Fundraising Guide P.4 | Investor Communications
Part 4 of our Comprehensive Fundraising Guide with Indie CPG & Amirt Richmond discusses strategies on all things fundraising. From researching the right investors, customizing outreach emails, and securing and preparing for meetings, this guide covers all the bases.
By now, you’ve learned and created:
- Where to find investors and a list of target funds to pitch
- VC personas and how to design your dream cap table
- A well-designed deck and story communicating your differentiation
In P.4 of our fundraising guide, you’ll learn:
- How to research key people on investment teams
- Importance of customized email pitches
- Securing and preparing for pitch meetings
- Creative ways to follow up on a pitch meeting
- Best practices for keeping in touch in between raises
- What to look for in a value-add partnership with a fund
- Understand a VCs priorities compared to yours
- Managing rejection and mental health along the way
Research the Right Person at the Fund to Pitch
In P.2 of our guide, we outlined how to make a target list of funds to pitch. Now you need to decide WHO to pitch at the fund, as some funds have investment team members focused on specific sub-sectors of CPG like beverages, wellness, or pets. You should also look for signals in their past work or volunteering that they’d understand your brand more than other investors. Maybe they worked at a brand in your aisle, invested in a complementary brand, or published a market landscape about your sector hinting they want you to reach out.
Look up their profiles on LinkedIn and Twitter, and maybe they publish a blog or newsletter too. Do you have anything else in common with them on your resume or values alignment? Their social media profiles can also give you a sense of their persona outside of work. Maybe you share a cultural connection with them?
From my experience, Analysts and Associates at CPG funds actually have a voice at the table compared to tech funds where the teams are much larger and structured. If a junior VC reaches out to you, they’ve likely already spoken to their team about your company and it’s worth an informal chat about your brand. It’s also possible that one of the Partners at the fund asked them to reach out to you based on thesis alignment.
Customize Every Outreach Email
Whether you’re sending a cold email or an easily forwardable email for VC intros, ALWAYS customize them for the recipient. The majority of the emails can be the same, with personalization for their name, fund, and a sentence or two about why you’re specifically interested in meeting them. A simple template should include:
- An introduction of yourself and a quick description of your brand (your product(s), value prop, market size, etc)
- Overview of your traction to date, with any big wins like key retailers and 2022 revenue
- 1 sentence about how much you’re raising and a few big reasons why, like retail growth. If you already have a term sheet from a lead investor, mention your valuation here too, otherwise skip that for now.
- 1-2 sentences about why you want to meet them. Maybe you see a clear thesis alignment with their fund, you heard they are helpful with retail strategy, you admire XYZ brands in their portfolio and aim to grow on a similar path, or you share a cultural connection beyond professional interests.
Securing the Meeting and Coming Prepared
Now that you have upcoming pitch meetings, you want both parties to be prepared. If you haven’t already, send the potential investor a link to your deck ahead of your meeting. Use a digital link like Docsend so they always have the most updated information and so you can get analytics of who is viewing your deck. A Loom pre-recorded video is another way you can send your pitch ahead of time in a more interactive format.
In Part 2 of our fundraising guide, we encouraged you to narrow down your target list of funds by stage alignment, so at this time you should only be pitching funds that write the size checks you are seeking.
Hopefully, investors take the time to read your deck and website before the meeting. But in case they haven’t, don’t use the 30 minutes to just read through your deck. At the top of the call, ask them if they’d like a full overview or summarized pitch, which can give you a hint if they actually read your deck or not yet ;)
On your side of the table, you can practice your pitch with a co-founder or advisor, make sure you feel relaxed right before the call, and try not to schedule meetings right after VC pitches in case the calls go over on time.
Remember Part 3 of our guide when we said you need to communicate more traction than vision in the first half of your deck? This is even more important in a live pitch meeting to keep your audience engaged and get them interested in a second meeting. The most engaging pitches are conversations; they shouldn’t feel like a cringe interrogation for either party. You are both trying to get to know each other to gauge potential for a long-term partnership, so start a list of goals you want to achieve after every pitch meeting. A few suggestions for goals:
- Confirm that the fund is aligned with your stage and sector, and note any trends the fund is watching.
- Learn something from every VC you meet about what they truly look for and the state of fundraising. What do the founders and products in their portfolio have in common beyond a sector thesis?
- Teach every VC something about your sector. You will most likely know more about your sector than they do, so use this as an opportunity to show off your unique intel. If they don’t invest, they are more likely to refer you to another fund because they now know you’re an expert in your sector.
- This theory breaks when you pitch a sector-specific fund like a VC that only invests in plant-based products. In this case, be prepared for them to know as much/more than you do about your sector. They are more likely to ask you tough questions to ensure you’re an expert.
- Communicate that you are a resilient, resourceful, and responsible founder building a brand worth investing in, and highlight your 2023 plans.
- Get thoughtful feedback to integrate into your deck and future pitches. Keep a list of all the feedback you get during fundraising to find the patterns vs. anomaly advice that was more rooted in opinion.
- Understand if there is potential for a second meeting or to keep in touch until your next raise.
If you need to reschedule your pitch for a reason out of your control (e.g. a company or family emergency), kindly let the investor know as soon as possible and suggest a few alternative times. If the VC asks to reschedule your meeting, don’t take it personally as they may have overbooked their calendar or have a last-minute work trip, or they might also be working through an emergency in their life. Be understanding and patient.
Following up on a pitch meeting
Before a pitch call or meeting ends, you should have a sense of whether the investor is interested in learning more about your brand or not. A few ways to gauge interest at the middle to end of the meeting:
- Take note of their questions, especially data they asked about that isn’t in your deck. Mention you will follow up with those materials.
- Ask them what their typical timeline and process is for evaluating investments as every fund is a little different in how they collaborate internally to analyze companies and build conviction.
- Ask if they’d like any other information to decide internally if your brand is a fit for their fund, as your goal right now is getting a second meeting (it’s unlikely you’ll get a term sheet at the end of a first call.)
- At this point, they might be able to answer this for you on the phone. It’s easier for a fund to tell you no faster than they’ll say yes after one meeting. They are doing you a favor by saying no quickly, so that you can focus your time with other funds.
- You can offer to send samples for investment consideration, and some funds will purchase your products themselves, sometimes before they even reach out to you.
- Alternatively, you can give a fund a discount code for your site so they can go through your purchase journey and receive the same package your customers do.
If they say no on the call or at the end of the meeting, do your best to still follow up and thank them for their time. Most people working in venture capital want to build a career as an investor at multiple funds over the next two decades. You might have another chance to work together when your company has scaled, or if they move to another fund that is more in your size/thesis zone.
Keeping in touch in between raises
When you hear your brand is in their thesis, but too early for their fund, you have a few options:
- Ask if they’d like to be added to your progress updates you send to advisors and your cap table to keep in touch. Use a newsletter tool like Beehiiv so you can see who is opening your updates, get an ROI on your time, and know who to follow up with a few months before when you go out to raise again.
- Feel shy about contacting them again because you were lightly rejected. This is a common feeling, BUT you might be perfect for their fund in 1-2 years. In this case, ask over email what metrics they look for beyond an ARR floor for investment in the future to keep as a note in your investor target list.
- Follow them on LinkedIn or Twitter and engage with their content, especially when they ask questions to their audience.
How to decide if YOU want to partner with an investor
We know it’s a challenging fundraising environment, but that doesn’t mean you have to go into a long-term partnership with funds you aren’t jazzed about working with. Just like funds are now doing due diligence on your brand, it’s important to keep a list of your dream investor attributes as well as reasons for YOU to say no.
- Are the terms they want fair, given the current value of your brand and market conditions?
- Is the investor someone you see yourself relying on for insights, advice, and introductions?
- Are their value-adds (e.g. access to retailers, co-investors, talent, key partnerships, software & vendor discounts) aligned with what your brand needs in the next 1-3 years?
- Are you speaking the same language? Are your goals and priorities aligned with their vision for your brand?
- Do you admire their past work, current portfolio, and outlook on the industry?
- Are there other brands in their portfolio you can learn from, and ideally connect with for knowledge sharing and collaborations?
- Does this fund reserve capital for follow-on investments or bridge rounds? If no, do they have a good reputation and network of co-investors?
Understand a VCs Priorities Compared to Yours
Investors are in the business of evaluating and supporting brands via dozens of pitches each month. Your priority is to secure working capital as soon as possible. This means you’re in a rush to raise faster than they are to deploy their capital under management, so it’s important to stay calm and cool.
The only way you can speed up their decision to invest or not is to have thoughtful answers to their questions and all of your materials ready that they might ask for. Additional materials may include a financial model, data room with your retail and/or DTC traction, and references from your other investors and advisors.
Be transparent about your timeline to close this round, but don’t try to force a VC into feeling fomo. They have to feel that on their own to build conviction and team-wide excitement about your brand.
- Good: Our goal is to close by XX date, with room to extend for serious interest. We currently have X% or $X of the round committed.
- Bad: We’re closing Friday, you in or out?! Lots of other funds are interested…
The problem with communicating your fundraising close deadline too early in a pitch conversation (especially before you have a lead investor) is it will undoubtedly change in this time in history. When you go back to the same fund saying there’s still time to participate after you told them they missed the deadline, it means you didn’t get the commitments you thought were done deals. Better to say you aim to close by the end of the quarter or before the summer, and then keep in touch with them until they tell you they are going to pass on this round.
How to Take Rejection Like a Champion
Hey, we know nobody likes to hear the word no, but it’s a means to an end during the funding process. Is there someone on your team, maybe a co-founder, senior leader or advisor, who can be your fundraising co-pilot? Having a trusted collaborator to work through deck feedback, secure introductions, and manage rejection will do wonders for your mental health over the four to six months it will take to secure new working capital.
Fundraising is a numbers game where you’re likely to hear no from most of the VCs you pitch. This is why we encouraged you to make a detailed target list of funds aligned by stage and thesis, so that when you hear no, it’s from investors who have context about your sector and insights from complementary brands they’ve spoken to recently via pitches and their portfolio companies.
How you respond to hearing no from an investor will also determine if there is an opportunity to partner in the future, or if they might refer you to another fund.
Additionally, consider getting comfortable with rejection outside of fundraising. You might try:
- Doing your own grocery demos, which will also give you consumer insights for your pitch deck
- Volunteering to secure signatures for an environmental or animal rights organization
- Seeking support from a leadership coach to dig into your relationship with rejection, which may benefit you in other areas of your business across retail sales, partnerships, and recruiting.
- You can also practice your pitch with other founders you trust, maybe as a group video call once a month. If you don’t have a fundraising co-pilot, founder friends on a similar fundraising journey are the next best thing!