How to Build Your Network to Connect with Investors
Networking is a key component of any successful startup. As a founder, you need to build relationships with the right investors in order to raise money for your business. However, finding investors can be intimidating and difficult to master.
One of the best ways to improve your fundraising skills and expand your investor network is to get advice from a mentor. Recently, we spoke with Andrew Smith, founder of VRRB — an innovative new layer-one blockchain — regarding what his mentors have taught him about networking with potential investors. Andrew Smith met with three different mentors on the Mentorcam platform: Colin Rogister (founding partner at Beat Ventures), Edvard Engesaeth (Y Combinator alum and co-founder of Nurx), and Hamilton Chan (Y Combinator alum and co-founder of Coaching for Startups).
The first step is to connect with the right investors. Before you do anything else, you need to decide what types of investors you’re targeting. In many cases, you’ll be pursuing venture capitalists (VCs), but in certain scenarios you may also want to approach an angel investor.
Initially, it can be challenging just to get VCs to notice you. If you send your pitch deck to a venture capitalist without first getting an introduction, they’re not likely to spend much time looking at it. You may occasionally be fortunate enough that your message resonates with them and they reach out, but more often than not, it will simply end up in the trash. This means that cold-pitching investors is largely a matter of quantity — you have to speak with numerous prospects and receive quite a few rejections before you hear a “yes.”
A much more effective way to connect with potential investors is by finding someone who can introduce you. Most VCs will be more receptive to your pitch when you already have a vote of confidence from someone they know and trust. Here’s some advice from Edvard Engesaeth and Colin Rogister about how to find people to introduce you to VCs or other potential investors:
Meet Potential Investors Through Founders
The best people to introduce you to a venture capitalist are the founders in whom they’ve already invested. Instead of trying to reach out to VCs directly through social media or with a cold email, reach out to the founders they’ve previously backed.
Founders are usually better able to empathize with you since they've gone through the same fundraising process that you are currently navigating. They're more likely to be willing to take a call with you and help you make the connections necessary to move your fundraising journey forward. You'll also probably have more in common with other founders than with a VC (even if the VC was a founder at one time). Start by reaching out to your fellow founders, build relationships with them, and have them introduce you to the VCs who funded their early stage startups.
Meet VCs Through Other VCs
The best way to get your foot in the door with VCs is to work your way in through the founders in whom they’ve already invested. But after you're in, you should use that foothold to expand your VC network further — because VCs all know each other. Once you’re having conversations with VCs, get them to introduce you to other VCs. They typically spend time in the same circles and it's typically very easy for them to share information with each other — it’s also common for VCs to share deal flow with one another.
Get the introductions you need as early as possible. Once a VC has passed on your startup, it’s usually much harder to get them to introduce you to anyone else. Most qualified investors you talk to are probably going to tell you no (at least initially), but if you can get an introduction out of them first then you’ve at least walked away with another investment opportunity.
How to Introduce Yourself
Whenever you make a new connection — whether it's with another founder, a potential investor, or just someone interesting you’ve met at an event —.the way you introduce yourself is very important. When you’re introducing yourself, don’t focus too heavily on the company you’re building. Instead, tell the person about you. What have you done? Why should the person you’re talking with listen to you? Why should they be interested in what you're building? Why are you the right person to build it? The first conversation should be all about establishing your credibility, and then from there you can broach the subject of what you’re creating.
The Fundraising Process
Once you’ve made contact with the right people, you still need to convince them to invest. This is where you begin the process of talking with VCs and finding out if they’re willing to make a commitment. Here are some tips from Colin Rogister and Hamilton Chan about getting successful outcomes from your conversations with potential investors:
FOMO (Fear Of Missing Out) is one of your most powerful tools as a startup founder seeking capital investments. Without lying or embellishing, find ways to generate FOMO among investors to create a sense of urgency around your startup. A lot of qualified investors act on the fear of missing out — whether it’s ultimately the smartest move for them or not. Funding early-stage companies is, in many ways, a hype game.
Build up a network of VCs before you even officially begin fundraising so that as soon as you start accepting checks, there’s already a good deal of urgency to commit. Once you’ve generated enough interest from enough VCs, they’ll become more likely to take action to avoid being left behind. Generating that interest from multiple investors at once is sometimes what makes the difference between a successful fundraise and an unsuccessful one.
Keep the Process Moving
When you’re raising money for a startup, there’s little time to waste. It’s important to keep the fundraising process moving forward by getting a yes or no from each potential investor as quickly as possible. You don’t need to rush their decision and come across as pushy, but it’s also prudent to apply a small amount of pressure.
When you approach a VC, let them know that things are moving quickly so you need their answer soon. If they aren’t interested, it’s better to let them pass sooner rather than later so you can move along to the next prospect. When you find someone who seems interested, take your time and do your due diligence, but avoid dragging the process out simply because you can’t let go of a lukewarm VC. It’s always hard to hear a “no,” but it’s better to get a quick “no” and move forward than to spend significant time on a “no.”
Focus Your Efforts
It’s especially important not to waste time on unresponsive investors. Unfortunately, you’ll likely encounter some VCs who never get back to you after connecting with you once. Many VCs will have the courtesy to let you know in certain terms that they’ve decided to pass, but when they don’t, you may be left wondering if you need to follow up with them or not. Communicating up front that time is limited and you need an answer quickly gives you the freedom to simply move past these unresponsive investors rather than try to play a game of back and forth with them.
Instead of chasing uncertain or unresponsive VCs, focus your time and effort on the ones that seem truly interested. Some will likely end up passing anyway, but that’s okay. Even the near-wins that end up passing are still relationships worth nurturing in many cases because they’ll be able to provide you with additional introductions and help you build your network further.
How Mentorcam Can Help
Raising money from qualified investors is one of the biggest early hurdles in the process of building young startups. If you’re struggling to connect with VCs successfully, you’re certainly not alone. Mentorcam is dedicated to making it easier for entrepreneurs like you to get in touch with experienced mentors like Colin, Edvard, and Hamilton who can give you tailored networking advice. Andrew Smith says:
“When I first came to Mentorcam, I was in the dark and sort of lost about how to even go about this. ... In a matter of a couple of calls, Eddie [Engesaeth] and Colin and then later Hamilton really gave me the confidence and some direction on how to go about executing on a fundraise. I would consider it successful. We ended up raising about 1.42 million. … We were able to raise enough capital to give ourselves enough runway and to hire a team size that allows us to execute on our roadmap. We raised close to 75% of our target in a really poor market for fundraising.”
The benefit of mentorship is just as much about ethos as it is numbers-based results. Mentorcam’s purpose is not only to facilitate conversations with qualified mentors, but to enable long-term relationships that extend beyond the occasional professional Zoom call. Andrew Smith says of his mentors:
“They'll check in on me and send me a text message — there's a lot of personal investment that they put into this. It's not just: "hey, you paid me for a 30-minute call and go on your way." There's an interest in seeing the advice that they give turn into actionable results and I think that's really a valuable part of the platform.”
You can start browsing available mentors and book a call today!