How to Prep Your Network for a Fundraise

This week's tip: how to prep your network for a fundraise.

Fundraising for your start-up is never an easy task. From the hundreds of start-ups I’ve seen try to raise on every side of the table I can tell you one thing:

Most founders are failing to fundraise purely because they are not preparing their fundraise properly in advance.

This is especially true for your network and the investors that you want to reach out to during the fundraise.

Whilst a lot of the prep are investor networks during a fundraise may seem obvious, most of you will miss out on doing the things that actually move the needle.

Instead, you will focus on:

• Getting to a random milestone that means nothing
• Telling everyone you are fundraising
• Tinkering with your pitch deck

And without the right preparation, you will fail to fundraise before you even start.

You will feel completely out of depth of what you need to do find the right investors, actually get meetings with them, and even if you do meet them in the end, you will have no idea what to say to keep them going.

Getting the basics right with prep is honestly the secret sauce to you successfully fundraising, and this all starts with formalising and mapping out your network.

To prep your network in the right manner you have to make sure you are doing the 5 steps below:

Step 1. Create your investor list

It may seem obvious, but the first step in any fundraising plan is to create a list of potential investors for your cap table. While this may seem like CRM 101, I can assure you that 99% of the founders I work with do not do this well. Common mistakes include not building a large enough list (aim for 100 names at a minimum), not being selective with the names added to the list, and not utilizing external resources and team members to help build the list.

Your goal here is to qualify are hard as you can.

If the investor doesn’t invest into your industry? Don’t put them in.

If the investor is a $100m fund and you are raising $20m? They aren’t a good fit, don’t put them in.

If the investor has invested into a direct competitor of yours? Don’t put them in.

The easiest way to create this list is using a Google Sheet (although I use a simple Notion CRM that I created for my clients). However, there are now excellent CRMs specifically designed for fundraising, such as FounderSuite or Folk, if you are willing to invest the money.

To make better decisions, you will need to find the right information for each investor. The picture below provides a simple starting point:

Once we have done this, your goal is to priorities each investors into, “A”, “B” and “C”. This way you know which investors you should prioritise (As and Bs) compared to the rest (Cs). Here’s more information of how to prioritise investors.

Step 2. Map out your network

Once we have the names of all the investors in our CRM, we can start to see which of these investors you already have direct or indirect connections to.

Warm connections are everything to a fundraise, so you need to make sure you have warm connections to as many of the investors in your list as possible. A general goal is for 70-80% of all investors in your network to come from warm connections.

The first thing we need to do is go through you and your co-founders connections to see who you think would be willing to connect you to potential investors.

You should be focusing on find them through:

• Linkedin
• Social Media
• Ex-colleagues
• Family and friends
• Email (6-24+ months)

Once you have created a list of people who could be willing to connect you to investors, now its about actually meeting or speaking to them, as well as mapping out who they are connected to via Linkedin.

As you can imagine, this will take a long time, but is important to see where you are at with your network. Only then can you define what tactics you need to do to.

Step 3. Find the right people in the fund

Once you have mapped out your network, you should have a better understanding of which funds you have connections to and which funds you do not. Your goal now is to research each fund starting from priority A-C in that order, to find the right people in each fund whom you want to speak to. These should be people whom you can either establish a strong connection with, or people who have led investments into companies similar to yours.

For instance, when I was a VC investor, my specialties were cardiology and cognitive behavioral therapy start-ups. If you were one of those start-ups, it would have made sense for you to try and speak to me because I had led investments into those companies before and would be willing to do it again.

This research may seem simple, but it can be very challenging to know exactly whom to approach. That's why it's so important to reach out to all your friends and connections to have a coffee chat. This can be the best way to get information on different people in each fund and determine which investor in each fund makes the most sense for you.

Step 4. Find out who will be your best introduction

No two warm introductions are the same. The person who introduces you to a potential investor matters a lot, so you need to spend a lot of time and effort figuring out your best intro. The highest quality is usually another entrepreneur, but there are other sources of introductions that can pay off.

These can include (in no particular order):

• Portfolio founders
• Other entrepreneurs
• Angel investors
• Your own investors
• Experts in your niche

Make sure whoever is introducing you (1-2 people per fund) will give you the highest chance of being perceived as a great founder. Rank the connectors on:

• Expertise
• Experience
• Reputation in the investment community
• Their perception of you and your company

Once we have found out who will be the best introducers to you, you always want to find the connectors who will be the best back-channelers for you. These are the people who are closely connected to each fund (preferably texting-level comms) and are batting in your corner.

Step 5. Build out your network even more

Once you have completed the above four steps, you should be able to identify which investors you want to reach out to, who you are connected to, and how you will reach out to them.

Your goal is to have 70-80% of all investors on your list come from warm connections. However, what if this hasn't happened?

This is where the beauty of doing this kind of preparation work early on comes in. Once you have mapped out your network, you can see where you are missing connections for each investor.

Then, you can develop a plan to build your network by connecting with:

• Angel investors
• Experts in your niche
• Experienced investors
• Portfolio founders of high-priority investors
• Other connectors you come across

I promise you, if you do these 5 steps you will have a much better start to your fundraise, and it will be the biggest change for you to fundraise better.

Never stop building your network, and do the right work in building your CRM before so you are working on the right things all the time.