Source: Kim Reisman, OpenView Partners
Here’s my take on what to do (and what to avoid doing) as you seek to maintain good and frequent contact with interested VCs.
Create a Newsletter
Of all of the founders/CEOs I speak with, very few have implemented a dedicated newsletter geared towards potential investors. This is not to be confused with a customer-facing newsletter, as the content and the audience differs greatly. If you have gotten around to it — thank you! If you haven’t, I highly recommend sending out a quarterly or biannual note to a “friends of” list that includes potential investors with tailored content for this constituency. Here are some ideas of things to include:
More often than not, founders are tight-lipped about specific facts and figures, and most investors understand that sharing detailed financial information without a confidentiality agreement in place is not an option for some businesses. That said, being open with round numbers can REALLY help investors get a basic sense in an email (versus a conversation, which is more time consuming for you!) whether they are a good fit for your company in the near-term based on their firm’s mandate.
While I respect that some will prefer to keep it vague in a newsletter, some kind of indicator of size and growth — even if you want to give a ballpark figure (Ex: We ended 2012 at a seven-figure run rate, having seen around 100% growth from 2011) — is really helpful for your readers and can save you time if you’re trying to execute a raise.
2) New Clients
If you’ve recently signed up an interesting client (and are legally allowed to discuss it), this is a great place to brag! Details surrounding their use case can also be great to jog investors’ memories on why clients choose your product over the competition.
3) New Hires
Who have you hired recently? Reading that you’ve hired three new inside sales reps in a quarter is code to me for “we are growing and ramping sales as a result” — expect a call. Seeing that you hired a VP from a competitor or a big name in your industry is a vote of confidence for what you’re doing.
4) Open Positions
It’s no secret that most VCs have broad networks. Spreading the word that you’re looking for, say, a VP of Product amongst this group might help you get some great inbound candidates.
5) Company Culture
Did your employees participate in a local startup competition or charity event recently? Perhaps a publication named the business a “Best Place to Work” in your city. Investors find these details interesting, as they show that the leadership team can handle generating growth in tandem with engaging and ultimately retaining great talent.
Don’t Be Rude
This last point is an important one. While I’m all for expressing an opinion, showing snobbishness and public derision for the investor community does not serve you when it comes to fundraising. See Andy Dunn’s (Bonobos) recent letter “Dear Dumb VC” for an example of what not to do when it comes to marketing to VCs. While I appreciate the pride he takes in his current investors, I feel that the pejorative tone of his article did only negative things for his business.
When all is said and done, the VC/Founder relationship is often a close or even a personal one, and investors will likely be turned off by rude behavior even if your company is interesting to them. Nobody is impressed with the CEO who is late to a call or misses a meeting, so my advice is to always use good manners when communicating with each individual you interact with at a firm (partners, interns, associates, assistants, analysts, etc – we all talk to each other!).
Marketing to Investors: 3 Quick & Easy Wins
To wrap up, I’ll reiterate that there are few easy and non-time-intensive steps you can take in order to optimize your relationships with potential investors with the goal of working with a best possible fit partner. If nothing else, I urge you to consider the three following pieces of advice:
- Meet a lot of investors, take the necessary steps to understand and remember what each firm/investor will bring to the table, and know that this will help you make an informed decision on who to work with rather than simply an emotional one.
- Proactively keep investors informed of important developments in your business.
- Avoid actions that will negatively affect your relationship with a potential investor.
About Scale Finance
Scale Finance LLC (www.scalefinance.com) provides contract CFO services, Controller solutions, and support in raising capital, or executing M&A transactions, to entrepreneurial companies. The firm specializes in cost-effective financial reporting, budgeting & forecasting, implementing controls, complex modeling, business valuations, and other financial management, and provides strategic help for companies raising growth capital or considering M&A/recapitalization opportunities. Most of the firm’s clients are growing technology, healthcare, business services, consumer, and industrial companies at various stages of development from start-up to tens of millions in annual revenue. Scale Finance LLC has offices throughout the southeast including Charlotte, Raleigh/Durham, Greensboro, Wilmington, Washington D.C. and South Florida with a team of more than 30 professionals serving more than 100 companies throughout the region.