If you’re thinking about a business opportunity that will require investment, then attend networking events in your area to identify key members of the investor community and meet other entrepreneurs. It is never too early to approach potential investors and it may be easier to create an informal relationship when you’re not actively seeking investment for your startup.
Be creative in expanding your network. Attend events, meetings, dinners and speaker series where investors and entrepreneurs meet to make you and your business visible to this community.
Once you are ready to raise financing and have developed your target investor list, contact the investors you know directly. For those investors you do not know, get the best quality introduction you can from other sources:
To contact an investor for a meeting, send an email request, as it is quick and easy to forward around an investor firm or angel network. Your email should include an articulate elevator pitch telling the investor who you are and what you do. Attach a copy of your executive summary covering details of the technology, market and team to the email.
Investors want an opportunity to review some initial information about a company. They will use this information to determine whether the opportunity fits their basic investment criteria regarding sector, stage and geography. If the opportunity does not meet their criteria, then they will not waste your time or theirs with an in-person meeting.
Agents and professional organizations provide capital raising services for startups. These organizations are usually compensated through a success fee that is calculated as a percentage of the investment round (ranging from two to ten percent). Some firms may require a monthly retainer as a guaranteed minimum payment amount for their services. The retainer is usually deducted from the success fee at the end of the engagement.
As with all your business decisions, do your research before engaging an agent. Check their references and evaluate their track record and reputation. Some investors welcome the referred leads from agents who have vetted and performed due diligence on an investment opportunity while others prefer to evaluate investment deal flow from direct sources. Early-stage investors, where round sizes are small, prefer to see all their capital used to build the technology and business model (and not used to pay an agent).
Kawasaki, G. Garnering angels: Raising capital. Retrieved April 8, 2009.
Kawasaki, G. (2004). The Art of the Start: The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything. Toronto: Penguin Canada.
MaRS. It’s Negotiable: A Guide for Entrepreneurs. Retrieved April 8, 2009.
eHow. How to Get Introduced to Venture Capitalists. Retrieved April 8, 2009, from http://www.ehow.com/how_14396_introduced-venture-capitalists.html.