3 Worst Ways to Find a Potential Investor : Under30CEO 3 Worst Ways to Find a Potential Investor : Under30CEO
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3 Worst Ways to Find a Potential Investor

| January 14, 2011 | 9 Comments

A couple months ago I wrote an article titled Top 10 Website to Find Angel Investors.  My research for that article revealed that there are virtually hundreds if not thousands of ways to find potential investors, but today I want to focus on the 3 worst ways to find a potential investor.  According to the Angel Capital Education Foundation, only 1 to 4% of angel investor applicants successfully raise angel investment.  I suspect that part of the reason that the success rate is so low is because entrepreneurs are using the following ill advised tactics to meet potential investors.

The Office Visit

So maybe you are located out in San Francisco, California and you hop on to California Venture Capital to locate a VC firm in your neighborhood.  It turns out that there are dozens of VC firms nearby so you throw on your best suit, stuff a pile of business cards in your pocket and follow your GPS to the front door of Sequoia Capital.  Obviously you will be stopped at the front desk unless you have an appointment.  Maybe you are good enough to sweet talk your way past the receptionist and you simply push your way in to introduce yourself to Mr. VC.  Venture capitalists might like ambitious entrepreneurs, but don’t fool yourself, this tactic is not ambitious, it is disrespectful and will certainly end in failure.

The Cold Call

Just the other night my phone started to ring from a number I did not recognize.  I went ahead and answered.  It was a salesperson trying to sell me health insurance.  You know what I hate my current health insurance plan and have actually been meaning to talk to someone about other options, but I actually just hung up on this particular salesman.  Similarly you might have an investment opportunity that a potential investor would love to take a look at, but an unsolicited phone call is going to be a major turn off.  That salesman may have had a great health insurance plan to offer me, but I never gave him a chance.  Don’t be that guy.

The Networking Event

So my first two points were pretty obvious – I hope.  This last point might be a bit counter intuitive though.  Yes that is right, I don’t think a networking event is a good way to meet a potential investor.  A networking event might be a good place to meet a CPA or attorney who you could build a relationship with, and then earn the right to be referred to their investor friends.  Serious investors do not need to go to networking events in order to find deals.  Their staff, friends, and other investors will likely refer enough good deals to them that they would never want to waste their time at an open networking event.  Networking can be great for many things, but don’t plan on meeting your next angel investor at an event any time soon.

Although raising capital is a 1 in 100 achievement, it is possible to find just the right investor.  With the right tools, connections, and patience you can be successful.  Just make sure to stay away from these 3 terrible capital raising strategies and good luck!

Today’s guest post is from Adam Hoeksema.  Adam is the Founder & CEO of ExecutivePlan.  As you continue on your quest to raise capital ExecutivePlan can help you write a more powerful, effective, and memorable business plan executive summary.  Make sure to visit Adam today at www.businessplanexecutivesummary.com and download his 11 Page Guide on How to Write a Powerful Executive Summary.

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Category: Funding, Startup Advice

  • http://twitter.com/zombieresponse Zombie Response Team

    I still can’t believe people are cold calling. This blows my mind. I never answer a number I don’t know because I know it’s someone trying to sell me something. It’s ridiculous and such an awful way to find people. Use social media or traditional advertisement, but don’t cold call.

    Interesting take on networking events. I agree, though. It doesn’t seem like the best place to find an investor.

    There are so many places online to solicit investors, there’s just no reason to do the above three mentioned.

    Thanks for the great article!

  • Pingback: Tweets that mention 3 Worst Ways to Find a Potential Investor : Under30CEO -- Topsy.com

  • http://www.ryanhanley.com/about Ryan Hanley

    I think you are completely and utterly wrong on the Cold Calling and Office Visits. There is a right and wrong way to go about cold calling, but saying “Don’t Be That Guy” is exetremely ignorant.

    I am an insurance agent, and I’ve written an article on Health Insurance for Entrepreneurs for this website. I’m not some schmuck who calls people to brow-beat them into buying my product. I cold call people to introduce myself. I start every call by asking them if they have time to talk, if they say no I thank them and move on. If they say yes we have a brief chat with the goal being an in-person 25 minute meeting to Qualify each other. Nothing pushy, just a meeting. From there its needs analysis and relationship building.

    Let’s look at your situation. You have a need for a New Health Insurance Plan and you told a Professional Health Insurance Salesman who could have possibly provided you with a solution, to Beat-it…. Who’s “That Guy” in this situation. I would say you are. You passed on the opportunity to solve a problem because you think you are better than someone who cold calls.

    Honestly all I got from this Article is that you feel you are above certain forms of prospecting because of some Elitist Misconception that Office Visits and Cold Calls are for lower class business people… You are willing to miss on opportunities because of this belief… That tells me more about your acumen as a Business Professional than the guy trying to start a relationship with you on the phone…

    Ryan H, http://www.RyanHanley.com

  • http://under30ceo.com MattWilsontv

    While I don’t think these are terrible strategies, they aren’t the best. But when you are hungry, it’s better to be tenacious about it and go for it then bypass these tactics.

    Of course, above all, the warm introduction is best.

  • Dtstone20

    Lets say you’re looking for private investors to raise capital for your business to invest in commercial real estate. First of all, you don’t ask for money; you’re offering them a chance to make a return on their investment. Never ask for money. So you call your local business bank (ie. Fannie Mae, Freddie Mac, Wells Fargo), and ask your banker for the names and numbers of some of their commercial real estate attorneys. Tell them you need an attorney or something like that; they’ll buy it. Call those attorneys and ask each of them for some references (potential private investors). Then call those guys and tell them that you were referred to them by their attorney. Give them your pitch of a lifetime opportunity, and Bingo! Money in the bank.

  • http://www.AustinRealEstateHomesBlog.com Rebecca Williamson

    I couldn’t agree with you more about cold calling and dropping in on people. There are so many other creative ways to get to people without interrupting them. Instead, you’ll make them want to contact you, putting you in the driver’s seat. Plus, there is such a low chance of conversion, why are you going to waste your time chasing a dream when you could be doing something productive to get you what you want.

  • http://twitter.com/ExecutivePlan Adam Hoeksema

    Thanks Rebecca. I could not agree more. There are just so many ways to meet a potential investor these days. I have actually connected with some pretty high level people in my industry simply by responding to their blog post or sending them a reply on Twitter. I think when you can find a way to offer value without trying to get something out of it, like a thoughtful comment on a blog post, you are much more likely to make a meaningful connection.

  • http://twitter.com/ExecutivePlan Adam Hoeksema

    Ryan,

    Thanks for the comment. I never expected quite that response from this article haha. I think you missed the point that I was trying to make with my comment on Cold Calls. My point was that if you are an entrepreneur that has a great investment opportunity, the cold call to a busy venture capitalist probably is not going to get you very far. I agree that the insurance salesman that called me might have had a great solution, but in this day and age people just don’t like cold calls. Right or wrong, I never gave the guy a chance. I can assure you that most VCs aren’t going to give you a chance with a cold call either. In fact, you probably would never make it past their receptionist. Keep up the good work on RyanHanley.com. I like the site. Sorry to upset you with this article haha.

  • http://www.ryanhanley.com/about Ryan Hanley

    I get what you are saying. I just hate when people Bang on cold calling… I know a lot of guys that have done a lot of things because they had the balls to pick the phone and ask for it…