When we think about investor meetings there are 4 questions we need to ask ourselves.
- When you need them
- Who do you need them with
- How to get them
- How to do them
A big mistake many first-time founders make when trying to raise money is to raise money at the right stage in their business. You can raise money at the idea stage, or when you have a prototype or users, but you only need money when you want to grow. This is a very particular decision about your company. The reason we warning you about raising money early, is the earlier you raise money, the more diluted that capital is.
Next, we will look at the different types of investors and how to approach each type.
Friends and family: Most common stage of funding of early-stage startups at the earliest stage. Only take money from them if you know they can afford to lose every single dollar they give you because there is a high chance you will lose every single dollar. If you do decide to go to them for investment, treat it like a real meeting and as if they are a proper investor. Go in with an actual pitch and understanding of what you doing. This will help train you for the next stage of raising money.
Angel Investors: Angles are rich people with a little too much time and money on their hands. They invest mostly as a sport. They are usually fairly easy to get in front of so email them or network them if they seem really busy. One thing to watch out for is angle groups. They are a group of angles that like to get together for dinner, come down hard on the founder, and then not invest. Try to do some research beforehand to find out if the investors you meeting with actually invest on a regular basis and if not it’s not a good idea to waste your time chasing them down.
Seed Funds: Slightly more professional than angles. These are usually newer but professional investors that are trying to learn the ropes. They are great and are often former founders with pretty quick processors because they know they need to move quickly, their whole job is to take meetings to email them. Cold emails are great, you just need to reach out. They are investing for a return so that they can raise their next fun so they are not interested in businesses that are going to produce a small return. They need you to return capital.
VC funds: They are the big deal in fundraising. They are professional investors with outside capital. They take meetings all day every day. They have structure. They are needing their investment to return their entire fund. So when pitching you need to give them the biggest possible outcome for your business.
Crowdfunding: A good way to raise money when you can’t think of another way to do it or you don’t want to be bothered with the time. Not a great way to raise large amounts of money
So most of these types of investors are open to receiving cold emails. Like everything, there are good ones and bad ones. A bad cold email would be when you don’t explain what you do, don’t show any interest in the investor you are emailing and what they have done in the past, and when you ask them for a large amount of time to listen to your idea. The only thing that limits investors is their time. The recipe for a good cold email is to do your research. Most investors are very happy to tweet and write blogs about things that interest them. They often communicate ideas that they have and companies that they want to see exist. You should go and research every investor that you want to talk to and a way to get in front of them with a custom introduction that is relevant to them and to you. You must tell them the stage that your company is at. You must state what exactly you do in a short sentence simple sentence.
Now as you move through meetings with investors, there are a whole bunch of meeting types that you will have to navigate.
First, there is the intro meeting: The intro meeting is fairly simple. All you need is a clear explanation of your idea. This is the elevator pitch. This is important because an investor will often come to a conclusion on what he is going to do in the first 30 seconds of the meeting. You can’t really get to ‘Yes’ in 30 seconds, but you can often get to ‘No’. having a demo is a big advantage because investors love to engage with real products and it is evidence that you are doing the things you say you are going to do. Lastly, look presentable, the first impression is everything.
Next is the follow-up meeting: follow-ups tend to dig a little more deeply into your business so you need to understand your metrics. These are either the metrics that your company currently has or the metrics that your company will have. You need to be able to explain your progress up till now. You need to be able to dig a little more deeply into your insights into why you are doing what you are doing. This is your chance to show how much you understand what you doing.
Decision meeting: this is when you need your deck. Make sure you don’t work on your deck more than you work on building your product. The deck doesn’t have to belong. The similar the deck the better. Maybe 10 slides describing your product, your team, what you going to build, and your early metrics. At this point, you need to know your top-level metrics off the top of your head and not have to open your computer to find them. The critical part of a decision meeting is you need to take where you are now and project what the biggest future actually is.
Diligence meeting: these meetings usually aren’t hard on you if you’ve done your homework ahead of time. Make sure you have your legal docs in order, your financials make sense, and your metrics dashboard.
The final step is the fancy dinner: this is the end and doesn’t always happen and even if it doesn’t what you need is money in the bank. It doesn’t matter if the investor is fancy or not or if everyone thinks he’s cool. What you need is money.
A few things to remember:
- Meetings do not equal progress. The only thing that matters is building a big company.
- Meetings are a waste of time if you don’t need them.
- The only thing that counts as a ‘yes I will invest’, is a ‘yes I will invest’ with signed documents.
- Push to close as quickly as possible.
A few things to watch out for:
- Infinite meetings. Investors that waste your time.
- Investors who are jerks and unprofessional.
- Investors who do diligence with you for one of their other portfolio companies.
- Harassment. No one should ever make u feel like you have to do anything else to get their money other than building a big company
