Investor Pipeline

First-time Founder’s Guide – How to Build Your Investor Pipeline

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As a founder, you should treat fundraising like you treat sales. And that means building a strong funnel and pipeline. Both funnels need to have a high volume of relevant and qualified leads at the top.

Investor pipelines create a natural funnel for your fundraising process. You want to fill the top of your funnel with investors who are active and typically write checks in the range you are looking for to fill your round.

Here are a few questions to ask yourself when filling the top of your funnel:

Geography:

  1. Where I am located geographically?
  2. Do I need to raise from investors in my local city or country?
  3. Is my business relevant to investors in another country or is my business only relevant to a problem in my specific city?

Some investors have a thesis around investing in a specific region. For example, if they are based in New York, they may be limited to or have a preference for writing checks for founders in New York. Research their portfolio companies to identify trends.

Funding amount:

  1. How much am I looking to raise?
  2. What is my current runway? How much cash do I have in the bank?
  3. Is this my seed round? A bridge? Series A?
  4. What type of funding am I looking for? (Angels? Strategics? Micro VCs?)

Once you know how much you are looking to raise, research investors that write checks in that range. For example, if you are raising a $750K seed round, find seed investors who write smaller checks rather than going after Series A investor with a minimum check size of $2M.

Business models and verticals of interest:

  1. Do I have a niche business? Do I need to find investors that specifically invest in my industry?
  2. Is it of value to work with investors that focus on my vertical? Does it make sense for me to look at strategic investors?

Look for investors who fund startups with your business model or vertical and don’t waste your time with those that do not. For example, if you are a B2B SaaS company, target investors that invest in B2B SaaS companies. If you are building a specific/niche business, it may make sense to focus on investors that exclusively invest in your vertical.

Additional tips:

  • Use AngelListCrunchbasePitchBook, and Signal to fill the top of your funnel.
  • Research the fund’s portfolio companies and ensure there are no investments that are competitive to your business.
  • Have a short list of similar startups (but not competitors) and gain insight by looking at their investors. Identify trends and target the investors that appear multiple times in your research.

How to set up your pipeline spreadsheet

Next, create your pipeline in a spreadsheet that can be shared with people who could potentially make intros. Use this spreadsheet to track introductions and move investors through your pipeline.

Column A: Affiliation and URL

Example: Sequoia, Founder Collective, Angel. Add URL to their website so it’s easy for people to view

Column B: Partner Name and LinkedIn

Find the person at the fund who typically leads deals in your industry. Add LinkedIn URL so it’s easy for people to view.

Column C: AngelList Profile

Add AngelList profiles so people can quickly view their portfolio companies.

Column D: Relevant Investments

List the portfolio companies that are relevant to your industry.

Column E: Focus Areas/Verticals

List the focus area/verticals the fund typically invests in.

Column F: Average Check Size

What is their typical check size? Research how much they have invested in their portfolio companies.

Column G: # of Investments per year

Make sure they are active and the fund is not dry.

Column H: Priority

Low, Medium, High

Column I: Status

First Meeting, Second Meeting, Sent Deck, Due Diligence, Term Sheet

Column J: Intro From

Who is connected to this person who could potentially make an introduction?

Column K: Email

Make it easy for the person making the introduction by having the investor’s email handy

Column L: Feedback

Track their feedback and gather insights on what the investor liked / didn’t like about your business so you can refine your story for your next meeting.

Template:

Make a copy of this spreadsheet to create your investor pipeline.

By asking yourself the right questions when vetting potential investors for your pipeline and keeping a structured spreadsheet, you can approach your fundraising as a process rather than a haphazardly, and increase your odds of landing the investors you want.

Once you have your pipeline filled and have thought through priority level, start reaching out / asking for introductions to the “low” priority investors. Why? Use these initial meetings as practice. Get really good at investor meetings and implement the feedback you receive in your early meetings when you are ready to go out and meet with the “high” priority investors. Gather insights on the questions they ask, how the meeting is structured, any data points you were missing, and nailing down your story.

Originally published on WeWork Labs Insider


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