Raising money as a founder requires a lot of research and preparation. You have to create a pitch deck, diligently research and prepare data, and determine your valuation. And once all of that is complete, it's time to reach out to potential investors to start pitching. But how do you know where to start?
You will need to build an investor database or investor list to help you determine who may be best suited for your funding needs and who to pitch to. The more detailed the list is, the more targeted and likely you will be able to comfortably secure funding. There are a lot of questions when building your investor database to consider including:
Who should be on the list?
What are the details needed?
What to do with the list?
Your investor database is key to ensuring you are efficient in your fundraising efforts and minimizing the chances of rejection. Read on to learn more about investor databases and how you can build one customized for your startup and investor needs.
Why is Building an Investor Database Important?
Securing funding for your startup requires you to create a pitch deck, secure meetings, and present information about your startup to investors. Creating an investor database can help you ensure you are spending time pitching to investors who are more likely to be interested in your startup and increasing your odds of funding. You'll spend less time fundraising and wasting time in front of investors with little or no interest in your company.
When you have an investor database all setup, you can start building those relationships earlier. The more time you spend networking and touching base with investors, the more you can get a leg up when it comes time to reach the next round of funding.
What to Include in an Investor Database?
You can decide your qualifying metrics before or even after you've begun building your investor database. You can build up a great investor database and then work from there to narrow it down based on particular qualifications.
Your investor database should include a detailed list of the people most likely to invest in your startup. The list can include your friends and family, angel investors, venture capital firms, and more. The research you'll want to include on every investor includes looking into the following:
- Have they invested in a direct competitor? You want to avoid reaching out to investors with equity in your industry's direct competition. They will not only say no, but if you send them your pitch deck, you risk them potentially sending your pitch deck to the competitor startup.
Have the investors or firms signed on to a deal within the last few years? If you notice they haven't been actively seeking new startups to fund, these investors may be a dead end and not a viable contact for you to spend time pitching to them.
Are they in your industry? The investors you want to invest in your startup will be familiar with your industry or the type of product, service, or technology. If you pitch to investors with little or no knowledge of your product or service or who it can benefit from, they may have many questions and learning needed and may not be able to see the big picture.
What stage do they typically invest in? What stage of funding do these investors usually invest in? If they prefer to invest in Series B funding and you're in the pre-seed funding stage, they may not be interested in funding your startup now. But you can keep them on the list as potential investors further down the line.
What is their reputation? – You're going to be working with this investor for years as you build your startup. Reach out to colleagues or other founders who this investor has worked with to see if they have any insights, they have on what it was like to work with this founder. Were they completely hands-off? Did they try to control the business in ways they shouldn't have? Did they have any successful exits? Learn as much as you can from their profiles and current connections.
Where are they located? Are they geographically in a good place to understand your market? Some investors and VC firms prefer their startups are located closer to them in order to provide support.
What are their personality and values like? Because you're going to be working with these investors for years, you want to ensure they are someone you can build a strong working relationship with. You want to check they have similar visions and goals and understand the startup journey.
Can they provide more than funding? Investors can be helpful beyond just providing funding. If you have a great idea and incredible traction, you're sure to be able to find an investor who will see the value. What you want to add on is to find an investor who can provide networking connections, advice, and other benefits based on their background and experience.
Vetting your investors is a time-consuming task and will always be ongoing. Filtering down your list of investors can help you narrow down your search and ensure you are spending your precious time on efforts that are worth it and are more likely to be a good fit for you and your company.
For each round of fundraising, you're going to work with different types of investors. While you narrow down your list, don't limit yourself to collecting information on investors perfect for you in the current round. You'll be prepared for your next round of funding when it comes.
How to Build an Investor Database
Whether you're starting from scratch or have already begun your networking efforts, you need to keep track of all investors you are considering pitching your startup to. You don't want to make critical mistakes through any round of funding by accidentally reaching out to investors who have already seen your pitch and said they were not interested. Building a detailed investor database is essential in helping ensure your startup successfully achieves its funding goals and is able to grow. Follow these tips to help you build your investor database.
Use Online Database Resources – There are a number of online angel investor and venture capitalist databases you can sign up for to gain access to their robust list of investors. You can use these resources to thoroughly research investors' backgrounds and learn more about who they are to see if they may be a good fit for your startup. You can see who they have invested in previously at your stage in development and add them to your database. investorhunt.co is a great resource to provide you access to over 90,000 angel investors and take a lot of the work of researching out of the equation.
Subscribe to Fundraising Newsletters – Sign up for every email list and newsletter by VC companies or Investor websites. You can get regular updates on funding announcements, changes, investor spotlights, new startups, and who is funding them. You can read through the information to see current updates on existing investors and new investors to consider.
Social Media – Social media has become a powerful way to network in the modern age of technology. There is a long list of investors utilizing social media like Twitter or LinkedIn to find potential startups they may be interested in funding. You can search for top investors in your industry to add them to your pipeline and contact lists.
LinkedIn is going to be your primary target for finding not just investor names but details on their background and more. You can use LinkedIn's search function to comb through thousands of great connections.
Networking Events – Get out to as many networking events as you can and connect with prospective investors. In these networking events, you want to have a great elevator pitch ready as you introduce yourself and create connections with people in attendance.
Reach out to Other Founders – Other founders can be a great resource in helping your build your investor database. They can provide you with great contacts and give you information on what it was like working with particular investors they partnered with.
Building up your investor database can be one of the most crucial steps in your fundraising efforts. It can help you ensure you make the best use of your time and be beneficial as you look for the perfect investor for your startup. By narrowing down your list and focusing your efforts on collecting details, you can ensure you can find the best investor and begin building a great relationship as you pitch your startup to secure that next round of funding.
It can be overwhelming when you're ready to start on your journey to find the perfect investor. Get the help you deserve to get your startup off the ground. Investor Hunt can match you with over 90,000 angel investors and venture capitalists in one place. Learn more about how Investor Hunt works here.