How to Source Your Investors

1 © 2013 SoftBank Capital
October 2013
How to Source Your InvestorsHow to Source Your Investors
Joe Medved, PartnerJoe Medved, Partner
@joevc@joevc

SoftBank CapitalSoftBank Capital
#1 VC for Exits and Seeds with Follow-Ons in New York*
*Over past 5 years per CB Insights
Making early and growth stage investments in companies that connect people, devices and the
world
Recent Exit Highlights
by by by by

Picking Your Investors is Like Marriage*Picking Your Investors is Like Marriage*
*Except there can be a unilateral divorce clause, and it’s not in the favor
of entrepreneurs, so avoid a shotgun wedding

How Much Do You Need?How Much Do You Need?
[Insert small pile and large pile of money
image, or scale with small and large]
 Optimally you will raise enough cash for 12-18 months of runway
 You’ll need to be out raising 3-6 months before your next round
 “Raise as little as necessary!” / “Raise as much as you can!”
 Raise enough to get you to the next value creation hurdles
 If you’re raising at a high market price, raise for a longer runway
 Target 20-30% max dilution on your first round. You’re likely getting 20% or
more dilution every round.
 Quality investors understand big companies are built with large teams that
should retain a significant portion of equity.

Typical ranges by type:
Which Type of Investor?Which Type of Investor?
Customers – Don’t raise! Friends & Family < $250K
Traditional VCs
$1M+
Seed Funds
$250K-$2M
Angels
< $500K

Where Do You NeedWhere Do You Need
Help?Help? Consider the collective skillset of the individuals and funds that you
would like to bring together for the round syndicate
 Product, Technology, Recruiting, Sales, Business Development,
Distribution, Manufacturing, Market Validation…

Frequent Communication Batphone
How Much Help Do You Want?How Much Help Do You Want?
Consider the desired level of engagement from both sides.

How Do You Get Their Attention?How Do You Get Their Attention?
 Referral, referrals, referrals
 Rise above their filters and inbox overload with mutual, trusted connections
 Leverage their portfolio companies & your customers, partners or advisors
 Networking
 Meet them at conferences, community events, narrowly focused meetups,
coworking spaces, alumni gatherings and office hours
 Start your own events bringing together influencers to demonstrate your
ability to connect with potential customers and partners
Active investors see hundreds if not thousands of pitches annually.

How Do You Get Their Attention?How Do You Get Their Attention?
 Engage online – many investors are active bloggers and tweeters
 Engage in conversation with them through their online presence, sharing
links with info about your company and product
 Build up your own social profile to demonstrate your influence and
knowledge
 New alternatives like AngelList, with its valuable investor data & access
 Build your social proof with investor & advisor endorsements, or presales
 Apply to an accelerator or similar startup program

Hook Them With A Simple PitchHook Them With A Simple Pitch
Best Practices
 Share demos or mockups, plus KPI
trends if you’ve launched
 Hand wrap an email that a mutual
contact can forward with this info
plus a paragraph pitch
 There’s less spam on Twitter and
LinkedIn. Send an @message or
connection request with a few
words on your product/service and
a link to learn more.
 Give a brief pitch at a conference or
meetup and ask if you can send
additional info. Land a full meeting.
Worst Practices
 Put together a long, text heavy
business plan that requires more
than a few minutes of reading to get
your value prop across
 Cold call or email an investor
through their general fund number
or inbox
 Deliver a message that just says
you have an amazing business you
would like to speak to them about
 Walk up to a speaker at a very busy
conference and give your full pitch.

You’ve Got a Meeting, Now What?You’ve Got a Meeting, Now What?
 Just like a sales pitch, go into your first meeting with in depth knowledge
of the investor’s interests and needs
 How do you fit within their investment thesis?
 Who else do you know in their network that you can reference?
 Have explicit reasons why they are a match as an investor
 Post the meeting, send the pitch deck you just gave with a brief
summary that can easily be forwarded to other decision makers
 Make the ask
 What is the next step in their process?
 What other information can you provide?
 When should you expect to hear back from them? If you don’t hear back,
send a polite follow up to stay high on their priority list.

Diligence, It’s For Entrepreneurs ToDiligence, It’s For Entrepreneurs To
 References!!! Speak to entrepreneurs the investor has backed before,
including those who have crushed it or been crushed
 Is their healthy engagement with the investor? And their team?
 Where can they help & what types of board members complement them?
 Leverage their network for customer references
 On top of your existing customer references, ask to pitch your business to
potential customers in their network
 Follow on investments
 If they’ll follow on, how frequently do they?
 How much would they reserve?
 If you’re working with a fund, what is their capital health?
 What percentage of their fund is invested and reserved?
 If they are raising soon, is your individual lead in good standing?
Never take money without running diligence on the investment partner
and their firm when applicable

What if None of This Works?What if None of This Works?
 What are the proof points you were lacking?
 Ask investors for specific reasons as to why they passed – team, market,
product, stage, etc.?
 Determine if you can bootstrap to get to those thresholds
 Could you provide services for a customer that could help subsidize the
growth of your product?
 You need a scalable solution long term, but services work can get you there
 If all else fails, can you join another startup in your area of interest to
gain the experience required to build your own company long term?
 The key to most early stage investments is the team
 Make your own bet on a promising startup and help it grow to demonstrate
the potential to run your own

Joe Medved, PartnerJoe Medved, Partner
www.joemedved.comwww.joemedved.com
@joevc@joevc

How to Source Your Investors

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