In part one of this Perfect Pitch video series, Stéphane Nassar from OpenVC explains how you can raise funds without introductions.
Key takeaways:
- Leverage your existing network in any way possible—remember, small checks bring bigger and bigger checks
- Inbound opportunities aren’t magic, and you’ll need to put in active work to get the right visibility in investor-heavy spaces
- A great warm introduction will come from someone who’s also investing in your business
The transcript is below, and the interview can be watched on Youtube.
Hello, everyone. I’m Steph from OpenVC and today I’m going to show you how to raise funds without intros. I’m going to try and show you the steps, but also give you tools and templates so it’s really actionable for you as you raise funds.
Let’s get started! First is the process: There are four ways you can access investors: inbounds, intros, existing network, and outreach. Warm intros, of course, is one talked about the most. This is when someone introduces you to a potential investor and that pre-existing trust makes it more likely to be successful.
Inbound is a very interesting one that isn’t talked about as much. Inbound is when an investor reaches out to you directly, so you don’t have to do anything first. While it feels like magic, it’s not—there’s a bit of work behind it which we’ll see in a minute.
The third one, an existing network, is when you’re a serial founder and already have an investor network. If you’ve worked in the VC space, you already know the people there. But even if you’re just a normal person who doesn’t work in that space, you still have a network you can leverage. Everybody has a network and we’ll see in a minute how you can use it.
And the last one is outreach. That’s the one we call “cold email.” It has a bad reputation because a lot of bad founders spam investors with not-so-great opportunities, and ruin the game for everyone.
Today, I’m going to show you how to do it right and increase your odds. Just to be clear: it’s still a challenge and the likelihood of success is not super high. But let’s see how we can improve that. Let’s start with this framework I really like. I call it the “You, your mom, and Marc Andreessen” graph. Marc Andreessen is one of the most famous VC investors in the world. When I work with founders who are about to start raising funds, I have them put their connections and their network on two axes.
The vertical one is prestige—how prestigious the investor is. And this matters because prestigious investors and big names attract more money and more investors.The second axis is distance, which means how close you are to that person. Do you have easy access to them or not? For example, your mom is “low prestige, low distance,” which is hopefully the case for everyone. And Marc Andreessen is “high prestige, high distance.” And your network is most likely going to line up at a 45-degree line with people scattered along it.
That’s the theory—now let’s look at practical examples of that. And this is all based on real examples that I’ve seen actually work. So your top, your bottom left, this is you here.
First thing to do is go to your mom or to your uncle or whoever—friends, high school friends—to get the first few checks. But your network is not just that. Maybe if you’ve been to college, a college professor that you really liked may become an investor.
Something that I’ve seen a lot also is your ex-boss. You used to work with him, you used to work for him, and you left the company to start your own business, but you’re still on good terms. Most likely, the startup you’ll be building has something to do with that industry. And so they get what you’re building and your relationship is built on pre-existing trust.
And especially if you’ve been working in a small company and had direct access to the owner, they can also be interested in investing. Also, partly because of tax incentives for them to invest. So, if they’re going to put $10K, $15K, $20K—great!
And then what happens, the magic kicks in because investors invest in packs. They are social animals. So, your boss, if he invests, surely has investing buddies. They have a WhatsApp group, they talk deals, they exchange deal flows. So, he is going to tell his buddies: “Hey, look, guys, I’m putting 10K in this guy. I’ve worked with him, he’s great. I completely get what he’s doing. Do you want to join in?” And that’s how you do the warm intro thing.
Now, let’s look at inbound. Another example I see quite often is the beta tester thing. So, the guy found you on Product Hunt, tried your product, loved it, happens to be angel investing on the side, and he is going to put $5K for you. And then probably introduce you to his buddies as well.
Another thing is maybe you will reach out to these testers because they’re a company. And they try the product for a few months as a pilot, they try your MVP, they like it. Again, they understand the space, they want to be part of it. Again, this is typical of smaller companies where they can make decisions and the owner is still at the head of the whole thing and they’re going to invest. And that’s basically how it works.
So, before we move to the cold email thing, I want to give quick advice on those three approaches to make sure we get it right.
Quick advice number one—existing network—small checks are fine, $1K checks are perfectly fine. There was a time when we used to say you need a minimum check size, but it’s not the case anymore. And actually the value of small checks is that they may bring bigger checks. The $1K checks bring $5K checks and they bring $10K checks, etc.
And then when you start putting in that way, you realize that you have more than you think. You realize that a lot of people around you maybe cannot invest $50K, but they can probably invest $1K or $2K and then bring in their uncle, their boss, their colleagues, whoever in their network into the project as well. So that’s how you maximize the existing network.
Second one—inbound—not magic. You have to be active, you have to work for it. And so what you have to do is be opinionated, present, and share your thesis on what you’re building in relevant spaces where investors are. And so depending on your business, it may be Reddit, Slack groups, Product Hunt, of course. Twitter is a VC nest so really, I say it’s a nest for everybody. Medium, Discord, especially if you’re in Web 3.0, and Hacker News. These are a few examples and there may be some other ones that are specific to your industry.
And the last one is warm intros. So just one thing on warm intros: a warm intro is not just someone forwarding his email to somebody else and saying, “Hey, look at that.” A great warm intro comes from someone who really supports and commits to what you’re doing. And the best way they can do that is if they invest themselves.
So, a great warm intro is when someone, just like in the example I gave before, is investing and then he’s sharing with somebody else he knows and says, “Hey look, I’m investing in this. I think it’s great what they’re doing. How about you take a look at it and maybe do this with us?”
Now, think about it the other way. If I share a deal with someone and I’m not investing myself, what kind of message does it send? It’s not great because if it’s a good deal, I would invest. So you could almost say that an intro from someone who is not investing, is actually a bad signal. So this is how you do network inbound intros.
Think about it for a minute. Have you maximized all of that? If not, you probably want to do that first because what we’re going to see next about the cold emails is the last resort. It is when you have exhausted all your previous options.
Because yes, for a lot of people actually, this pink area here is enough to fuel their entry round or pre-seed round. Now, for some people, they’re going to need more and they’re going to need to go into that white area, which is the area of outbound and the area of cold emails. Maybe because they need more money, they couldn’t gather enough with the pink area, or maybe because they want specific people on the cap table, people that add specific value that makes sense for their business.
And to do that, to be able to access that white area, we’re going to need something called “signal.” So let’s look at that. And that’s the second part of the presentation signal.
