reciprocate. The more you can genuinely help others, the more they will be willing to help you. Remember, no one is required to help you. They do it by choice and goodwill. Expressing gratitude whenever you can is the best way to motivate the good connectors and build long-term relationships with your network.
Gearing up to fundraise?
This guide explains explains the most important components of a successful fundraising strategy and how to prepare.