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One of the trickiest parts of any fundraising process is getting real investor engagement.
Often we hear from founders that the investor is in, only to find out later that they’re not really. Complexity is based on two dynamics. First, the founders have happy ears and, second, the investors have FOMO and want the opportunity to be in the cycle.
These dynamics are not great for the founders because, as the investors withdraw from the cycle, the cycle can collapse. The root of the problem is the lack of clear and thoughtful written communication. Here is the protocol that can help founders avoid this problem.
1. Verbal commitment.
At the end of each investor meeting, ask the investor if he is interested. If they are, ask how much they want to invest. If the investor indicates the amount, it means that the interest is potentially real.
If the investor is not there yet, he will tell you. If so, ask what else do they need to make a decision and what are the next steps.
If the investor wants, say, $ 50,000, ask if there are conditions or if they are met. Some typical responses to the condition will be “I am on hold”, or “I am if you take a paid tour, and get institutional direction (which I would interpret as they are not). ”
Whatever the answer in this situation, think verbally about what you heard.
Literally say “You are for $ 50,000 pending conditions” or “You are for $ 50,000 provided we take an institutional tour”. Ask the investor to confirm verbally. Then say that you will send them an email to confirm all of this in writing. It is essential that you tell them are not until they confirm by email.
Related: The 5 Best Pitch Tactics I Heard As An Angel Investor
Ask them to confirm in writing.
In the evening of the same day, send a summary of all points and details to the investor with a request to which he responds with the YES to confirm. Make the subject of the e-mail: your COMPANY NAME. In the body, be concise and precise without adding anything more.
If the investor responds, you are all ready and can count the investor as committed. If the investor responds and says you haven’t done it right and is making changes, think again with a clean version that includes the changes.
If the investor does not respond, it means that he is not really involved.
If you raise on the note and make a closing, then in your written validation email, attach the convertible debt note and the transfer instructions. This way the investor can view the note, ask questions and then send the money to you.
If you are not closing, you must add an investor to your list of committed investors and keep them updated regularly.
Follow up quickly every two weeks to keep investors engaged. Good rounds have momentum and you want investors to feel good about investing. The update email should include business and cycle progress.
Keep in mind that if the cycle does not proceed, it can be a stop for the investor, and he can withdraw. However, it is always best to keep them informed and to be transparent.
Investors are much more likely to stay with you if you communicate with them regularly.
Related: How to Find and Find Angel Investors
Leverage committed investors.
In addition to keeping investors engaged during the cycle, you need to leverage them to get more investors. After a few days, they are on your tour, contact them and ask if they can introduce you to other investors. The intros that come from committed investors are always very powerful. Ask for permission to tell other potential investors that this particular investor has entered the cycle. Again, determined investors help create leverage.
The more investors enter the cycle, the faster your cycle should go, because you get a network effect and build momentum.
At Techstars NYC, we regularly see a problem when the founders do not follow this protocol. Their rounds do not meet as quickly. As a founder, it is always better to be clear and know exactly where the investor is than to live in the country of a may be.
Related: How To Show Investors That Your Startup Is Worth The Money