How to grow your network before you need to raise money
Early stage founders often ask me for advice on the best ways to raise money. Unfortunately, the question usually comes when they actually need the money.
That's a dangerous spot to be in. Raising money for your seed-stage startup is hard. It's even harder if you don't already have relationships with investors. That's why we always tell founders to start networking early. As John Hill, Network Catalyst for Techstars, always says, "Build your network before you need it."
"Build your network before you need it"
That's much easier said than done, of course. VCs are busy and they won't always have time to meet with a seed-stage company. The secret weapon? VC fund associates. These more junior team members can often be overlooked but play a critical role as scouts and sources of deal-flow for their respective funds and internal advocates for your company.
Now, it's likely that they, too, are too busy to meet with you. But they're more likely to want to establish a connection and keep track of your company, because your company could one day be an attractive investment for their fund.
I believe that there's a quick and relatively painless way to create these relationships and keep them warm. It starts with an introductory email making a modest ask: Can I include you on our company email update? Then follow through with regular email updates to everyone in your network.
"Associates are more likely to closely read messages from a founder"
VCs are drowning in email, and the same is true of associates. But associates are more likely to closely read messages from a founder, as their primary job is to be on the hunt for and build relationships with promising startups.
There's a formula to both of these, so I'm providing templates you can use for your own.
Template #1: The Permission Email
This first, cold email still needs to be tight. It should provide at a glance all the information the recipient needs to know about you, and include a clear ask. In this case, you're asking for something small: permission to include them in a monthly update.
Still, even that requires doing some homework. Make sure you have qualified your investors, so that you know whether that firm invests in companies like yours, including sector, stage, check size, geo, and whether that fund has made competitive investments. (For more on this, read our Fundraising 101 Deck).
Here's what your email should say:
Subject: [My company name] Updates to [Fund Name]
I am a founder of [insert company name].
I'm writing with a quick ask: My company sends out email updates on our progress and highlights when we hit key milestones, and I would be grateful if I could include you in the recipient list (which is always bcc'd).
I'd love for you to get to know our company early, before we start looking to raise money, as there could one day be a good fit for us to discuss a potential investment, based on my understanding of your fund's thesis, sector, geo, and check size.
By way of background, we're a [location]-based company that [short description]. We're [age], we've raised [$] in seed funding, and have [most impressive result]. Over the next few months we expect to [ambitious, but achievable goal].
Would you please let me know if you have any objection to us sending you our update?
Template #2: The Update Email
Remember, at this stage in your company's life, your primary goal when it comes to investors is to build a network of people who know your company and can follow its growth. This is also an opportunity for a VC to respond to you directly if they see something that intrigues them, without you making an ask of their time.
That's the point of this next email: you're making someone aware of your priorities, milestones and challenges. You're not asking for money, and you're not asking for a meeting. It's just a succinct update that you can send to many people. Use a recurring subject line like "[company name] [month, year] update" so that the email will be easy for someone to find later.
This email isn't the same as the one you'd send to investors, but it's close. You won't need to disclose your cash burn and other metrics that your seed backers want to know. But you should quickly recap any revenue progress, exciting hires, customer traction, product developments and other meaningful news.
For early stage companies, you'll likely be dealing with the same challenges for months at a time. That's why a milestone based email can work well. If things move quickly, once a month is a nice regular cadence.
The email is an opportunity to let people know what your priorities are and where you need help. Don't expect recipients to reply with advice or introductions, but by including these you at least give them the opportunity to, and you're slowly creating a relationship filled with content and context.
Here's what your email could look like:
Subject: [company name] [month, year] update
It's been a great [quarter/month/etc.] here at [company name]. Since our last update, our focus has been on [thing 1], [thing 2], and [thing 3].
- [key result 1, e.g., product advance]
- [key result 2, e.g., customer traction]
- [key result 3, e.g., financial milestone]
This month, we're focusing on [new focus]. Our goal is to [goal].
The biggest challenges we're dealing with right now are:
- [challenge 1, e.g., technical challenge]
- [challenge 2, e.g., competitor just raised money]
- [challenge 3, e.g., customer request you don't know to address]
If you know anyone we should talk to about any of these issues, please reach out.
Until next time,
It's important to be truthful. Don't overstate your achievements or understate your challenges. And of course, for all mentors, advisors, investors, lawyers, bankers, and other key players in your network who you're sending this note to, ensure that they are all BCC'd.
"Your goal is to sustain and grow your network"
Your goal is to sustain and grow your network. If people feel misled, they won't help you. But if you do the upfront work to find relevant associates, and deliver a regular update with relevant information, you can make people familiar with your company and lay the foundation for fundraising conversations later.
Good luck, and reach out anytime if we can help. And, of course, do feel free to include me on your monthly updates as well!
If you found this helpful, please check out our Startup Insights page for more advice.