How to Source Your Investors


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A roadmap for how to identify, attract the attention of, and diligence the right investors for your startup.

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How to Source Your Investors

  1. 1. 1 © 2013 SoftBank Capital October 2013 How to Source Your InvestorsHow to Source Your Investors Joe Medved, PartnerJoe Medved, Partner @joevc@joevc
  2. 2. 2 © 2013 SoftBank Capital SoftBank CapitalSoftBank Capital #1 VC for Exits and Seeds with Follow-Ons in New York* *Over past 5 years per CB Insights Making early and growth stage investments in companies that connect people, devices and the world Recent Exit Highlights by by by by
  3. 3. 3 © 2013 SoftBank Capital Picking Your Investors is Like Marriage*Picking Your Investors is Like Marriage* *Except there can be a unilateral divorce clause, and it’s not in the favor of entrepreneurs, so avoid a shotgun wedding
  4. 4. 4 © 2013 SoftBank Capital How Much Do You Need?How Much Do You Need? [Insert small pile and large pile of money image, or scale with small and large]  Optimally you will raise enough cash for 12-18 months of runway  You’ll need to be out raising 3-6 months before your next round  “Raise as little as necessary!” / “Raise as much as you can!”  Raise enough to get you to the next value creation hurdles  If you’re raising at a high market price, raise for a longer runway  Target 20-30% max dilution on your first round. You’re likely getting 20% or more dilution every round.  Quality investors understand big companies are built with large teams that should retain a significant portion of equity.
  5. 5. 5 © 2013 SoftBank Capital Typical ranges by type: Which Type of Investor?Which Type of Investor? Customers – Don’t raise! Friends & Family < $250K Traditional VCs $1M+ Seed Funds $250K-$2M Angels < $500K
  6. 6. 6 © 2013 SoftBank Capital Where Do You NeedWhere Do You Need Help?Help? Consider the collective skillset of the individuals and funds that you would like to bring together for the round syndicate  Product, Technology, Recruiting, Sales, Business Development, Distribution, Manufacturing, Market Validation…
  7. 7. 7 © 2013 SoftBank Capital Frequent Communication Batphone How Much Help Do You Want?How Much Help Do You Want? Consider the desired level of engagement from both sides.
  8. 8. 8 © 2013 SoftBank Capital How Do You Get Their Attention?How Do You Get Their Attention?  Referral, referrals, referrals  Rise above their filters and inbox overload with mutual, trusted connections  Leverage their portfolio companies & your customers, partners or advisors  Networking  Meet them at conferences, community events, narrowly focused meetups, coworking spaces, alumni gatherings and office hours  Start your own events bringing together influencers to demonstrate your ability to connect with potential customers and partners Active investors see hundreds if not thousands of pitches annually.
  9. 9. 9 © 2013 SoftBank Capital How Do You Get Their Attention?How Do You Get Their Attention?  Engage online – many investors are active bloggers and tweeters  Engage in conversation with them through their online presence, sharing links with info about your company and product  Build up your own social profile to demonstrate your influence and knowledge  New alternatives like AngelList, with its valuable investor data & access  Build your social proof with investor & advisor endorsements, or presales  Apply to an accelerator or similar startup program
  10. 10. 10 © 2013 SoftBank Capital Hook Them With A Simple PitchHook Them With A Simple Pitch Best Practices  Share demos or mockups, plus KPI trends if you’ve launched  Hand wrap an email that a mutual contact can forward with this info plus a paragraph pitch  There’s less spam on Twitter and LinkedIn. Send an @message or connection request with a few words on your product/service and a link to learn more.  Give a brief pitch at a conference or meetup and ask if you can send additional info. Land a full meeting. Worst Practices  Put together a long, text heavy business plan that requires more than a few minutes of reading to get your value prop across  Cold call or email an investor through their general fund number or inbox  Deliver a message that just says you have an amazing business you would like to speak to them about  Walk up to a speaker at a very busy conference and give your full pitch.
  11. 11. 11 © 2013 SoftBank Capital You’ve Got a Meeting, Now What?You’ve Got a Meeting, Now What?  Just like a sales pitch, go into your first meeting with in depth knowledge of the investor’s interests and needs  How do you fit within their investment thesis?  Who else do you know in their network that you can reference?  Have explicit reasons why they are a match as an investor  Post the meeting, send the pitch deck you just gave with a brief summary that can easily be forwarded to other decision makers  Make the ask  What is the next step in their process?  What other information can you provide?  When should you expect to hear back from them? If you don’t hear back, send a polite follow up to stay high on their priority list.
  12. 12. 12 © 2013 SoftBank Capital Diligence, It’s For Entrepreneurs ToDiligence, It’s For Entrepreneurs To  References!!! Speak to entrepreneurs the investor has backed before, including those who have crushed it or been crushed  Is their healthy engagement with the investor? And their team?  Where can they help & what types of board members complement them?  Leverage their network for customer references  On top of your existing customer references, ask to pitch your business to potential customers in their network  Follow on investments  If they’ll follow on, how frequently do they?  How much would they reserve?  If you’re working with a fund, what is their capital health?  What percentage of their fund is invested and reserved?  If they are raising soon, is your individual lead in good standing? Never take money without running diligence on the investment partner and their firm when applicable
  13. 13. 13 © 2013 SoftBank Capital What if None of This Works?What if None of This Works?  What are the proof points you were lacking?  Ask investors for specific reasons as to why they passed – team, market, product, stage, etc.?  Determine if you can bootstrap to get to those thresholds  Could you provide services for a customer that could help subsidize the growth of your product?  You need a scalable solution long term, but services work can get you there  If all else fails, can you join another startup in your area of interest to gain the experience required to build your own company long term?  The key to most early stage investments is the team  Make your own bet on a promising startup and help it grow to demonstrate the potential to run your own
  14. 14. 14 © 2013 SoftBank Capital Joe Medved, PartnerJoe Medved, Partner @joevc@joevc