In a competitive environment where everyone is trying to get the ear of investors (and mentors), making a cold approach, if done correctly can bring great results and demonstrate initiative and will to succeed. Approaching an investor ‘cold’ means you are doing it without any pre-existing relationship of any sort. Consequently, the investor will likely have no idea of who you are or what your business is all about. Make sure you are familiar with the necessary prerequisites before approaching investors. Read on to determine how to cold email an investor.
How To Approach An Investor (or Mentor)
The first thing to determine is which VC funds you think you would like to work with. I have written a post on this previously which will give you important insights. When deciding to cold email an investor, the next thing to determine is to identify whom you will be approaching in the firm. Logic would suggest emailing the senior Partner in the investment firm as the chances are he or she will be the ones who have a key say in what gets funded and what does not. However, they are likely to be engaged with pressing matters for the firm and involved in key discussions about a range of portfolio companies and may miss a speculative approach. They may not even see the email as their PA vets correspondence and perhaps may not fully understand the relevance of what you are offering to the firm. Similarly, I would suggest emailing the most junior member on the team is also not likely to result in much success as they will also not be able to contextualise your communication and progress it in the right way due to lack of experience.
The person you need to contact has to be someone you feel is a strong enough voice in the firm to be an advocate for your cause. The best way to determine who this is is by reviewing their profile on the website and reviewing the portfolio companies that they are, or have been, involved in. This will give you a flavour of the sub-sectors and types of businesses that they have experience of. Further, you can search for their profile on LinkedIn and learn more about them such as where they studied, who they previously worked for and what their interests and specialisms are etc. This is important information for you to understand the person you are selecting to represent you in the firm. What I would do is find two such people with a view to emailing both. People find it more difficult to ignore an email that is sent to them and their colleague rather than one that is sent only to them that they can dismiss. They feel a level of colleague accountability!
The next thing you need to determine is when to send the email. This is critically important for success. Sending the email at 2pm on a Wednesday afternoon will have virtually no chance of being seen and may well be forgotten by the end of the week soliciting no replies. This is due to typically heavy workloads and lots of travel that investors endure during the week. However, sending the email on a Sunday afternoon, for example, is likely to be more fruitful. Investors are usually online around the week and weekends and the good ones are always keen to identify the next best team to support. As such they will not hesitate in replying to you on the weekend or the middle of the night if they think you are worth it. In any case, most firms have a Monday morning review session where they talk about existing portfolio companies and discuss new opportunities. Everyone wants to get the week off to a good start so if they have your approach in their inbox on Sunday afternoon, they will have something useful to talk about in their Monday morning meeting in front of their peers.
The Cold Email
Now comes your sell. The content of what you write and how is what will grab or deter the target and so it is important to get this right. I thought the best way to demonstrate this was to present a template for a company, X that is looking for a first round fundraise for growth.
I have come across your investment firm, [NAME], and am intrigued by the types of companies you are backing such as A and B. I notice that you have personally been involved with these companies and I have checked out their websites and it looks as though they are doing great with your support.
I would like to introduce myself as the Founder of data analytics startup, X that I have recently launched with my Co-Founders [NAME] and [NAME]. We are first time founders but have a successful track record, having worked at a number of analytics firms in the past such as [NAME], and [NAME]. We have come together and have been working on X for the last 12 months and are currently seeking funding to take our business to the next level.
We have got to product development stage and have 10 small and mid-sized clients signed up to use our product. At the moment we have offered this for free but the feedback we have got from our customers has been invaluable and has allowed us to improve our product immensely. The revenue plan would be for us to license the product and we think mid-tier companies (1,000+ employees) would be an ideal market for our product.
I am getting in touch with you as from your website it seems as though ours is the type of business you would consider supporting. We believe it meets your investment criteria in that it is proven with clients, has a strong team behind it, and is a scalable business now that we have achieved important proof points that mitigate some risk. You will be familiar with the competitive landscape for our business and I would be interested in your opinion on this. We believe we outclass other competitors who claim to offer what we do. We love how you have worked with your portfolio companies and we believe we would be a good fit in your portfolio.
I look forward to hearing from you and can send you a teaser if there is sufficient interest.
As you can see the email is split into four sections. The first is you showing them that you have researched them rather than just sending them a standard email. This is the ‘Charm’ paragraph. The second section is your introduction to set the ‘Context’ so they know a little of what you are about and what you are looking for. The third section is the ‘Action’ paragraph that shows the investor what you have done. There is nothing more frustrating to an investor than potential entrepreneurs who have taken no action and are looking for funding in the promise of then taking action. An idea in itself is not enough to secure funding. The final section is the ‘Close’ paragraph where you explain why them and briefly why you think they should invest in you. This is also detailed as it requires you to look at their website to understand what their investment criteria for new investments is. It also requires you to be succinct to explain why you think you are a good fit.
The overall email needs to be succinct, as they will not have enough time to read pages and pages of text. Keeping it to the point is important to ensure you get them hooked. Offering more material is a good idea but I would not attach anything to the initial email. There is a danger this would unnecessarily stuff their inbox and potentially scatter your proposition to lots of people, some of whom may have no desire of investing in you.
Following Up With The Investor (or Mentor)
Once out, I would wait and let them contact you. A period of about a week is sufficient to follow up with a polite courtesy email to ensure they have received your initial email. If you fail to get a response, I would wait another couple of weeks and send a final email to see if there is interest. If you don’t hear anything now, it is safe to say they are not interested and it is not worthwhile pursuing further. However, hopefully by planning what you say and how, and approaching the right investors, you will be in a good position to start to have some dialogue with investors. In time, hopefully this could turn into investment for your business.
At Growthologie I am committed to helping tech entrepreneurs secure funding for their business. And so I appreciate any comments or feedback you have on this blog post so that I can tailor my content more specifically for you.