By Lucy Parkinson, Director of Research, LSN
Here’s a situation we’ve seen many times. An LSN client finds that they’re a very close fit for an investor’s mandate, and reaches out to that investor to start a dialogue. The investor responds, and over a couple of meetings or phone calls a relationship starts to develop. However, in spite of the mutual interest from both the startup and the investor, the timing isn’t right. Perhaps your company is too early to fit the investor’s criteria, or the investor is currently focused on exiting one of their existing portfolio companies. Either way, they’re interested in you, but can’t allocate right now.
So what happens next?
Sad to say, many startups would let this situation become a missed opportunity. Even if an investor encouraged the company to touch base again when a particular milestone was reached, this crucial information may slip through the cracks in the company’s fundraising architecture. The missing element in these cases is relationship management.
LSN strongly encourages our clients to implement a customer relationship management (CRM) system to keep track of every contact they make with potential investors and strategic partners. CRM systems are typically cloud-based, accessible from anywhere, and inexpensive (about $5-25/month). We recommend Salesforce.com (LSN has no relationship with Salesforce), but there are many options out there. What’s key is that the whole fundraising team commits to using CRM as a hub for all the information and important dates and progress markers for the entire fundraising campaign.
As the term ‘relationship management’ indicates, allocations don’t happen spontaneously; even if you’ve spoken to an investor who’s a perfect fit on a technical level, it takes months of relationship building to reach the allocation. It’s important to note down every phone call, email and face to face meeting; if you had a positive dialogue with an investor but haven’t checked in with them in a while, it’s probably time to touch base again with an update on your company’s progress.
Consider again the aforementioned scenario; a very interested investor who simply can’t allocate right now. If you use your CRM system to make a note of the investor’s conditions and to set a follow-up date for a future touch-base, you can keep the relationship progressing. For example, if the investor wants to see the final results of a certain study, you might touch base a couple of times while the study is ongoing, then request another meeting once the study is complete. If you’re raising an A-round and speak to an interested investor that can only invest in B or C rounds, you could provide them with regular progress updates as you bring together the A-round, then circle back for a meeting once the B-round begins.
It’s these deferred, delayed and slow-to-develop opportunities that prove how vital it is to manage your campaign professionally. The most important investor relationships often take some time to reach fruition, and without CRM, those vital opportunities can be lost.