I met up with someone who had raised over five million dollars with almost zero effort. He sent off a few emails with the terms that he wanted and the investors agreed. The round was done. It was incredible to see.
When you think it over, it makes sense. Over the years, this person has build a large network and significant credibility in Silicon Valley. He also made his previous investors a lot of money with a successful exit. He's a known commodity.
For the rest of us, we need introductions. New founders could try to meet investors for months or even years and not make any progress raising a round. Here's a quick post on how to source introductions. These people spend their personal capital by making an introduction. They may say they're not comfortable doing it yet - so be gracious and keep building.
Here's where you can source introductions:
They know your company better than anyone else. The kind of person you want as an advisor is also likely to be trusted by the startup ecosystem. Our advisors, Zach Coelious and Garry Tan, have been incredibly helpful.
2. Founders who have raised previously
If you know people who have raised previously, they are a great source of introductions, since their investors have chosen to invest in them. Note that they spend their personal capital on you, so ask judiciously.
3. Angel list
I haven't used them, but I hear they can be helpful, especially if the team decides to promote you.
The people who run accelerators take an unknown commodity, you, and then put their reputation behind you. It's like having an advisor, but at scale.
5. Current investors
As soon as someone invests, you can start asking for introductions. Investors often invest together as they trust each other's judgement.
6. Investors you have pitched, but who are on the fence
This is one that takes a little more nuance, since it's a negative signal to get an introduction from someone who's passed. You need to be reasonably confident that this isn't a likely pass and seems relatively likely they could become an investor. At the end of a meeting, you can ask, I appreciate the time you've taken to meet. Since you now know a lot about our company, who do you think could be especially helpful? Then, you can ask them for an introduction to those people. If you can turn 1 meeting into 3 more, you can quickly add more pitches to your funnel. As one piece of etiquette, you should always be willing to take money from someone who gives you an introduction.
7. Inbound interestIf your company has been around for a while, you may have gotten to know investors casually. When you decide to raise, you can reach out to them. The great thing about these investors is that you already know them. There isn't the uncertainty of both raising money and meeting someone for the first time.
8. Investors that passed previously
I especially like those investors who have passed and articulated why they passed. You can reach out to these people and explain your progress. This is yet another reason to handle rejection well (see "Treat investors well when fundraising").
9. "Cold" meetings and emails
This is in contrast to 'warm' introductions you get from other people. I've had less success with these, but you can get meetings this way. It's just time consuming, hard and unlikely you can get the volume of meetings you need to raise.
10. Move to a tech hub
This one may sound controversial, but moving to a tech hub, like Silicon Valley, can significantly increase your chance of raising a round. There is a huge density of investors here. It's a lot harder to become part of this ecosystem when you're far away. It can be done - it’s just harder.
For various reasons, some investors will choose not to invest in you. It may have nothing to do with you: perhaps they're at the end of their fund, in the middle of raising a new fund, or focusing on a specific investment category. That's why it's important to have enough conversations in the funnel, so some will convert.