How to Target The Right Investors
One of the biggest things I've seen in 10 years in venture that founders do not do right at Pre-Seed, Seed, and even Series A stage is
TARGET THE RIGHT INVESTORS.
In this blog we are going to unpack how to pick prospective investors - WHO to pitch and WHY.
1. NOT ALL WALLETS ARE YOUR WALLETS
All investors are all different:
From Angels to Growth Stage Venture
From Biotech to Fintech
From Prolific to Infrequent
From Busy to New
From Associates to Partners
From Flush with capital to Dry Funds
You need to figure out WHO to pitch and WHY.
2. ALWAYS START WITH THE WHY ?
The best way to qualify investors is to put YOURSELF in their place.
WHY would an investor be interested?
The answer is their math and interests need to align. Most common matches: Check Size, Stage, and Sector but there is a lot more to it!
3. RESEARCH INVESTORS
The more time you spend preparing and refining your investor list the better. It is much better to be disciplined and prepare than to just rush to pitch everyone.
Pitching investors who are not right for you, even taking time to send them your pitch, is a WASTE OF TIME.
Fastest raisers use the most targeted lists!
To research investors use all of these resource:
Angel list
LinkedIn
VC web sites
Crunchbase
Google
Your network
Next to each prospective investor, write down the reason WHY they are a fit for you. If you can’t find a reason, then consider removing this investor from the list.
Here is an example of poor research:
A lot of founders asked me for an intro to Fred Wilson. 90% of those asks don’t make sense because Fred is focused on specific TYPES of businesses - networks. If you Google, read his blog, etc you’d know.
Next, let’s unpack how to do this right.
4. THE RIGHT CHECK SIZE
The biggest criteria of all is the investor check size. The check size is the function of the fund size.
It is a mistake to pitch a later stage firm for a pre-seed round, as they aren't likely to invest.
Why?
Because the fund math doesn’t make sense.
If someone is managing a $1B fund then for them a $500K check is too small.
Another thing to understand is smaller firms may not be able to lead your round.
For example, it is hard to lead a $3M round with a $500K check. Similarly, some angels write $5K checks, some write $50K — be sure to research!
5. THE RIGHT SECTOR
Always research an investors portfolio before the meeting! For Angels, either confirm that they are a generalist OR that they invest in your space. For VCs make sure you are talking to the right partner - inside a firm people tend to specialize.
Consider the example - our team at 2048 Ventures.
Neha Khera- Deep Tech, Enterprise, Marketplaces
Zann Ali- Fintech, Marketplaces, SMB
Julie Wolf - Biotech, Healthcare
Daniella Cohen - Healthcare, Biotech, Deep Tech
If you blind pitch us - it is an instant negative signal!
6. AVOID INVESTORS WHO BACKED A COMPETITOR
Another strong reason to do research — make sure the investor you are pitching didn’t already invest into your competitor. Most VCs wouldn't invest in your business if they believe a portfolio company may one day compete. You should always look at the portfolio pages and explicitly ask - have you invested or intend to invest in a competitor.
7. AVOID INFREQUENT ANGELS
This is a painful lesson founders learn, especially outside of Bay Area and NYC.
Infrequent angels will take 5-7 meetings and still don't invest.
Why?
Well, they don't invest frequently ;)
Focus on angels that write > 4 checks a year!
8. BEWARE OF PARTNERS AT CAPACITY
Senior partners at VC firms may be on too many boards and they may not have capacity to invest. Study their web site to see how many investments they have relative to other people at the firm. Overloaded investors will still take meetings, but it is much harder for them to invest. If not sure, be clear and ask — do you have capacity to get involved with another company!
9. BEWARE OF JUNIOR INVESTORS
In some firms junior investors have a harder time getting the deals done. This is really painful for the founders and for those investors, but this is the reality. Senior partners have more weight / can get deals done easier. If you engaged with a junior partner, be clear and ask — who will lead the deal - would it be you or a senior partner. If you are spending all your time with a junior investor, but they can’t get the deal done you are wasting your time.
10. USE CHECKLIST FOR TARGETING ANGELS & VCs
Here are things you should note for Angels:
What is their check size?
Are they a generalist or invest in your space?
Do they invest frequently?
Can you reference them through your network?
And for VCs, use the following:
Do they invest at your stage?
Is their check size right for you?
Do they lead or follow?
Which partner is the right partner?
Are they senior or junior?
Do they have capacity?
Can you reference them through your network?
11. FILTER INVESTORS USING YOUR ROUND SIZE
$500K - $1.5M Round ➡️
Target Angels first, then Micro VCs that are generalists or invest in your space.
$3M Round ➡️
Target Angels + Micro VCs first, then a specific lead VC partner.
Series A ➡️ Target specific lead VC partner
12. SUMMARY
Not all wallets are yours
Pick relevant Angels, VCs, or Micro VCs
Thoroughly research each investor + portfolios
Understand: Check size, sector, focus, capacity, ability to get deals, and other factors
