Creating a Roadmap for Engaging Investors: Advice for Startups

Starting a business is an exciting but challenging endeavor. One of the most daunting and important components of a startup’s success is obtaining external capital. To obtain the investments necessary to launch, scale and achieve success, entrepreneurs should map out a plan and dive deep into the world of tech investment.

Knowing how to discover appropriate investors and engage them in meaningful conversations is vital, but often times it's a daunting process. With high rejection rates and unknown timelines creating challenges, startups need to be prepared with a roadmap of their own. Below, we have a few points of advice that can help startups get the ball rolling on their journey to finding the right investors and engaging with them.

Research & Understanding

Understanding the investor landscape is a critical first step in the fundraising process. Start with researching venture capitalists, private equity funds, corporate venture capital arms, angel investors, philanthropic investors, and other types of groups or individuals who may be willing to invest in your startup.

Become an informed entrepreneur. Research investors and their portfolio companies, and plan for strategic conversations around their interests and goals. Learn about their investment type, size of investment, investment criteria, and the focus of the startups they back. While larger funds are the norm, there are opportunities for smaller funds on the rise, so don’t limit your research to just the big-name venture capital firms.

There are a variety of resources you can use to find potential investors, including:

- AngelList: angel investing and startup job platform

- Crunchbase: database of investor and startup profiles

- VCgate: database of venture capital and private equity firms

- Digital.NYC: digital industry hub to connect companies, investors and resources

File the Necessary Paperwork

Before you start reaching out to potential investors, you need to make sure that you have secured the legal and regulatory components of starting a business. You need to register your business with the appropriate government agencies, set up corporate accounts, open a business bank account, obtain licenses or permits, and evaluate intellectual property issues. All these factors must be in place before engaging investors and taking on investments.

It is also important to be aware of some of the financial regulations and laws in your industry so you can address investor questions confidently.

Identify Ideal Investors

Once you have prepared for the legal side and conducted research on potential investors, begin to compile a list of startup investors and angel investors that meet your criteria. Your list should include target objectives and include criteria such as target geographies, stages of investment, corporate investments versus private, areas of focus, and other criteria that is most important to your business.

In order to reach potential investors, you can present a concise and compelling message, which will allow them to better understand why your company is a good fit for investment. In terms of investors within your target list, it will be helpful to learn more about individual investors and the team behind them.

Connect & Start Conversations

Arguably the most important step in the investor section process is connecting and starting conversations. Investors receive hundreds of emails and pitches weekly, so make sure you make yours stand out. When crafting your messages, keep it short, succinct, and make sure to include pertinent details to pique the investor’s attention and help them review with ease.

If you do not receive a response, do not give up, as investors may be too busy to reply. Don’t be afraid to contact them again—emails can always get lost and investors often travel, taking them out of their normal email routine.

Engage in Meaningful Discussions

Once an investor shows interest and responds, engage them in meaningful conversations. Make sure to express your ideas and plans in terms of company goals and objectives. Ask what the investor is looking for in terms of success metrics and use this information as a guide to navigate the conversation.

Be prepared to discuss any form of due diligence. This can include offering financial projections, answer investor’s questions, and clarifying any information they may request. Also, having an executive summary or even creating a website dedicated to your company will make your pitch stand out and give the potential investor an idea of what your company has to offer.

Last Steps & Making Closing Proposals

Once investors come to a conclusion that your company as an opportunity for success, you may need to negotiate in order to reach an agreement. It is important to present financial milestones and stress the importance of achieving these goals. Once the roadmap is established and milestones are cleared, the investor may be ready to close the deal.

At this stage, it is crucial to put together closing paperwork and agreements including: a term sheet, subscription agreement, shareholders' agreement, and a dilution table. It is essential to understand the terms of the investment such as the ownership stake, liquidation preferences, and voting rights.

Final Thoughts

Finding and engaging investors is a critical step in the startup process. Being aware of the market and its various types of investors, making contacts, and engaging in relevant conversations can help you prepare for a successful closing and create a stronger relationship with an investor.

Following the steps detailed in this article, from research to closing the deal, will help entrepreneurs to create an actionable roadmap for finding and engaging investors. With preparation, awareness, and practical guidance, startups can make their pitch stand out and capture investor attention.