Startup Funding - The Dos and Don'ts of Approaching an Investor (2024)

Startup Founders Seeking Funding… hear this.

As far as investors are concerned… you are simply a bus. If an investor misses a chance to invest in you, even if you’re a super cool bus… there will be another bus along in 15 minutes.

Lately, I have been inundated with LinkedIn spam messages inviting me to hop on some misguided founder’s bus. Here’s a hint, LinkedIn is not a bus stop. If you want to find investors looking to hop on a bus, you might want to drive to the startup investor equivalent of a bus stop.

Here’s a sample message,

“I am the CEO of a New York City Financial Tech startup offering fractional share investing, banking and budgeting to new millennial investors. We have a live app and two functioning sites: Currently raising capital. We have followed you on AngelList, give us a look if interested.”

What’s wrong with that?

Let me make a list,

1. I’m not currently making investments and my LinkedIn profile and AngelList profile reflect that fact (did he read my profile?).
2. When I did make investments, I focused my investments in the Washington DC region and my profiles reflected that.
3. I didn’t invest in people who reached out cold and uninvited and my profiles reflected that. I had my own network, system, and pipeline for finding companies in which I would invest and my profiles reflected that.
4. There is no compelling message in that spam that tells me why I would want to catch that bus.

Got that? I’m not making new investments. When I was making investments, I didn’t invest in New York. I didn’t invest in founders who can’t figure out how to get in my pipeline. I didn’t invest in founders who did no research into the investor they were approaching.

Next bus, please.

It’s important for founders to understand the difference in perspective between a founder and an investor. For the founder, their company is not a bus… it’s their baby. It’s the only thing they are working on. It is all. It is their everything.

To an investor, your company is just a bus in a fleet of buses. It is one more thing that may or may not be added to the investor’s portfolio. It is not the so-called be-all or end-all. There are a thousand buses standing in line to get into an investors fleet. If the investor misses your bus, it is of little consequence to them… there will be a new bus coming by in a few minutes. And hopefully, unlike this bus driver who reached out to me, the next bus driver will have a working GPS.

So here’s a list of don’ts that could push an investor to wait for the next bus.

Approaching an Investor – The Don’ts

• Reach out to investors without doing any research on the investor
• Send unsolicited spam email or social media messaging without being invited to do so
• Pay money to get in front of investors (if don’t have the hustle to get in front of an investor without paying for it, how are you going to get customers, employees, strategic partners?)
• Avoid exorbitantly priced (anything over $200) pay-to-play pitch events (show the investor that you’re capital efficient and find the many no or low-cost opportunities to pitch to investors.)
• Avoid online social media sloppiness
  • No politics, alcohol, drugs, and sexism
  • Inappropriate images

Approaching an Investor – The Dos

• Research the investor’s preferences and pitch to investors that invest in companies that match your company’s profile
  • Geographic investment presence (investors tend to limit the geographical area in which they invest)
  • Company stage (Some investors won’t invest pre-revenue, some invest only in series A, etc.)
  • Sector (most investors concentrate their investments by sector, B2C, B2B, FinTech, Cyber, Health Tech, etc.)
• Find someone you know who knows the investor to make a warm introduction
• Present to local angel groups, or other local non-pay-to play quality pitch forums.
• Have a strong online presence with good professional content
  • AngelList profile
  • Gust profile
  • LinkedIn profile
  • Twitter profile
• Engage a law firm that is experienced papering seed and Series A funding rounds. They can help advise you on how to raise money and make introductions to investors.

When approaching an investor, every mistake you make exposes a flaw in your bus. As a founder, you’re committed to you’re bus. As an investor, I’m looking to avoid risk. I’m looking for reasons why I shouldn’t get on your bus. You get one shot… make it count.