The Essentials
- If you’re using the “shotgun approach” and cold-emailing VCs, you’re not going to gain traction.
- Use a targeted, research-based approach. It’s slower, but the conversion rate is much higher.
- When you do engage a VC, remember that the most likely outcome is that they won’t become an investor in your company. Your goal should be to build a relationship with them.
Cairn Cross is a Managing Partner at Fresh Tracks Capital in Shelburne, Vermont
Jeffrey Thomas is the Managing Partner for Lever’s Venture Funds, based in North Adams, Massachusetts
As venture fund managers operating in New England outside of Boston, we often compare notes about deal flow, valuation trends, and portfolio companies. Recently, the topic of cold inbound emails from fundraising startups led us both to erupt.
We both rely on email as our primary communication channel, yet each day our inboxes get filled with emails from startups trying to raise money. I delete them immediately. Few investors we know even read them, and fewer still follow up with the sender.
It wasn’t always this way. Digital direct marketing tools have now made it easy to send poorly targeted emails to thousands of investors accompanied by a teaser or basic pitch deck. Founders blast away at VC email lists scraped by third parties. That’s called a shotgun approach, referencing the difference between shooting a bullet and shooting a shotgun shell that contains hundreds of small projectiles that spread out over a large area.
A shotgun approach to raising money is unlikely to be successful. A targeted approach is much better. Here are some of our recommendations.
Develop a list of 25 possible investors that have one or more of the following characteristics:
- Invest in companies in your geography
- Invest in rounds similar in size and stage to your round
- Invest using instruments similar to the instrument you wish to use for your round (e.g. SAFEs, convertible notes, or priced rounds)
- Invest in your industry
- Ideally, have many years of investment experience
Once you have identified the firms that could be a good fit,
- Figure out which partner or partners might be the best partner to approach
- Use social media tools such as LinkedIn to search your network for someone who could introduce you to the partner(s).
If you have no way to get an introduction, then consider:
- A well-worded and targeted cold approach that outlines why the partner/firm should be interested in investing in the opportunity.
- Following the partner(s) on social channels and engage the partner(s) via thoughtful commenting to build a relationship
- Attend conferences or networking events where the partner(s) are speaking and ask questions and engage.
If that sounds “old school” to you, consider that many VCs are older and learned their practice before digital outreach became prevalent. A lot of us still prefer talking on the phone!
And when you do engage a VC, remember that the most likely outcome is that they won’t become an investor in your company. Your goal should be to build a relationship with them. If you can, the investor is more likely to give you helpful guidance, candid feedback, and introductions to other VCs who might be a better fit.
