Best Practices for Following up with Investors

17 Nov

By Michael Quigley, VP of Market Research, LSN

mike-2

As a fundraising entrepreneur you ought to be having calls and meetings with a numerous potential investors and strategic partners.  Now to my knowledge, no term sheet has ever been drafted and executed during that first conversation and as such follow up is a crucial piece of every fundraising campaign. As the VP of Market Research at LSN I split my time interviewing life science investors and helping companies navigate the fundraising process. In doing this I have developed a keen understanding of what makes companies really stand out from the pack with their investor communications and I would like to share with you some of what I have learned.

Follow up Starts During the End of the Meeting

We have written before about the importance of taking time during investor meetings to get to know and understand the investor as this can aid you in your pitch, however one question entrepreneurs often do not ask is “Can you walk me through your process?”. Every investor differs in a number of ways including their process and timeframe for reviewing potential investments. Is the person your speaking with the decision maker? Or do they need to have a larger team review during a weekly meeting and agree to move forward? Having the answers to these questions can greatly help you in understand when and who to follow up with. Speaking of when to follow up, at the end of every meeting or call in addition to asking about process setting a date for when to touch base again is paramount. Deadlines and accountability make the world go round and in a world where every investor can be reviewing 10-20 deals at a time, having a deadline established for when to have feedback can help to ensure your opportunity gets proper attention in a timely fashion.

Provide Additional Value Every Time You Follow Up

If possible you should avoid following up simply for the sake of following up at all costs. What is much better is if you can, in addition to asking about their review of your tech, provide additional news that recently surfaced in your space and how it relates (positively) to your investment opportunity.

Another possible value add would be to provide an update on your company’s recent study results, new partnerships established, board members added – really, anything tangible demonstrating your company is making forward progress. Investors love to see progress as they review a company, as it provides a testament to the team’s ability to perform.

Suggest Next Steps

Included in your follow up message should also be a suggestion for a next step if they are indeed interested.  Now, what this next step will be will vary depending on the current status of your conversation but it could include suggesting a face to face meeting, a conference call with additional members from the investment firm or the transfer of an NDA and access to a data room. Because investors are generally under a time crunch with stacks of deals to review, it is crucial that you have a NDA and a data room ready to go at all times while fundraising. It both keeps the investor at peak interest when they are reviewing and shows the CEO’s preparedness for raising the round.

Don’t Get Discouraged

If an investor doesn’t get back to you when they say they would you may feel down but you are certainly not out. There a millions of reasons why they might not be getting back to you.  By making the assumption that it was because they didn’t like you or your technology, you are only trapping yourself in a potentially false reality. I want to stress this point again:  Investors review LOTS OF OPPORTUNITIES and until you are in later stage dialogue, the unfortunate reality is you are one of many and as such a delayed response shouldn’t by any means fell like a death sentence. I would recommend that you continue to follow up once a week, always providing additional value and information whenever you can. In my experience it is far more often that investors will thank companies for their persistence and apologize for the delay than become annoyed or hostile in any way.

I hope you found these tips valuable, and I wish you all the best in your fundraising campaigns!

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