There are many reasons why web3 businesses may turn to investors for capital, some of which may be for venture capital mentorship, not having enough money to raise the capital on their own, or simply not being able to apply for a large business loan.
However, when people think of investing, the first thing that comes to mind is people in suits. Investors come in all shapes and sizes and are as plentiful and varied as there are entrepreneurs. In this article, we will give you two main tips you should know before going on the hunt for outside money.
1. “Do Your Research”
Know the different types of investors
Most people describe their funding as being from venture capital, and they’re usually wrong. Contrary to popular belief, venture capital is not some catch-all term for outside investment. Rather, it is an exclusive, extremely hard to get subset of investment with extremely strict conditions to even be considered as a venture capital candidate.
Therefore, familiarize yourself with different investor types so that when looking for investors you may refer to the correct terminologies. If you’re looking for friends or family who might be potential investors, that’s very different from looking to outside angel investors, and the criteria of information they might require from you before they decide to invest will be very different too.
Now, you may know that you’re looking for angel investors or angel groups, but who specifically? Angel investors, as angel investing books will attest, come from every walk of life, and they each have different specialties.
Consider the region you’re in, the size of your company, how close you are to breaking through the market. Angel investors and groups all have different reasons for investing, and thus, will specialize in wildly different groups of investors.
The onus of properly researching your angel before approaching them falls on you. Target only a few angle groups and individuals and be specific. There’s nothing more off-putting to an angel investor than an entrepreneur not knowing who they’ve invested in last and what they specialize in.
This class of investors is very useful to the beginning entrepreneur but is rather tricky since these are personal relationships that you may, for plenty of good reason, want to avoid mixing with business.
A common thing that gets brought up is that it is rather awkward to bring up the question “will you invest?” While many have always thought this is because of the emotionally distant nature of the question, not many question if asking this is even necessary.
When procuring funding from friends or family, focus on showing them your business, but instead of asking them if they themselves might invest, turn the topic of conversation to ask whether they know anyone who might be interested.
This, like most good ways to broach conversations with people in your personal life, gives them an “out” to say that they might help you look if they themselves aren’t interested. If they are interested, then the conversation will very quickly lead that way instead.
2. “Bulk is bad”
Avoid templated communication of any kind. Ask yourself: when you are calling a local business to make an inquiry or messaging an online shop, are you ever happy having to hear their answering machine or having to navigate their chatbot?
The feeling that something is automated or copy-pasted brings an air of deep emotional detachment, and while useful for the above scenarios, are completely at odds with what you want to be doing in your communications with your investors. You want to be showing them why you have looked for them specifically and that you are honest and sincere.
This is why you should avoid bulk emails. Avoid sending the same resume, business plan, cover letter, pitch to many investors. You might think that you’re casting a wide net, but what you’ve missed is that the fish have long swum away.
Patience is the number one virtue in this process. While angel investors are on the lookout for you, at the end of the day, you’re at the mercy of their time and interest.
As I mentioned in the previous point, narrowing your target group of angel investors down to a select few not only helps in gathering research on them, but also helps in making sure you have more time to focus on tracking them down individually.
A great tool for this process is LinkedIn. Make sure to check out where they went to school, look out for any mutual contacts, and seriously plan to take time out to go down and listen to them when they have public engagements.
When you eventually do approach them, be tactful and sincere. If you’re applying to an angel group, read their submission requirements thoroughly and their portfolio well. It is always a good sign to investors when you are willing to present yourself to them in a way that they find most intuitive.
Avoid companies that only offer databases/leads
Bulk is bad precisely for the fact that if you could attain something with little effort, chances are that many people have already thought of and tried said method.
Investors looking for unsolicited pitches and calls are already rare. With these database contacts, you can practically give up hope of any of these investors being “the one” since their phone lines and e-mail inbox must’ve already been stampeded by hordes of desperate entrepreneurs.
When bulk is good
Have an excellent ad. By that, I don’t mean literally putting out an ad in the paper, but using the techniques of advertising and making ads out of your pitches.
Always carry around a summary of one to three sentences, a perfect tagline that describes your business in a few words, and a good video showcasing your work. Just like this article, your angel may walk away remembering just a few maxims or taglines which you’ve outlined.
The reason why these are good is that it shows that on your end you are well-prepared, and also since these are elements of a pitch rather than the main body of the pitch, having them done up well only promotes feelings of sincerity.
Always remember. Bulk is bad. Do your research. Both these core principles stem from the key understanding that humans, especially investors, have a keen sense of sincerity.
Investors who have to screen and deal with hundreds and thousands of businesses know for sure whether you are in it just for the money or whether you intend to really make good on what you’re promising,