A practical guide to networking with investors
Raising investment for your start-up or small business is not easy. It doesn’t matter whether you are raising investment via crowdfunding, through business angels or venture capital, the key to success is your ability to network with investors. In this blog start-up founders share their advice on investor networking and offer six practical steps you can take to start raising investment today.
Sacha Waters, Business Development Manager at Crowdcube explained
“It is perfectly possible to raise £150K through crowdfunding without a lead investor but only if you are willing to network like talking to people is going out of fashion.”
Hatty Fawcett, Founder of Focused For Business, couldn’t agree more.
“The best advice I was given when I was raising investment for my own startup was “You have to kiss a lot of frogs before you find your prince or princess”. “
And yet, many of us don’t find networking easy – let alone asking people for money. The thought of combining networking and asking for money sends many people running for the hills! Here founders who have recently raised (or are in the process of raising) investment, share how they networked with investors.
Tom Lock, Founder at AP Brands, says there are some important ground rules for investor networking:
“Be humble, but confident, and make sure you are honest.”
Steve Goodheart, Chief Operating Officer at Margin Guardian feels the key is
“To think long and hard about the strategy you want to adopt before approaching anyone. Consider the stage you are at in terms of pre-revenue, proof of concept etc so you can match-make with investors who invest at this stage.”
When you start to network with investors, both Steve and Tom agreed LinkedIn was a very useful tool.
Reflecting on his fund-raising round, Tom recalls
“No one was safe when we were approaching our network. Friends, family, colleagues, suppliers and customers. We hit the lot!”
Steve categorised investors in a slightly different way and feels tailouring your message for different groups of investors in your network is essential:
“Identify people with funds, people who know people with funds and people who have been through the process of raising funds. They all need a different approach.”
Speaking to investors
As with all networking, it is better if you have a warm and engaged relationship with your investor network before you actually ask for investment.
Tom recalled how he warmed up his network prior to fund-raising
“We sent out a few emails and communications in the run up [to raising investment], saying that we were preparing for a fund raise, which hopefully meant it didn’t come as too much of a shock when we actually asked for money.”
Steve did the same when networking with investors, and made additional use of social media
“We had update chats explaining the business idea in an informal manner via phone calls and LinkedIn communications. We also got the message out there on Facebook status updates before approaching individuals directly.”
When it came to “the ask”, both Steve and Tom had their own favourite opening line.
“I’ve launched a new business and I’m looking to give you an opportunity to join in at a very early stage.”
Whist Tom’s was direct and to-the-point
“I was wondering if you are looking at investing in anything at the moment”
Thinking about what they’d do differently next time they network with investors, both Steve and Tom had some excellent tips.
Steve recommends being really clear about what you want:
“Spend a lot more time thinking about your approach, in terms of exactly what you require and when before speaking to people”
Tom encourages being realistic about how long raising investment takes
“Start earlier. You can never start too soon. Raising money always takes longer than you think.”
Six Steps you can use to network with investors today
If you are about to start investor networking, the following practical steps will get you focused and ready to work your network:
- Grab a paper and pen (or a spreadsheet if you prefer)
- Write down 5 different groups of people within your network (e.g. friends, family, former employers…)
- For each group, write the names of 5 people within each group and their contact phone number
- Pick up the phone and dial the first number
- Open the conversation “Hello. I wanted to tell you about an exciting new business which you might like to contribute to…..”
- Make it fun/ make a game of it – set yourself little targets e.g. I will speak to three people before my next coffee…