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💰 How To Build Your Investor Pipeline

Learn how to build a strategic investor pipeline with our guide. Discover tips on identifying the right VCs, leveraging Signal and open-source databases, and securing warm introductions to accelerate your VC fundraising journey.

Toby Egbuna
February 8, 2024

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Note: this is the what behind CREAM. Over the next few weeks/months, I’ll be sharing the how. Subscribe to my newsletter to get these insights straight to your inbox.

CREAM:

  1. Consider if VC fundraising is for you

  2. Ready your documents

    1. Part 1 - Pitch deck and communications

    2. Part 2 - Financial model, market calculations, and data room

  3. Establish an investor pipeline ← todays newsletter

  4. Activate your fundraising round

  5. Maintain relationships

The importance of building your investor pipeline

There are over 12,000 venture capital funds in the US. You can’t talk to all of them, nor should you. That’s why it’s important to build your investor pipeline and identify funds that are good fits with what you’re building. This is a two-part process:

  1. Find eligible investors

  2. Find people who can introduce you to those investors

Think about it this way: fundraising is similar to sales (it is definitely NOT the same thing, but I’ll elaborate on that later). If your product is an e-commerce platform for Shopify retailers, you’re not going to sell it to brick-and-mortar small businesses that don’t have an online presence. Be very intentional about meeting with the right investors.

Finding eligible investors

There are three categories we’ll use to identify the right investors:

  1. Geography - Does the fund make investments where you are based?

    Most of the time, this is simple as you can filter for funds that operate in your specific country/state, but you might cross funds that are listed as investing in the US but in actuality, they only invest in a specific state or territory. Ex: Red Hawk Ventures only invests in companies that are based in Alabama or willing to move to Alabama.

  2. Industry - Does the fund make investments in your industry?

    If you’re a healthcare tech startup, you’re not going to have any luck pitching VCs that invest in consumer tech. Some funds are “industry-agnostic,” meaning they invest in any industry and take bets on the founder and team. Some are wildly specific and only invest in solar energy climate tech. VCs generally use the same terminology for the industries they invest in, so ruling out a fund based on their listed focus should also be easy.

  3. Stage - Does the fund make investments in the stage my company is in?

    Last is the stage. If you’re raising a pre-seed, you’ll want to look for early-stage funds. Some funds are specific and try to invest as early as possible (as in when there’s only an idea on a napkin, such as Hustle Fund) and some try to invest when there’s more traction but the company is still pre-product-market-fit. One thing to note here is that people’s definitions of stage vary dramatically. For example, a lot of investors in the Southeast US will consider a company doing $500k as a Seed-stage company, while VCs on the West Coast would make a Seed investment as early as $0-50k in revenue.

How to find your VCs

There are a lot of public investor databases, but I’m going to limit this list to the best kind: those that are free. That leaves us with Signal and open-source databases.

Signal

Signal is a public investor database with thousands of VC funds available for you to look through. With this platform, you can segment funds by the three categories mentioned above plus a few others:

Using the example above of the Shopify e-commerce startup, and filtering for Seed funds in the e-commerce industry (Sector of interest in Signal), I can use Signal to see that there are 1033 potential investors in its database.

Signal doesn’t let you filter by multiple geographies at a time, and filters for a specific location include any funds that invest in that location, so for demonstration purposes, we’ll filter exclusively for funds that invest in San Francisco as it’s a safe assumption that they also invest anywhere in the US. That leaves us with potential 735 investors.

That sounds like a lot, but remember that fundraising is similar to sales. Doing the math from my own experience, I started with a list of 300 funds and ended up closing 2 VC investments. That’s a .67% close rate.

For that reason, you want to make your investor list big so you can line up as many meetings as possible. To be safe, try to start with 300 potential funds.

The pros of using Signal are that the database is massive and the information is accurate as they have a connection to LinkedIn. The downsides are that you can’t export to csv., and the list can be a bit overwhelming to start with.

Open-source databases

Open-source investor databases are lists that are created by someone else and shared publicly for other people to look through. You’ll often find these in a public Airtable base or Google spreadsheet.

Similar to Signal, most of these will allow you to filter based on the three big categories, and some might even include contact information for investors.

Here are some of the open-source databases that I tapped into during our raise:

The pros of using open-source databases are that many of them (like some of the ones listed above) are built for specific purposes like listing VCs who invest in underrepresented founders. The downside is that they aren’t updated regularly so some of the information can be outdated.

Building your investor database

Now that you know where to find investors, we need a place to keep your list! That is where your investor database comes in.

For this, I highly suggest using Notion, but you can also use a Google sheet.

First, create a database, and title it Funds.

Next, update the database to include the following columns:

  • Name of fund

  • Contact

  • Website

  • Funding stage

  • Location

  • Industry

  • Check size

  • Who can intro?

Now, the tedious part. You’ll want to populate this spreadsheet with all of the funds that would be a good fit for your round. You can use the properties field in Notion to streamline this and make it easy to filter once the list is built. You should be able to populate every column except for the “Who can intro?” column. We’ll save that for a bit later.

Or, you can just use my template → access template.

Please note: this will take time. A lot of time. Again, you don’t want to raise without having a list of at least 300 potential funds. You want to be as efficient as possible, and this is a great way to do that.

Requesting introductions

When you’ve finished building your spreadsheet, the only remaining column will be the “Who can intro?” column. First, let’s talk about why you need introductions to investors.

The importance of the warm intro

As I’ve mentioned, raising venture capital is predicated on your ability to get a warm introduction to a target investor. Many VCs will claim to accept cold emails and/or require you to apply for funding on their websites to be objective about their company pipelines, but all of that is 🧢 (cap).

VCs and other investors regularly share the companies they’re looking at - aka ‘deal flow’ - with each other. They expect people to email them new investment opportunities, and in my experience, a lot of the funds that claim to only invest in people who follow their formal process still accept warm introductions. The practice sucks, and it needs to be banned if VCs do want to be inclusive about who they invest in, but that’s hopeful at best.

How to get a warm intro

Here’s a simple process that Jenny Fielding, Managing Partner at Everywhere Ventures and former Techstars MD, on how to find people and request warm introductions:

  1. Build your investor pipeline - ✅

  2. For each fund, go to the fund’s website and see who is on the team

  3. Find at least 2 people from the Team on LinkedIn

  4. See what mutual connections you have with that person

  5. Put the name of the mutual connections in the “Who can intro?” field for that fund

  6. Repeat steps 1-5 for the other funds in your list

Here’s what it looks like in practice:

  1. First, I’ll select one of the funds from my investor pipeline. Let’s go with Harlem Capital

  2. Clicking into the Team, I see that they have 5 investors - 2 Managing Partners, 2 Partners, and 1 Principal

  3. I’m going to aim for the head honchos and look to see who in my network can introduce me to Jarrid Tingle and/or Henri Pierre-Jacques

  4. Looks like I have 100+ mutual connections with Henri and Jarrid! Good start.

  5. Now, I just need to figure out who to ask for the intro. Ideally, I find someone who 1. I have a good relationship with but also 2. has some clout so the introduction is taken seriously. I suggest looking for people who are either founders themselves or work in venture capital with another fund.

  6. In my case, Jack, who I know from working with the Peachtree Minority Venture Fund, is a great fit.

  7. I would do this again and find at least one more person who can make the introduction to Henri, and then I’d do the same to find at least two people who can introduce me to Jarrid.

Asking for the intro

Now that you have your pipeline built and you know who can introduce you to the investors, you need to start asking for introductions.

I wish we had an easy-to-use communication to ask for these intros…

Oh, wait! We do! 😏

Go back to the comms that you created in the Ready stage of CREAM and find your forwardable email. It should look something like this:

Hi <name> - Great catching up with you earlier today. I would love an introduction to <investor’s name or VC name>. I’m including a blurb below that you can forward along.

All the best,

Toby

Toby Egbuna is the Co-founder of Chezie (www.chezie.co).

They’re working to help 57,000 companies around the world create better products, grow sales pipeline, build more inclusive workplaces, and ultimately drive business results by reimagining what’s possible with their most under-utilized asset: employee resource groups.

They’ve had some great early success since launching in Oct 2021. Some quick points on their traction:

  1. $1M ARR

  2. 37 enterprise customers including Acme, Dunder Mifflin, and SHIELD

  3. 90% of sales through word of mouth

They’re currently raising their pre-seed round, of which $750k is already committed. You can read through their deck here: https://docsend.com/view/link.

Simply load up this template and change out the <name> placeholder to add the name of the person you’re requesting the intro from. It is a best practice to personalize the message at least a bit - so try to add some sort of customization to each request so the person knows it wasn’t a blanket email.

Things to consider

The process is pretty straightforward, but, as with everything, there are some nuances. Here are some of the hacks for building your investor database:

  1. Ideally, you try to get introduced to a Partner at the fund, but Partners are experienced and more judicious with their time than analysts or more junior investors are.

    Most funds do a weekly or bi-weekly team meeting where everyone brings up deals that they’ve sourced and presents those deals to the team. Much of the sourcing is handled by these junior people, so don’t be afraid to ask for introductions to them. Just keep in mind that meeting with an analyst means you’ll have more meetings before you get to a decision.

  2. ALWAYS send a note to the person who made the introduction after you connect with the investor. People like to be helpful, but what they like even more is to know that their help was valuable. Give folks their flowers!

    Here’s an example message that I sent to the person who made the intro for our pre-seed Lead investor:

  3. It’s okay to tier the funds in your pipeline. I was interested in working with Harlem Capital based on the fund’s brand and focus on investing in underrepresented founders. If there’s a fund in your top tier but you don’t have a direct connection to someone on the investment team, look to see if someone can introduce you to someone who has a direct connection, who can then introduce you to an investor. I wouldn’t go more than two degrees of separation from the investor, but this is worth a shot for those funds that you’re really excited about.

  4. Fundraising is similar to sales, but they are not the same.

    Okay, now I can address this. People will tell you that fundraising is just like sales. It’s not. Those people are wrong.

    Sure, there’s some overlap in terms of conversion rates (if you want to close 10 deals, you’ll probably need to connect with 100-300 customers depending on how good of a salesperson you are), and you are “selling” your company and vision to investors, but that’s basically it.

    Fundraising is all about signal (not the database, the term), or the signs that an investor should invest. There are a few components of signal - a good team, a big market, notable traction, etc. - but none of those signs matter more than who else is investing.

    If you’re raising your round and you get a commitment from a top-tier VC like a16z or Accel, that is signal that experienced investors believe in your company, and often, that alone is all they need to invest.

Summary

If you’ve made it this far, you have now:

  1. Considered and determined that venture capital is the best funding path for your company

  2. Readied your documents, including your pitch deck, financial model, market calculations, comms, and data room

  3. Established your investor pipeline and identified people in and around your network that can make introductions for you

Next, the real fun begins. We’ll activate your fundraise and help you start talking to investors.