Podcast: Cold Emailing Investors
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Why most first-time founders send bad cold emails and what you should do instead to get an investor's attention.
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Rough transcript:
(Not copy edited)
In this episode let’s start where many founders, especially first-time founders, start. By immediately reaching out to investors for money! This is often done before you have much to show for it and sometimes even before you have launched. It’s a very common mistake less experienced founders make and due to their lack of experience they usually don’t have a very strong investor network. So they have to do what in our business is called cold outreach, cold intros, or cold pitching. Do you get it? It’s damn cold much like polar bears' toenails.
I know this to be true because every day I personally receive anywhere between 1 and 5 cold pitches. That’s an email from a founder with whom I have no previous relationship and they likely just scraped my email from some awful database somewhere. That’s every single day, for years now and until I imagine until the end of time.
It’s relentless.
And I’m not even a very well-known investor! I can’t imagine how much cold outreach top investors receive. Their inbox must be a minefield full of very very pathetic emails from founders they’ll never work with, let alone even respond to.
Now now now, I don’t want to poo poo on all those finely crafted, albeit desperate emails you founders are working on and sending out with a hope and dream attached every single message. I do however want to encourage you to stop wasting your time on them. For your own sake and for my poor, poor inbox. Here’s why.
Firstly, and I’m trying to be honest and not mean here when I say these emails are super pathetic. Almost no investor worth their salt is going to give them much attention. They know, perhaps somewhat snobbishly, that if you had something special, a lot of traction, or a really impressive background, you wouldn’t be sending out such emails. In those cases, investors find you, not the other way around.
And on that topic that’s really how the best companies fundraise. They first create the excitement either in the form of building their core product or with traction. My old boss Dave McClure at 500 startups used to always say there are only two types of pitches in the world, a traction pitch, and a vision pitch. Take a wild guess which one gets funded more often, especially in the early stages.
By far the majority of cold pitches I get in my inbox are the latter, a vision pitch. That usually takes the form of a *very* long rambly email with little substance. I stop reading them about halfway through. I think if more founders with traction just put the damn traction numbers in the subject line may be their cold pitches would be more successful, but I digress.
Let’s warp on this, though before I go off on too many tangents just to say that sending cold emails often makes you look like a total amateur. And we work in an industry that is mostly made up of amateurs! However in this case it’s a form of noob that is less tolerated and you should probably stop and instead save that time and energy on building your company, recruiting talent to help, and of course, generating that elusive traction.
But of course, I know you won’t listen that advice and you’ll still persist. You’re a stubborn lot you founders but that’s also one of your most endearing qualities. So let’s shift now to how you can at least send better cold emais.
By far the biggest issue I see from the cold pitches I receive come down to one thing. Relevancy. These pitches often have almost no relevance to me, my history, or what I’m looking for. I’m sorry to say that I won't be investing in ‘Pakistan’s largest event ticket platform’ or ‘the leading marketplace for hotdog kiosk franchises’. Yes, these are actual pitches I’ve received lately.
Further to this, and specific to me, if my last 10 investments have been into Norwegian companies where do you think I put my focus? Yup, unless you were also born with skis on your feet I’m probably not going to be that interested. For most investors it takes about 5 minutes of research to learn a little about them and what they find interesting. Thankfully for founders, us investors just can’t stop talking about ourselves in the form of Tweets, blogs, and *cough* podcasts. So instead of using a big huge net to catch an investor trying using a fishing rod, or perhaps even better a spear. That way you can be super preciece with your outbound time and efforts. This also allows you to tailor each message and play to one of our biggest weaknesses as an invesotr, that being talking up our egos.
Second to the relevancy of a pitch the other main issue I see with cold pitches is you’re likely reaching out way too early. Most cold pitches I get are pre-launch. Almost no investor and certainly no venture fund is going to fund you at this stage, least of which some investor you have no history with. The only founders who get funding pre-launch are the ones who have proven themselves already. Usually in the form of a previous exit. If you fall in that group you are probably not sending cold pitches because your previous investors or other existing network are happy to back you again.
It actually makes me a bit sad to get these pitches because I know how much time you’re spending chasing investors instead of chasing traction, users, or revenue. You have been seduced by all those headlines of “So and so raises 10 million dollars” and “Startup that is changing the blah blah blah in some way raises a ton of money”. It may seem like there is so much money slushing around you are bound to get some! Unfortunately, this is not the case and those big rounds happen due to 100s factors, few of which you have control over or the ability to leverage at your current early stage. So ya, sorry not sorry, it’s just not going to be that easy im afraid.
There is something else important to talk about that I think those who send out cold pitches just don’t understand. That being the motivation of the various types of capital. For example, if you’re pitching a fund you have to show them why this will be HUGE. Their incentive structure only works if you 10x (or more) their investment by creating a business worth more than 100 million dolllars. Anything less they just can’t even engage with. Really they almost need to see unicorn potential in every investment they make. So the pitch here is “Let me know show you why this will be a massive business”. If it’s not going to be massive you really have no chance with most funds. VCs may act approachable and quote ‘value add’ but unless you’re building a big business they really don’t care. They won't tell you this, and they might even take a meeting with you but that’s only to see what you know, and to see if you have that massive business potential. Often they’re meeting with you not to invest now, but wayyyy down the line once your business is big or you have pivoted a few times and starting to figure it out.
When it comes to angels the motivations are a little bit different. Here angels are often so early that it’s impossible to know if a business can ever get huge. I typically work around this stage and many times have been asked “how do you know if it’s a good investment”. And while I have a few good or bad signs I look for the truth is I have absolutely no idea who will succeed. Usually the ones I’m certain will be a smash success are out of business within a year. So I’ve stopped trying to act like I know and just be patient to see where it goes.
So the pitch to angels is again more about relevancy and by saying to them “I want your unique experience and advice in building this”. With this in mind it is much better to ask for advice and help than to ask for money from the onset. More often than not, and if they like you, those advice sessions can quickly morph into a potential investment. This is really how I work with cold outreach emails asking for investment right away going right to the trash. And those asking for relevant advice getting at least a consideration and some cases an initial meeting. I mean we’re not a god damn ATM machine, please stop treating us like one.
Now I worry I’ve just made you feel depressed while also making fundraising feel yet more unobtainable. For that I’m sorry but someone had to tell it to you straight. So me try to leave with something a bit more helpful and something I learned from another former 500 Startups colleague Eddie Thai. He surmised things well by saying to get funding you have to win both the heart *and* the mind of the investor. That’s really the big secret and more fodder to why a single cold email will not get you there. To win the heart that can take time and we really need to get to know you as a person first. And to win the mind, well that probably takes time but more specifically it takes data over time. We need to see the trend and the momentum of your business. So instead of sending these long shot single emails, send the investors you want to work with quick monthly updates. Those we much rather prefer and it helps to see you progress. I’ll do a future podcast on what those emails should look like but at a high level, it’s 3 bullet points telling us what happened, don't forget the data and metrics, and a sentence or two about where you might need some help. This is often called the ask and it’s a great way to get a new investor engaged in what you’re doing.
Until then, I wish the much growth in metrics and for the love of god, please don’t email me until you have that.
