How Best to Approach VC’s or Angel Investors


I can’t tell you how many entrepreneurs first approach investors either at the wrong time, in the wrong way or in the wrong format.  Today, we will tackle these simple to fix pitfalls.


First, let me establish what I mean by the wrong time.  It is important for you to have all the required elements in place before approaching investors.  This includes completing all the necessary research supporting your business plan (see Lesson #7 on how to write a business plan) and, if possible, having some type of “proof of concept” behind you.  Examples include a working prototype, closed customer contracts, brand name pipeline, growing traffic to the site, a proven team in place or anything else that demonstrates to the investors that the heavy lifting research is behind you, there is some initial traction for the product and a solid team is ready to begin execution of the plan.  If you don’t have these pieces of the puzzle firmly in place, wait before approaching any potential investors.

Secondly, the proper way to approach an investor is typically through a referral.  The investor is much more likely to hear your pitch (among the 200 they listen to each year) if it is being sent to them via somebody they already know and trust, someone that can vouch for you.  If possible, use LinkedIn to look for the mutual connections that can open that door for you.  Other options include asking your lawyer or accountant to provide an introduction.  If there are no mutual connections, you have no choice but to cold-call the investor, the least successful way to close a deal.  But, if that is your only option, it is important that you come across as professional, smart, enthusiastic and polished in both your information and your delivery.

As for the desired format, I typically find that investors are very busy, and are more receptive to getting an introduction via email (which you can obtain via their website or by calling their office).  Email gives them a chance to research you and your idea before committing to a phone call or an in-person meeting.  Make sure you keep a clean social networking trail on Facebook and Twitter, as they will most certainly be Googling you.  Also, make sure your LinkedIn profile is complete and compelling, as it is your online resume.

The contents of the email are the most crucial.  Remember, investors have short attention spans.  If they can’t understand your business within 30 seconds of reading, they are moving on to the next one.  You need a very short and sweetly written cover letter that summarizes your story in a few sentences (not paragraphs).  Something that gets them jazzed up.

For example, iExplore’s email could have read, “iExplore is the #1 ranked website in the rapidly growing $10BN adventure travel industry, with over 1MM visitors per month and a strategic partnership with National Geographic.  Our revenues are growing 50% per year and we are raising venture capital, which should yield you a 10x return.  See attached for more details in our executive summary.  Let me know a good time for an introductory call or meeting to discuss this further.  What does your schedule look like Friday morning?”  That’s all you really need, including a clickable link to your website so they can easily learn about your product in more detail (so make sure you have a snazzy website to backup your snazzy pitch).

Notice what that paragraph did:

  1. Described the business and its leading market position.
  2. Detailed industry size and growth.
  3. Highlighted a brand name strategic partner.
  4. Showed the business was driving revenues, and how quickly they were scaling.
  5. Wet the investor’s beak with the opportunity to make a big 10x return.

That was a lot to accomplish in 2 sentences.  The paragraph also closes (as it always should) with a clear call to action on the part of the investor, which will be very easy for him or her to hit reply and say, “Friday at 9am looks fine.”

Now that the cover letter is solid, follow the above link to Lesson #7 and prepare a 1-2 page executive summary (with the best of the best from the bigger business plan, include management bios and 5-year forecast).  That’s it.  Do not send them any more than this, as they will not read it at this time.  They will certainly ask for much more information during the due diligence process, which you will already have prepared with your full plan sitting in reserve.  And, worth mentioning again, graphics and charts go a lot further than text when getting your message across as quickly and effectively as possible.

You only have one chance to make a good first impression with a prospective investor.  Don’t blow it!

Reprinted by permission.

About the author: George Deeb

George Deeb is a managing partner at Red Rocket Ventures, a Chicago-based startup consulting and fundraising firm with expertise in advising Internet-related businesses. More of George’s startup lessons can be read at “101 Startup Lessons — An Entrepreneur’s Handbook.”

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