How Investors Met Founders
Real-world examples to help you brainstorm how to build your investor network.
Well, that went fast! It’s hard to believe Labor Day is next weekend—we hope you have a great holiday!—and summer is almost behind us.
💭 Thought Bubble: How Investors Met Founders
In our most recent post, we discussed Neha Govindraj’s advice from episode 138 about the importance of building an investor network before you actually start fundraising. While we made a couple of suggestions on how best to tactically do this, such as finding common connections and attending industry events, they felt a bit general and somewhat obvious.
This week, we decided to build off of that and ask a handful of investors about the most interesting/unique ways they’ve sourced investments. For example, industry conferences were top of mind for me because we met one of SpringTime’s recent investments at an unofficial happy hour at a major industry conference. While this validates that certain industry conferences are worth pursuing, it also shows that sometimes the informal side events (i.e., those not affiliated with the conference) are just as valuable.
An investor at a professional angel group in the Midwest, who preferred to remain anonymous, told me he also met a founder via an event. After this investor finished his talk, a founder introduced himself and explained at a high level what his business does, laying a great foundation for a follow-up conversation. The angel group wound up investing a month later. What stuck out to this investor is how well prepared and proactive the founder was. As this investor noted to me, “The takeaway is that if you are going to attend an event, take the time to connect with the people you want to speak with and showcase your knowledge about them. Getting an email from a founder the next day saying they are sorry they missed a chance to speak with you at the event is a much less effective way to engage.”
In episode 102, Rich discusses how powerful an intro from a founder in a firm’s portfolio can be, which is exactly how Rohan Verma, Principal at Lewis & Clark Ventures, met the founder of an eventual investment. Rohan was traveling to Europe for a portfolio company board meeting and asked the CEO if there were other founders he should meet in the region. The CEO recommended an individual Rohan stayed in touch with and invested in a couple of years later.
Larry McHugh has been investing in early-stage startups via Atlanta Technology Angels for over seven years, and the surprising way he met an investment was (almost) in his backyard. As they were getting to know each other, a new neighbor mentioned he was starting a business. Larry was intrigued enough to ask if he was looking for investors; he was. The neighbor applied to Atlanta Technology Angels and received a substantial investment from the group, along with a personal angel check from Larry. Sometimes investors are hiding in plain sight, potentially right next door! While the odds of your next door neighbor investing are quite small, thinking outside the box of traditional investors can be helpful in finding your earliest backers (episode 131).
Two other investors, Katie Dunn, Angel Investor, Board Director, Startup Advisor, & Partner at Power To Pitch, and Becca Shmukler, Principal at Laerdal Million Lives Fund, both met founders via industry-specific Slack groups. While it ultimately didn’t lead to an investment, Becca reached out cold to a founder who she thought was building something interesting. In Katie’s case, which did lead to an investment, the founder reached out to her.
The final example I’ll give is one of my favorites, because it’s the one method folks love to hate, cold emailing. Maya Menon, Associate Partner at SeedtoB, had a founder reach out who “succinctly communicate[d] market opportunity, traction, and her own entrepreneurial ethos”. The cold email was compelling enough for Maya to take an intro call and ultimately led to an investment.
A successful investor connection can come from anywhere if you’re prepared, even a cold email, which is why next week we’ll dive into the specifics of what makes for a successful cold outreach. Stay tuned!
💰 How much are Seed-stage companies raising?
Peter Walker, Head of Insights at Carta, posted new data on the amounts raised at different rounds in the US, along with variations between primary rounds and extensions; e.g., “Seed” vs. “Seed Extension”. For primary Seed rounds, the median amount raised is $3.4M, and for Seed Extensions, the amount is $2.5M. The median amounts across all stages are down from 2021, but it’s important to remember how much of an anomaly 2021 was.
💸 Q2 2023 Valuations Report
Pitchbook released their latest report on amounts raised and valuations across different stages. Median pre-money valuation at the Seed stage fell to $10.0 million, down 16.7% from Q1 2023. Seed remains somewhat insulated from the pullback we’ve seen at later stages, though, in large part because there are still so many investors, creating demand that keeps valuations high and rounds competitive for the best startups. It will be interesting to see if demand softens in the near future as funds allocate more capital to existing portfolio companies and diminish dry powder.
😴 Decompression Zone
Consciousness remains a vexing mystery. There are so many perplexing questions around what it is and what is capable of having it (Plants? Animals? Maybe even computers?). In this podcast, Steven Strogatz interviews consciousness researcher, Anil Seth, to explore how the latest research is helping untangle the complexity. Prepare for a real mind warp.
👋 Have a great weekend!