Fundraising is one of the two hardest tasks entrepreneurs undertake. The other, even harder, task is to spend the money you do raise wisely.
This short article will focus on the first: raising capital for your startup company.
As for my background, I have been on both sides of the fundraising table, entrepreneur and investor. As an entrepreneur, I have successfully raised capital for startups and venture capital funds where I have been a founder and executive or general partner. As a venture capitalist, I have invested in dozens of companies and entrepreneurs and decided not to invest in hundreds (if not thousands) more.
There are several fundraising stages: pre-seed, seed series A, B, C, and beyond. Each has a different strategy, set of requirements, and investor expectations. To provide a comprehensive or even introductory commentary on all of these is beyond the scope of this article.
Regardless of stage, one tactic that helps entrepreneurs fundraise successfully is what I call the “Seven Touches.”
“Touches” are thoughtful and purposeful interactions you have with an investor, whether they are a family office, angel, or professional venture capital fund. To be effective in fundraising, you need to interact with an investor seven or more times (depending on the length of time from initial pitch to a decision).
Why Seven Touches?
- At a minimum, consistent and thoughtful interactions demonstrate your attention to detail and professionalism.
- More importantly, each touch provides an opportunity to reinforce your company’s value proposition and highlight value-creating company activity/progress.
Notice the tactic is about touches, not “kicks”. These touches are gentle in nature, must be directly related to your company or the market your company is in, and are not confrontational.
Touches fall into two categories: The Essential Three and the Reinforcing Four.
The Essential Three – The minimum you should undertake.
- Thank You Notes
This touch is all-important! Send a handwritten thank you note to each member of the investors team that was present at the initial pitch. Send it the day of, or after, your initial pitch. If handwritten, it should stand alone. If via email, and you promised to send follow up material, do both in one communication and try to personalize the “thank you” in some fashion.
Pro Tip: If you met the investor through a referral, consider sending the person who referred you to the investor a handwritten thank you note as well.
- Meeting Follow-up Material
If during your pitch you promised to send additional information, (e.g. a full set of financials, copies of journal articles, etc.) send them right away, while your pitch is still fresh in the investor’s mind. Delay in, or failure to send, basic materials will show that you are not well prepared or just irresponsible. Both negatively impact your credibility.
Pro Tip: Keep a folder in the cloud or on your computer where you store key documents for fundraising to make follow-up tasks like this simple and organized.
- Follow-up after Investor’s Decision Dates
You should have walked away from your initial pitch understanding the investor’s decision-making process. If they give you a date of when you should hear back from them, and that day passes (by a few days) without you hearing from them, follow up. You should send a respectful note asking if there is anything more they need to assist them with their evaluation of the opportunity. Blend in asking when you might expect to hear back.
Pro Tip: Don’t remind them that they told you you’d hear back by date X and you are looking for a decision. This is a gentle touch to bring your pitch top of mind.
Reinforcing Four
These are touches with a purpose. Use the opportunity to reinforce your value proposition, convey value creating progress, and build confidence in your team. Use a variety of transmission methods – email, overnight mail, phone calls/voicemails.
The “Reinforcing Four” touches can come from any number of the following interactions:
- Subsequent investor information requests: During fundraising, it is common for investors to request additional information. If it would be expected that you have the information readily at hand, send it as soon as requested. If special preparation is required, such as creating a new graph or chart, pulling updated financials, manage the investor’s expectations regarding the timing of when you will send the newly prepared information – then meet or exceed that expectation.
- Company press releases: Send the investor a link to a press release with an appropriate introduction to set the context for why you sent it. Highlight the takeaway message. Make sure the release is press- and message-worthy and just not “fluff”.
- Fundraising successes/events: If you have a commitment from another investor and they give you permission to tell others, this is a very nice touch. If you have been invited to pitch at a conference, send the invite you received and invite the investor to attend (if local/regional).
- New and meaningful data: This can either be data you mentioned in your pitch that would be forthcoming or just data that is meaningful (i.e. confirming data you presented) which you’ve recently obtained but was not in your pitch.
- Award announcements: Share announcements of any award your company, or team member, might have been given. These can be related to the business – like winning or placing in a business plan or pitch contest, or even if a member of your “C” suite team receives a personal award, such as for outstanding service to a well-known and respected non-profit.
- Grant awards: Notices of award from SBIR/STTR agencies or from professional foundations (e.g. American Lung Association) are huge and productive touches.
- Market information: Consider sending information that impacts the market or customers you plan to serve and supports your value proposition. Examples include new and favorable pricing announcements (reimbursement code, tax incentives), new government regulations that drive product adoption, professional association guidelines (industry standards, practice guidelines), and updated market studies by reputable third parties showing segment growth.
- Intellectual property milestones: Casually inform investors about new patent filings or allowances/issuances. Pro Tip: Notices of office actions are not good touches, they introduce confusion and doubt in the strength of your IP.
- New major customer or strategic partner relationships: When you score a banner win or partnership, investors like to hear about it.
General Considerations
- Use email strategically. Make it as easy as possible for your investor to see and track key information. Summarize the information and restate the value proposition in the body of an email, and then refer to an attachment. Just stating – “please see the attached” or “FYI” is not
- Be as brief as possible and get to the point.
- Be respectful and polite in all your touches.
- Edit yourself. Re-read your communications before sending to check for tone and to make sure the purpose for sending is accomplished. Make sure there are no typos or errors.
- Balance your timing. Space out your additional touches. Your goal is to demonstrate consistency via frequent touches (~ once every 10 days), and not to be seen as bothersome.
- Communicate with purpose. Your goal is to have the investor trust that what you send is new and useful information that supports your value proposition.
Following the Seven Touches does not guarantee success but, if used correctly, will put you and you company in the best light possible and keep doors open when the initial answer is no.
About Dan:
Dan is an experienced executive leader, investor, and mentor with expertise across venture capital, entrepreneurship, new company formation and strategy, due diligence and research, deal execution, and management guidance. He has specialized expertise in technology transfer, intellectual property management, licensing, and commercialization within agtech, bioscience, and healthcare.
Throughout his career, Dan has been an active and engaged leader, member, volunteer, and speaker within multiple industry-related non-profit organizations and academic centers, national professional associations, and regional networks. His experience has led him to raise more than $100 million for venture capital partnerships, and serve on the board of more than 30 organizations.