How to Find An Investor for Your Startup Successfully

Everyone in the know in the startup and investment ecosystem knows that fundraising isn't only about the money raised — though that is key and is definitely what makes the headlines. There is a lot more going on behind the scenes when a startup goes out to raise capital. Finding the right investors is a careful process of identifying the people who believe in your vision and can be long-term partners on your startup or small business journey. 

Just as the investor will do their research on you and your startup company, you must also perform similar research to be prepared for anything the process of fundraising may throw at you.

We break down the process into four steps:

1. Research
2. Targeting
3. Outreach 
4. Pitching 

How to Find an Investor: 4 Key Steps

1. Research

Once you have a good understanding of each of these, and what they have to offer, try to identify the type of investment that works best for you, given your stage of growth, the domain you operate in, your location, and the types of products or services you offer. For example, if you are building a social app in the content creator space, you should look for investors that invest in social and are interested in the creator economy. 

If you’re still early in your lifecycle and may not have enough visibility into a product-market fit to make it through rounds of VC diligence, angel investors might be the best bet. The check size will be smaller but it can move fast if the investor knows your space and sees value in what you’re building. 

2. Targeting

Once you’ve zeroed in on the type or types of investment that might work for your startup, spend some time building a target investor list. Use resources like Crunchbase, Pitchbook, AngelList, and of course good LinkedIn to zero in on the exact venture firms that you want to target. Read up about their team, the expertise they offer, their track record of venture capital investments, and the network they can open up for you.

To complete the cycle of research, look for startups that have been funded by your target investors and learn more about their experience as a portfolio company. Reach out to the founders and ask them questions about the fundraising process, the expertise they receive from the investor entity, as well as the ease of working with them.

3. Outreach 

You’ve done your homework and have identified investors who will be valuable from a capital and expertise standpoint. Now comes the part of getting in touch with them so you can convince them of your company’s value. 

After you have identified VC firms and other investors, dig a level deeper and find the exact person you need to meet and pitch to. This will help you be uber-specific in asking someone to introduce you and will ensure you connect with the right person. 

If location, location, location is the key maxim of real estate, network, network, network must surely be its counterpart in the fundraising landscape. You now know who you’re looking to pitch to, so it’s time to put the word out there to find a route to each of your target investors. 

Friends, family, former colleagues, and other founders are all fair game to help you get your foot in the door. A word of warning here — try to ensure that all introductions are being made by contacts who are trusted by the VC or family office or corporate VC. This will be your first introduction and will go a long way when it comes from a reliable source. 

If you have connected with companies that have received earlier investment from your target firm, this is a strong way to be introduced to the investor. Make sure that the company is in good standing with the firm and you’ll be in a good position to begin the conversation. Some of these companies may also be super-introducers, where they can connect you with multiple investors in their network. 

You can also leverage platforms like AngelList or Angels Den which offer ways to connect with potential investors. Although a low success rate compared to networking, direct outreach is also an option — if you can craft a compelling email or LinkedIn message or form fill on the company site, it may just attract attention and open a door for you. 

4. Pitching 

When you get a highly-anticipated meeting with a VC firm, it’s now your moment to shine and present your company and its potential to the investors in front of you. This is a critical meeting and you and your team should prepare for it accordingly.

If you’ve done your research well, you should be well-prepared to tailor your presentation for the specific firm and perhaps even the specific investor you are pitching to. We share some ideas here on how to build a compelling pitch deck. We’ll also walk you through some tips and tricks to present your company at its best, during the meeting.

Most Common Types of Investors

At a fundamental level, you should prepare yourself for the world of fundraising by understanding the options available to you. Friends and family, angel investors, venture capitalists, and accelerator programs are some of the funding sources for early-stage startups. 

1. Family and Friends

Startup fundraising often begins with investments from friends and family. This can be a great option before your business has developed the tangible traction necessary to woo professional investors while you are still just trying to get your idea off the ground.

2. Angel Investors

Angel investors are individuals with access to large amounts of capital who invest their money in fast-growing companies or young startups they personally believe in. Many angel investors come from backgrounds in business or as entrepreneurs themselves, and their advice can sometimes be just as valuable as their financial contributions. Angel investors are often accredited investors, although they don’t have to be.

3. Venture Capitalists

Venture capitalists are professional investors who offer large amounts of capital to promising startups in exchange for equity (a percentage of ownership in the startup). Venture capital firms have access to large pools of funds from institutional investors, and they can also be a great source of networking opportunities. However, VCs also generally have the most stringent requirements when it comes to winning their investment.

4. Accelerator Programs

Startup incubators and accelerator programs, like Y Combinator, are yet another source of capital for growing companies. Accelerators typically accept select applicants in cohorts and provide them with funding, office space, mentorship, networking opportunities, and more.

What Do Investors Look For?

There are many factors that investors consider when deciding whether or not to give money to a startup. Angel investments and investments from friends and family often hinge on the investor’s own personal faith in or passion for the company, whereas a VC will more likely want to see a strong business plan and evidence of existing market traction.

One factor that nearly every type of investor values very highly is the characteristics of the founding team. Regardless of the business proposition itself, a well-developed team of skilled, hard-working entrepreneurs with impressive backgrounds is enough to make almost any investor take the offer seriously. Remember that a VC’s investment is like a bet they've placed on your business — oftentimes, they're betting on the people involved more than the business idea.

What Is a Fair Percentage For an Investor? 

As you’re negotiating with investors, remember that one of the most important parts of the deal is how much equity you’ll give up on your cap table (a breakdown of your company’s dilution of ownership among investors, founders, or other stakeholders). In most cases, founders raising seed rounds should try to stay within the range of 10% to 20%, but the exact percentage you should aim for varies based on many factors. 

If you’re not confident about how much equity you should offer to VCs, a short conversation with an experienced founder or investor could help you clarify your unique situation.