13 August 2020|Fundraising, Latest Posts, Pitching Skills
It might seem incredible that an unsolicited email from a startup founder to an investor they’ve never met could result in a response, let alone a multimillion-dollar deal, but it does happen. I know because we’ve made investments this way, including one of the most valuable companies in the Storm portfolio, which came to us through a cold email. In this post, I’ll explain the qualities that can make a cold email successful—at least for me.
Target your email appropriately
If you’re thinking about blasting out a mass email to every investor you can find an address for, you’re wasting your own time, not to mention that of any potential investors. If I see a message that I can tell has been sent or Bcc’d to 3000 other investors, I’ll probably delete it without reading, as I imagine you would too.
We all get a ton of email, and drawing from my own inbox as an example, I get a shocking number of emails from entrepreneurs who shouldn’t have targeted me for whatever reason. For starters, it’s no secret that my focus is B2B SaaS; if you’re working on a life sciences or consumer product business, I wouldn’t know how to build that business, and I’m certainly not the right fit. This advice isn’t limited to a specific sector, either—it also applies to the stage of your business. If you’re just a team with a prototype or an idea and no revenue, you need a seed investor who gets involved pre-revenue. Again, it’s no secret that the seed stage isn’t my game: Storm is generally looking for companies that have some early evidence of product-market fit in the form of revenue. There are many seed firms that want to be the first check into a business; if you’re not at this stage, why target them with a note? No matter how great your email prose, you’re not going to convince me to change my investment strategy. It’s just not a great use of time.
Personalise your message
Now that you’ve reduced your investor list down from the entirety of all venture investors, you start to have more time to personalize your message. Don’t try to literally make it personal; you don’t know me, and I don’t know you. However, you can tailor your message in a way that lets me know you’ve put a little work into convincing me to read on. The best bit of homework you can do for this is to look at what your target investor has put their money behind already. Look for companies in their portfolio that are relevant to your business, or other CEOs they’ve invested in. In Storm’s case, maybe you’ve read something someone here at the firm has put online or watched one of my videos; maybe something resonated that you want to mention or generated some questions you want to ask. Adding touches like this makes a difference in an investor’s willingness to respond. To be clear: I’m not talking about flattery or stoking an investor’s ego, but displaying an interest that shows you’ve done just a bit of homework.
We’re buried under a constant deluge of emails, so we’re always developing filters. An email that shows an entrepreneur has invested a little time is a positive indicator of fit. It’s only possible if you target.
For instance, one of my favorite SaaS metrics is sales efficiency; I’ve made videosand published blog posts about it that anyone can see. If your email tells me you saw one of my videos and your sales efficiency is great, you’ll get a response from me—and if you don’t, that means I dropped the ball.
Put your best metrics forward
Except in early cases where a product or team hasn’t yet come together, every business has numbers. This is the universal language of business. Find the ones that will get an investor interested, put them into a format and context that any investor can understand, and make sure they go into the email. Some typical examples:
● Churn rate
● ARR growth
● Number of customers
● Gross margin
● Sales efficiency
Use bullet points, so it’s easy to digest. Ultimately, every investor is looking for a certain profile when it comes to business metrics. Your job as a founder is to achieve that profile, and you either have it or you don’t. Putting the relevant metrics into your email in a concise format lets the recipient know straight away whether there’s a fit. Maybe you’re worried your numbers aren’t good enough and you just want the meeting; I get it. The problem is that even if you get a meeting, you’re not going to get an investment. Just get the metrics out there and qualify your time.
Less is More
I’ve lost count of the number of entrepreneurs who’ve told me they’re going to change the world or disrupt an industry. I love that there are people out there willing to take on huge challenges, but wanting to be a disruptor and change the world isn’t enough for me to take a meeting—I need to see why your business is a good fit for Storm Ventures. You should be able to explain it in 100 words or less. This word limit helps you focus on the relevant metrics and less on extemporizing about changing the world or disrupting an industry. Save that for your PR strategy.
If you’re worried about sending detailed, confidential information, then the good news is: you don’t need to send it. There’s little point to sending a discounted cash flow analysis or whatever in a cold email, because the objective of the message is to get to the first meeting, not to give any potential investor all of your data.
But if you truly think you need to send more details, put together something simple and enticing and attach it as a PDF. I personally am not a fan of Docsend—it’s a hassle and feels intrusive—but that’s just me. Maybe others are fine with it. It doesn’t work well on a phone either, which is probably where 50% of my email gets consumed.
Send the email yourself
Having your admin assistant write the email sends a message: “This wasn’t important enough to me to send it myself.” This means I don’t have to read it. Investors only have so many hours in a day, and small things like this make a difference when they hit our inboxes. If you’re so busy that you need your admin assistant to write the email, at least make sure they log into your account and send it from there. It’s an easy hack. For early-stage companies, bankers and brokers raising money isn’t a great way to get introduced either. Maybe they can help you in the background, but this is your business, and raising the next round is critical: make it your priority.
Associates / Who to target at the firm
You may have heard advice to the effect of: “Only target senior partners within a firm.” Ignore it. This may vary from firm to firm, of course, but as far as I’m concerned, an opportunity that comes from elsewhere within Storm has just as much value as one that crosses my desk personally. Find whatever way into a firm you can. We have a team at Storm because we all work together, and leveraging others at the firm can sometimes be an even more effective way to get noticed. With that said: avoid sending notes to everyone at the firm. It’s aggravating because you’re effectively asking everyone to read the same note, think it through, and respond. We don’t talk collectively about opportunities as a team until they’re fully qualified and someone has already met the founder.
Every venture investor I know makes their email address fairly easy to find, including me. My job is to meet the founders I don’t know yet. For me, Linkedin is fantastic as a tool, but terrible in terms of messaging. It’s not my workflow. I don’t want another inbox to deal with, and you’re less likely to get a response from me there (see the sections on targeting and personalization above again if you need a refresher).
It’s difficult to gauge how long to wait before following up because it depends on the way a particular investor works or where they may be that week. My rule of thumb is to wait a week, and if you haven’t heard back, send another message—but not the exact same one you sent initially; reply to your sent email with a couple of polite lines. If another week goes by and you don’t receive a reply, it’s safe to assume they didn’t think you were a fit. And don’t let it bring you down that you didn’t get a response: everyone is trying to do their job, and it’s not personal. It’s certainly possible they were too busy and missed it, but that’s why you’re targeting more than one investor.
Cold pitches work. My job as an investor is to deliver returns to my LPs. The only way I can do that is by making the best investments I possibly can in entrepreneurs and companies with the best potential. I’m positive that there are amazing entrepreneurs out there who I haven’t connected with yet, founders with companies that would be a great fit for our firm. The global Covid-19 pandemic makes cold emails even more important: I want to meet entrepreneurs in any country, and as far as I can tell, email is the best way to do it going forward. You live in rural Georgia? No problem. Remember that the goal of the first interaction isn’t to close a deal—it’s to get the next meeting. Build interest in what you’re making and move along step by step from there.
For more info, watch this video: https://www.youtube.com/watch?v=87_yHVEmwNo&t=1s
Ryan Floyd is founding Managing Director of Storm Ventures and host of the #AskaVC YouTube channel.