People often quote the line “Show me the money!” but really, the more important line—the line that enables Tom Cruise’s sports agent character to show his client (played by Cuba Gooding Jr.) the money—is when Jerry begins to repeatedly say “Help me help you.” Here’s how it works.
I recently gave a talk to MBA students at Harvard Business School. The students asked how to get warmly introduced to investors. We discussed the cold emails they send to potential investors and employers. I was somewhat dismissive of those attempts—maybe more than I should have been. One student said, “when we hit you up to read our business plan or make an introduction if you barely know us, we know that’s a real imposition and we have our hands out. We just don’t have the network to do it ourselves yet!”
We all need help. In this case, my guidance was to start with what they had and, for many in that room, that meant their professor, my friend, Jeff Bussgang. They also, by a show of hands, had a few classmates who had worked at venture funds over the summer or had already accepted job offers at funds. If you have the beginnings of a network that could reach into venture, here are some tactics I hope will help to get you in front of actual investors:
1. Do Your Homework: There are many ways to identify the right investors for your startup. Look at the companies you respect, especially those that overlap with but don’t directly compete with yours. Who funded them? Review the data available at CB Insights, CrunchBase or many other places. Fund websites also provide a good sense of general investment themes. Whatever you do, don’t come to me (or any other contact) and say “I don’t even know where to begin; Which investors do you recommend?” That just makes us feel like you’re not prepared and want us to do your legwork for you…at the time you’re asking us to vouch for you with people in our network.
2. Be Focused: I received a request from a student: “Hey, I’m going to be in [city] and would like to sit down with investors. Can you make intros?” Answer: No. Why should they meet with you? About what? Have you targeted any specific funds or people and can you articulate why you want to meet with them? Is there a project on your desk or are you looking for a job or doing research? The outcome will vary greatly depending on what you’re doing. If you’re asking me to spend my personal capital to make the intro, enable me to make good decisions that won’t waste anyone’s time.
3. Keep Good Records: Sometimes when founders are focused, they’ll ask for outreach to a specific person or fund, but haven’t kept good records. In that case, I may make outreach on their behalf only to receive a reply saying “We turned him/her down a month ago.” or “I went to college with him and saw him for dinner three weeks ago, why didn’t he contact me directly?” In those instances, I look silly and so does the founder. You need to keep good records. The most effective I’ve seen are updated regularly, and specify fund name, name of person, title, dates of outreach and by whom and current status. When I peruse them, if I see them littered with misinformation, it makes me a little nervous about doing outreach because I know that enhances the odds of a reply saying “Ed, I passed on this already.” To help me help you, keep accurate records indicating who is at which fund and whether you’ve already approached a fund. If one partner at a fund has passed, you need to know that and so do I because we’ll have to have a pretty compelling reason to reach back out.
4. Competitors & Ex-spouses: When you ask for introductions, it is incumbent upon you to know whether that fund has already disclosed that it has financed a competitor. You may not have that many competitors and it should be easy enough to research who has backed them. If it isn’t disclosed, that’s fine; but if it is, you should expect that it is fair game for the investor to now be on notice (and perhaps the company will be as well) that you’re in fundraising mode. When a VC backs a company, there’s an understanding that they won’t also back a direct competitor. Sometimes companies pivot into each other (i.e., change their business strategy in a way that brings them into conflict with other portfolio companies). These conflicts are unavoidable, but absent that, definitely avoid sending your information to a fund that is presently invested in a direct competitor. I mentioned ex-spouses, because I’ve seen this come up. Don’t let someone make an intro for you to the fund at which your ex-partner works (at least not without disclosing that).
5. Up & To the Right: Founders are often encouraged to meet investors before entering the fundraising process. I agree. However, you still need to create an incentive for the investor to want to invest his or her time. That means providing enough information to convince them that you’re a compelling opportunity. While a good story is nice, some hint at metrics that are moving up and to the right (showing increased traction) is valuable here. It’s fine to be pre-customer or even pre-product, but in order to help me help you, you need to have something that establishes forward motion. I recently discussed this with one founder who claimed, “We have __ followers on social media.” The number itself is impressive but not if it has been flat for the last year. In my experience, investors like to know the rate of change, even before you’re seeking funding.
6. Show Up: The feedback I really dislike receiving from investors is “You introduced me to a founder, but they no-showed the meeting.” or “They never got back to me.” or “They canceled same day.” We know things come up and it is fine to cancel on someone when you have a real excuse, but it creates a disincentive to make additional introductions if you’ve squandered my capital by no-showing the investor.
7. Materials: I like to enable investors to stop reading early. I know this sounds backwards, but if you can clear the obvious hurdles early, you make it easier for them. For instance, if they’ve decided they only invest in companies in the San Francisco Bay area and you’re based in Chicago, disclose your location early in the email. Similarly, if they only invest in companies with $15 million or more in trailing revenues and you’re pre-product, that too should be up front. For instance, the email may headline: “Seed stage SaaS (software as a service) company in NYC, first institutional round, run by founders who have previously raised venture funding.” You won’t win a Pulitzer for the prose, but you’ve now given the reader plenty of information to enable them to stop or continue reading. Investors are flooded with opportunities and, as a result, have short attention spans. What you don’t want to do is have the reader scratching her or his head because you’ve been unclear about these items.
8. Principle of Least Effort: We’re all busy (most of us anyway) and it’s very easy (even desirable) to de-prioritize the things we’re not required to do. Spoon-feed me! Give me the easiest path to sending your emails out. I always like it when founders send me an email that says:>>>