During my decades of raising capital and running startups, I've learned a few things about preparing for investor meetings. If you're lining up appointments with people who have the potential to write big checks, I recommend you make your way down this full list. Following these guidelines will help you secure funding and build valuable partnerships.
1. Do your homework.
Create a target list of “smart money” investors, and do your homework on every prospect. Raising money for your startup is like any sales system. You gather leads, sort and prioritize those leads, and run through a process -- typically using a tool such as a sales funnel. Then you close business.
Faced with a fundraising challenge, however, most entrepreneurs will call on anyone and everyone with an "angel investor” or “venture capitalist” sign on the door. This is one process, I suppose. But it definitely doesn’t seem like a very efficient one. It's akin to knocking on doors in real-estate sales, or cold-calling from a phone book as a stockbroker. It's far more effective to apply a business-development mentality: Qualify leads first, then work to get warm introductions and finally work the sales process as you make your way down your list of warm leads.
I write a great deal about "smart money" investors on my blog. These individuals have domain expertise in your vertical markets or specialized technical knowledge and contacts in your product area. They also have a track record of investing successfully in your domain -- and the financial wherewithal to make additional investments.
Identifying "smart money" investors is a process, but you can accomplish it using publicly available information or intel from a subscription-based service (often at a relatively modest cost). With list in hand, you should rely first on potential investors with whom you have a personal relationship and a good deal of credibility. Convince one of them to invest, and he or she will become an advocate to persuade others.
If your list includes key prospects you don't already know, work your existing connections to see if any of your contacts could make an introduction. LinkedIn and Angel's List are two great resources for this type of professional networking.
Before you meet with any prospective investor, learn as much as you can about him or her -- background, style, most successful bet and biggest failure. What does each know that could be helpful in networking? "Smart money" investors bring a lot more to the table than fluid assets. They also can hold immense value as you build your company's influence and brand awareness.
2. Follow a strategic planning process.
I won’t belabor the point here, since a look at "Essential Elements of a Fundable Startup Business" sums it up nicely. You needn't adopt a full, six-month process of the type you'd apply in a big company. But you should have a clear understanding of some key components:
- target market
- market size and growth
- your unique value proposition
- customer profile
- competitive landscape
- your product roadmap
- your plan over the 12, 24 and 36 months
- your key milestones, especially over the next 18 months
3. Develop a business plan and financial model.
The results of your strategic-planning process form the starting point for your business plan. The average strategic plan forecasts a quarterly financial model over the next three years. Consequently, it doesn't give a very detailed view of expenses for the upcoming 12 months.