how to source your investors

1 © 2013 SoftBank Capital

October 2013

How to Source Your InvestorsHow to Source Your InvestorsJoe Medved, PartnerJoe Medved, Partner

@joevc@joevc


SoftBank SoftBank CapitalCapital

#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


Picking Your Investors is Like Picking Your Investors is Like Marriage*Marriage**Except there can be a unilateral divorce clause, and it’s not in

the favor of entrepreneurs, so avoid a shotgun wedding


How Much Do You How Much Do You Need?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.


Typical ranges by type:

Which Type of Which Type of Investor?Investor?

Customers – Don’t raise!

Friends & Family < $250K

Traditional VCs $1M+

Seed Funds $250K-$2M

Angels< $500K


Where Do You Need Where 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…


Frequent Communication Batphone

How Much Help Do You How Much Help Do You Want?Want?Consider the desired level of engagement from both sides.


How Do You Get Their How Do You Get Their Attention?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.


How Do You Get Their How Do You Get Their Attention?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


Hook Them With A Simple Hook Them With A Simple PitchPitch

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.


You’ve Got a Meeting, Now You’ve Got a Meeting, Now What?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.


Diligence, It’s For Diligence, It’s For Entrepreneurs ToEntrepreneurs 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


What if None of This What if None of This Works?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


Joe Medved, PartnerJoe Medved, Partnerwww.joemedved.comwww.joemedved.com

@joevc@joevc