Why You Need An Investor Acquisition Strategy
So, you’ve started a business. And it is going great. You have a strong offering, proven business model, and a strategy and team that can grow it. But you need capital to get you through to the next milestone. Now what do you do?
I have at least one meeting a week in which a founder asks me how they should go about raising capital. And like a good coach, I ask them what steps they have already taken and where they think they should go next.
For many, they have done all the right things by tapping into their networks, their schools, their local chambers, etc. When that doesn’t work, they turn to a buckshot type approach that floods the field in the hopes that some lower-level associate will pass along their deck to the right people. And when this doesn’t work, they feel stuck.
And then I share the good and bad news – there is capital out there (yes, even this year) held by hundreds of groups, syndicates, and funds small and large.
So how do you sift through all of this to find the few who are really interested in you and for whom you can offer value?
You treat them like customers.
Consider this. You have something of value for customers that you want them to pay for. When targeting your customers, you do your market research. You identify the segments, their motivations, their needs, and build marketing and sales strategies that find them where they are and speak to them in their language. You wouldn’t just blast your messaging into the universe and hope that it hits the right customers. So why would you do it for investors?
Instead, build your Investor Acquisition Strategy starting with these simple steps. [While this list appears linear, it really is a cycle that you will iterate on as you learn.]
Identify Investor Segments
You can slice and dice these segments any number of ways. Keep it simple and organize it based on what tools work for you.
Investor traits: Not just stage and size but their mission, industry or technology focus, locations, etc. Add to these your:
Team’s traits: Check every connection you and your team have to schools, specific demographics you represent, and obviously friends and family connections.
Note: Don’t overlook non-dilutive and traditional funding sources. Sometimes bank or small business loans are the cheapest money you can get.
Understand their Needs and Motivations
This takes it to the next level and will help you prioritize and filter and be more specific about your value prop.
Dive deeper into each segment’s motivations and priorities. Consider creating personas for some or all of your segments to further decompose and define each segment. For example: Many small VC funds might have similar investor traits, but their goals and how they engage with companies could be vastly different.
Develop Value Propositions
Just like with your customers, you will have more than one value proposition for investors depending on their motivations for buying (or in the case investing).
Be clear about the benefits you bring to the table. It’s about them, not you and your innovation. Show them how you can not only make them money, but also support their goals and strategies.
Tailor your messaging to suit each segment and persona.
Build the Specific Funnel
Or if the "funnel is dead" to you – use whatever tools you prefer but the key is to start putting actual names on paper.
Start with what you know. Begin with your local area and first-degree connections. Now that you know what you are looking for, you can be very specific in your asks. Tap into your Dormant Ties.
Prioritize but quickly and strategically expand. Some segments will be much stronger in certain regions, some investors can help you gain access to other opportunities.
Research their existing portfolios to find alignment and where you might fill a gap.
Find the ‘In’
I like an 80/20 approach to the actual outreach. 80% of your energy is on your priority investors and 20% of your energy can be on some outliers and long shots.
Get warm intros. Some groups have office hours or events during which you can make a connection. Every conversation you have with someone should end with , “Who else do you think I should talk to?”.
Timing is key. Every investor has their own battle rhythm. Know when to submit your material for the best chance to be on their schedule (or considered for the next round or fund).
Make the Pitch
This is a whole other blog – stay tuned! Hopefully you are funded, but even if these investors pass, you should...
Stay in touch
All business is a relationship business. Many ‘no’s’ are really, ‘not yet's’. You might not be right for each other today but stay connected for future opportunities.
Be a good connection. Now that you understand them, be a source of other possible investments by making referrals.
Send updates. Just because they didn’t invest doesn’t mean they don’t want to see you succeed. Send them an update on the progress and traction you are having.
I know this is just a short primer for what is a complex and difficult topic, but I hope that it might help you get unstuck or see your situation in a different light.
As you grow your business, please keep in mind the importance of strong and trusted relationships. An investor relationship can last for 10 years and will be a critical part of your success. Choose those who can provide more than just a check. And sadly, every part of life has its bad actors so vet everyone as much as you can.
And if you need help getting your Investor Acqusition Strategy off the ground, please connect.