13 March 2020
How to build a pipeline of investors
If you need to raise funds for your business, the appeal of an investor pipeline is hard to ignore. Positive investors can write cheques to fund your round and assure financial stability for your company as it scales and grows.
Of course, things are never plain sailing in business, and building a pipeline of investors can be put into the pile of things that take effort.
The long and short of it is this – investors want to feel 100% confident in an investment before they sign a cheque. They look for specific things in an investment, and if these things are met, then they take out their wallet.
Providing this confidence is where you come in. You have what it takes to lift barriers, address investor concerns and demonstrate due diligence in a winning way. In this article, we’ll provide tips and advice on how to do just that.
What drives investors?
Here’s a simple truth – investors are driven to earn returns.
Yes, they can buy into your idea and the challenge, but they won’t stick around if it isn’t going to earn them anything.
Money influences investor appetite.
This truth is helpful because it explains investors’ risk awareness. This, in turn, drives investors to look for six key things in an investment opportunity.
The six keys:
1. An industry they know
2. An owner and management team they trust
3. A large or profitable market
4. An idea that offers a competitive advantage
5. An idea that will generate cash flow
6. Traction, i.e. existing growth, momentum, achieving milestones.
As part of your investor preparations, you should address these during due diligence. This will provide a good structure to your pitch and help you nail down your value proposition.
Building your pipeline
Once these concerns are addressed you can approach the building of a pipeline of investors.
1. Create a list of potential investors
Your list should answer the question, “who will we target?” and be influenced by the first thing investors look for – an industry they know.
You can build up your list by:
✓ Joining an angel investment network, such as E2E
✓ Discovering business leaders on Crunchbase
✓ Identifying key individuals in industries on PitchBook
✓ Scouring social media for influencers – especially LinkedIn
✓ Enter co-working spaces to grow your network, such as Regus
2. Hit your milestones
Your milestones could include launching a beta version, hiring key people, raising your first round of funding, or achieving market validation with your first paying customers. Ultimately, this is about being able to show investors business momentum.
3. Demonstrate value
How does your company add value? What is your unique selling point? When you contact potential investors, this is essential. Can you demonstrate outstanding traction? Have you got a bagged and sealed prototype ready to go into production? Have you got a patent? Have you got licences and rights? These things are valuable to investors. They will get you noticed.
4. Contacting investors
Cold calls by email or phone rarely work. You are far more likely to open the door to investment by meeting face-to-face.
But how do you set this up?
The best way is through an individual introduction. This breaks the ice and gives you commonality. If this isn’t possible, try approaching through a business network. If you must send an email – make your pitch short and sweet. Ask for a follow-up meeting. Don’t be pushy. Put your idea out there in the fewest possible words and see where it takes you. You might get a reply, even to say “thanks, but no”. If you must make a call – call the person’s secretary or company and leave a message. Direct cold contact with a potential investor will, almost inevitably, happen at the wrong time. No matter how tempted you may be, there’s every chance you’ll catch the person you want to invest at the wrong time if you call them.
5. Network, network, network
These are the three most powerful ways to meet potential investors without prior contact:
1. Networking at business leader events, such as E2E’s ScaleUp2Success receptions which bring together business leaders and investors within the entrepreneurial community.
2. Attending start-up and scale-up seminars.
3. Consider shared-office environments.
The importance of networking and showing up at events cannot be overstated. As a new business, you need to get the word out there about your company, and what better way to do that than in person where you can make an impression?
Join communities, participate in discussions, and help people wherever you can. Offer advice, showcase your product or service and start planting your seed (company) with the people in your industry who have a wider network than yours. Find a business community near you.
A last word …
Selling yourself is just as important as selling your business and idea, which is why networking, events and face to face contact are so important.
If you want to build a pipeline of investors, you should reach out in ways that enable you to make the right first impression. Email and phone will only get you so far with a potential investor, get in front of them face-to-face and be passionate and persuasive in presenting your proposition.
Good luck on your journey.
E2E is the UK’s leading connector for high growth businesses with a community of 23,000 entrepreneurs and 3,000 investors who contribute £230 billion to the UK economy with 1.15 million employees. Founded in 2011 with the support of Sir Richard Branson, E2E’s Former Honorary President, E2E have physically brought together more than 30,000 entrepreneurs at over 300 events in 11 cities across the UK, and this year, E2E begin their international footprint. In addition, E2E focuses on facilitating strong links between founders, investors, non-executive directors and corporates to enable extraordinary connections.