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The second most common reason why startups fail (29% of cases) is due to running out of funding and capital. This underscores the relevance of fundraising & investor relations as a continuous process for startups that are growing.
However, finding the right investors to fund your startup can be daunting. As a founder, attracting the interest of potential investors is crucial for securing funding along with having a well-thought-out plan on how to go about this task.
In this guide, we’ll break down the process of investor seeding into manageable steps. We’ll cover everything from developing a clear strategy for reaching out to investors to navigating the sometimes time-consuming process of securing funding.
What does investor seeding mean?
Investor seeding is the process of finding and building relationships with relevant investors for an upcoming investment round. This involves researching and reaching out to angels, funds, and multiplicators who are willing to invest in your business or can aid in spreading information about your startup. It’s not just about getting money, it’s also about finding investors who can offer relevant opportunities or introduce you to useful networks.
To do this well, founders need to do thorough research on which investors they require, and how they can reach them and start nurturing these relationships. That means you need to be able to know what is the best way to get their attention, where they spend their time, whether are there people that can introduce you to them or help you get closer, and what other support you might require from others. But investor seeding is also about getting interest from investors proactively, how do you popularize your startup and funding round with the right investor circles.
By focusing on a strategic approach to investor seeding, entrepreneurs can improve their chances of finding and attracting the right supporters for their startups.
Essential components of the investor seeding process:
- Identifying investor targets: Research what kind of investors you are looking for and require. Which background and focus should they have, how much involvement do you want to have with them, which value-add shall they provide beyond capital. And also then find the investors fitting your target.
- Researching potential investors: Conduct thorough research to learn more about identified investors. Explore their investment history, portfolio companies, and areas of interest to assess their suitability for your startup.
- Access points & channels: Determine how you will be able to reach these potential investors, whether through industry events, networking channels, online platforms, intros from existing contacts, or through other means.
- Preparing & updating your key data: As you seed your startup you will need relevant data about your startup and your progress. That information needs to be available and kept up to date.
- Identifying & leveraging existing networks: Tap into your existing network of contacts to expand your reach and discover potential investors.
- Strategic engagement: Develop a strategic approach to engaging with potential investors and multiplicators.
Why is investor seeding important?
Investor seeding lays the groundwork for securing the right investors who can support your business. This is why it matters:
Strategic investor selection & outreach:
Startups need to be proactive in choosing and picking the right investors who align with their specific needs and strategic objectives. Founders can assess potential investors for their industry expertise, networks, and track record of supporting similar ventures. This proactive approach allows startups to prioritize quality over quantity, focusing on building long-term partnerships with investors who offer not only capital but also strategic value and support.
Early initiation:
By starting early, startups have the time to explore various funding options, build relationships with potential investors, and strategically position themselves in the market. Early engagement signals seriousness to investors and provides startups with the opportunity to mitigate financial pressures and make informed decisions instead of rushing to secure funding as their runway is becoming thinner and thinner.
Capital injection:
Founders struggle to invest in research and development, marketing efforts, and infrastructure, hindering their ability to compete and grow in their industry & need a capital injection from investor seeding because it provides them with the financial resources necessary to fuel their growth, develop their products or services, and scale their operations.
Validation & credibility:
Through seeding it is possible to receive validation and build credibility with investors. You highlight your potential and capabilities and demonstrate professionalism beyond just a short-term capital requirement.
What is expected?
As you engage with investors there are a couple of things you should consider to build meaningful relationships:
Comprehensive research:
Startups risk wasting time and resources by pursuing investors who may not be aligned with their needs or investment criteria. Doing comprehensive research helps you avoid teaming up with the wrong investors, build better connections, and boost your chances of getting the right support to make your business grow and succeed.
Understanding thesis & expectations:
Investors don’t always clearly state what they expect from startups. Aligning with an investors thesis is a base requirement to even have a deeper conversations, but beyond that the expectations likely include timely responses to inquiries, transparency about challenges, regular updates on your startup’s progress, and professionalism in your communications. Startups should view the seeding process as an opportunity to cultivate long-term relationships with investors, fostering trust and collaboration for sustained growth.
Involving existing investors:
Existing investors can play a valuable role in introducing startups to potential investors. They can introduce the startup to new potential investors, which is super helpful because it expands the network of people interested in supporting the company. It is one of the best ways to show credibility to other investors, as another investor gave their seal of approval on your company and provided capital to back their confidence in you.
Building relationships:
Building relationships with investors requires more than just pitching your startup. It involves understanding their interests and priorities, customizing your communication to resonate with them, and consistently following up to nurture the relationship. By investing time and effort in building rapport, startups can increase the likelihood of securing investment and long-term support.
Keep them updated:
Investors appreciate entrepreneurs who share regular and timely updates. Trust isn’t built overnight and investors want to see the ups and downs and if you are able to deliver on your promises and projections.
Issues & challenges:
The process of seeding for investors and funding can be challenging for startups. Here’s a breakdown of some specific challenges a founder might face:
Finding the right fit:
Finding the right investors who grasp the startup and their needs as well as offer the appropriate funding, takes a lot of work. As this will be a long-term engagement, it can backfire if you onboard unsuitable investors and in some rare cases even hold dangers, such as investors working with a competitor.
Positioning your value proposition:
Many founders have challenges explaining the value and properly “selling” their startup to investors. They might struggle to explain the core idea and value, traction data, market potential, and growth plans compellingly. It can be difficult to receive attention and support to obtain funding.
Persistence and engagement:
Engaging investors is not a one-time task but a continuous process that requires persistence and effort. Startups need to consistently reach out to potential investors, follow up on leads, and cultivate relationships over time
Benefits of DueDash
What is the best way now to start seeding for potential investors with all the above-mentioned elements in mind? You don’t have to look far. DueDash enables you to search and build meaningful relationships with investors as well as provides you with insights at every stage of your investor process.
Comprehensive data management system: A single system that streamlines data collection, organization, and presentation & guides startups to set up and manage all their data eliminating the need for multiple platforms.
Effortless information updating: Founders can easily update their core information such as 5T and KPI data within the system. This allows founders to stay on top of their business metrics and make informed decisions promptly.
Sharing core information with investors: Startups can benefit from proactively sharing key information about their business with potential investors. The public profile-sharing feature allows founders to share their profiles with potential investors seamlessly. With effortless sharing, real-time updates, and templates, startups can communicate their value proposition effectively.
Updating and maintaining investor data: Startups can upload information on their exchange with investors to streamline communication and provide regular updates. By analyzing investor engagement, founders can customize their messages, prioritizing those who have expressed the most interest in their pitch.
Pipeline management: Startups can benefit from actively managing a pipeline of potential investors. This involves systematically adding new leads, tracking interactions, and progressing them through the fundraising process. By organizing investors into a pipeline, startups can prioritize outreach efforts, monitor progress, and maximize efficiency in securing funding.
Streamlined communication & reporting: With DueDash’s built-in messaging system, you can send personalized messages to connect with relevant investors, share updates, and respond to inquiries promptly, fostering meaningful engagement and building trust with investors.
Detailed analytics: Founders gain access to comprehensive analytics, including which investors viewed their deck, their contact information, frequency of views, specific slide engagement, and time spent on each slide. This detailed data allows for a more targeted follow-up strategy, ensuring that you can prioritize outreach to the most engaged investors.
How to use DueDash for Investor seeding?
Follow these steps to get started:
Create your profile: Begin by setting up your DueDash account and fill in the required data for investors.
Fill your data room: Find the data room option in the menu on the left side. Upload your pitch materials, sales & marketing documents, as well as further data in the respective data room levels.
Profile sharing: Utilize the public profile link to share your pitch deck. This can include sending it directly to potential investors, incorporating it into your email signature, giving it to your network for introductions or sharing it through your network on social media and professional networking sites.
Adding deals/ investors in the pipeline: Go to the search area in the left menu section and start adding the potential investors into your pipeline.
Search: Search Investors using the search functionality in the left side menu. Apply filters to find relevant investors for outreach
Pipeline management: You can start approaching the deals in your pipeline which can be managed using manage deal cards across the pipeline.
Messaging: Send direct messages and communicate with the investors.
Notes: Start collecting relevant notes and Q&A for investor questions
Send out update: Decide who should receive the update and send it or schedule it.
Review analytics inside DueDash: Dive deeper into the analytics to understand the nuances of investor engagement. This data is crucial for refining your pitch and identifying the most interested investors for follow-up.
Get started with your investor engagement today and have your own investor CRM at hand.
