Do’s and Don’ts of Pursuing Investors for a Startup

By Ron Leaf, Partner

Back when I was managing a venture capital investment partnership, I received a call from a consultant who asked if he could introduce me to an entrepreneur seeking capital for his business. Without knowing the entrepreneur was also on the call, I said ‘yes.’ The consultant handed off the call to the entrepreneur who immediately started his pitch. The business, he explained, was a new craft brewery, and he emphasized that the product would have a superior taste. He continued his lengthy description without a pause, and I was unable to comment or question.

I do not know how the entrepreneur that was seeking to start a craft brewery fared in his quest for capital. Our investment fund had a prohibition on investing in companies that produced guns, alcohol or tobacco products, so his failure to understand our investment criteria led to a waste of his effort and my time.  

Approaching a prospective investor must be done thoughtfully in order to improve the chances of success. Many investors will only invest in or with someone they know. This means getting a personal introduction to the prospect is a critical first step to getting the opportunity to be considered. It may be obvious but use your network to provide a personal connection to people who might actually consider investing. Be prepared to explain why you are approaching someone. And listen, don’t just pitch.

Connecting with a prospective investor means understanding the investor’s motivation for investing. Before discussing your great investment opportunity, get to know the investor’s interests and approach. A preliminary contact could include questions about whether the investor is seeking... MORE