It’s a dilemma we faced ourselves, and one that I see so many other founders struggling with – pitching investors that you want to invest, but haven’t built any kind of relationship with yet.
For us, we learned this lesson the hard way by pitching a ton of investors and realizing that we just didn’t have the relationship yet to get them to invest. So we applied to accelerators and got into Techstars, that was where we finally were able to start building relationships with investors the right way.
Semil, a well-known investor and the MD at Haystuck Fund, focuses on Seed Stage Investments. He shared his thoughts about this topic on Twitter last week and I think his point is one that many founders (like me) do end up learning the hard way:
The point Semil is making here is a good one. While you as a founder are living in your company every day, see the progress you’re making, and likely have a couple investors onboard, building relationships with new investors takes time.
Unless you have started and successfully exited in the past, or happen to be good friends with someone who knows an investor you’d like to approach you’re likely starting cold.
Mark Suster talks about the concept of investing in lines, not dotes and does a great job of sharing this concept from the investor side.
The first time I meet you, you are a single data point. A dot. I have no reference point from which to judge whether you were higher on the y-axis 3 months ago or lower. Because I have no observation points from the past, I have no sense for where you will be in the future. Thus, it is very hard to make a commitment to fund you.(Source – Mark Suster)
Accelerators like Techstars, YCombinator, 500 Startups, AngelPad and many others are great at helping Seed stage startups make those connections with investors that can build more organically over time.
The reality is – Seed stage founders do need to do something to kick off a relationship and that something shouldn’t be asking for money. How you get to that first meeting is up to you but don’t be surprised if you pitch 50 investors that you’ve never met before and all 50 say “no.”
Just know that it might not be that they don’t like you, or don’t like your startup, it might just be that they haven’t had enough time to collect enough data to make a good investment decision.