Stop Raising Capital — Start Focusing on Acquiring Talented Influencers
This article is going to sound counter-intuitive. It works alongside the common belief that people will only want to lend you money when you don’t need the money and in parallel with a blog I recently wrote discussing the power of grouping. That blog has helped me better understand the power that the advisor/influencer talent network that surrounds a company has over your long term success and how it should be prioritized over traditional VC financing.
My hope with this blog is that it will help you understand the thought process we are applying as part of scaling our organization and hopefully help you improve the probability of short and long term success for your organization.
Financing Info
Financing — It’s Easier Than You Think
There are lots of articles available online that will tell you not to spend time emailing VCs cold/directly. They provide you with the factually correct info that 99% of deals into VCs come from warm referrals. These blogs will tell you to focus your time on finding influencers that will then refer you into VCs. I can tell you after 4–5 months of cold emailing investors, that these blogs are factually incorrect.
Yes, investors will respond to your cold emails. Yes, they will invest in you cold. Yes, the probability is lower than if you referred. Yes, you need to work harder to stand out if you are going to come in cold. If investors aren’t paying attention to your emails it means you are:
a) Too early for financing
b) Not communicating your business idea in a way that inspires interest
To be clear, what these articles are really providing you with guidance on is that finding a credible angel, who is willing to refer you into a VC, is the path of least resistance for gaining access to a VC. Not that you can’t reach out to and get VCs to invest directly in your company. There is a subtle but important distinction to be made here.
How to Garner Interest from VCs through a Cold Email
I’ve set up 8–10 VC meetings through cold emails. I do this by word hacking my way through their standard VC email filters. The word hacking recipe is fairly simple. Find a way to stand out. What features of your company will appeal most to VCs? Talk about that. To be clear, a feature is not we do X. A feature is knowing the one part of your business (potentially very different than your product) that will appeal to that specific investor and crafting your email to speak to that one specific item. Sometimes this requires a custom email for each VC based on research performed on the VC fund and partner. Sometimes you have one element which is so powerful that it will appeal to all VCs allowing you to write a single blanket email. There are lots of VCs so trial and error to optimize is encouraged.
As entrepreneurs if we can’t stand out with VCs, how will we get our products to stand out among the large multitude of products that exist? The complexity of standing out with VCs is significantly simpler than achieving PMF.
Item of Note: Yes I’m a serial entrepreneur. My response rate to cold emails is actually higher when they don’t know my background. For VCs I don’t know, I can typically get around 50–70% response rate on a well-crafted email vs 20% response rate when I leverage my background. You don’t need to be a serial entrepreneur to stand out.
Talent Acquisition
Realizing the Core Challenge
Within 20 days of starting our financing. I realized that our company, and more specifically me, as the individual responsible for successfully financing the company, had a problem. My network in Canada was quite deep. If I really wanted to meet someone, with a few phone calls or emails to my network, I could probably get a warm intro. In the US my network was abnormally light. I had maybe 5–10 contacts that I could ask for warm referrals from in that market.
I decided to go after the complex challenge of scaling my US network. Lots of cold emails, InMails, attending startup events and cold connect requests. Slowly my network started to grow. I was meeting great people from early engineers at companies that hyperscaled well past unicorn status, to founding and executive CEOs of Billion dollar companies. I realized, that our challenge was not going to be financing the company. If we hit our growth metrics, and presented our product properly, an email into 3–5 VCs would take care of this.
The real challenge was going to be architecting a deep bench of talent, that extended past our day to day team, which would improve the probability of our success as an organization at a global scale. We needed people who would help us avoid and proactively solve problems that we were not even aware existed. We needed people who in a single conversation, would move forward our thought process 2–3 years. We needed people that could help us both predict and create the future.
Executing Against the Core Challenge
I am in the middle of executing against this core challenge now. So I’ll have to update this blog at some point to let you know how it works out. Here are some of the highlights on what are likely some of the less obvious techniques and amplifiers that can be used to increase success:
- Identify Required Superpowers — We are in the process of mapping all the superpowers we require to be successful as an organization. Superpowers we require daily we will hire for. Superpowers required for a few hours monthly or quarterly we will fill in through our advisor bench. One example of an infrequently used, but highly valuable superpower is “The Google Shaper”. As a number of our products depend on Google integrations, we need someone on our bench who will let us know about an upcoming change in Google policies and potentially help us proactively prevent that change from happening. That will be their one job for us. We may never use their superpower, but if we do it could make or break our company.
- Finding Talent — My objective is to turn every meeting I have into 1–3 subsequent meetings. Great people, will save you tons of time by referring you to other great people. Most people are awkward about referring people to you if you're raising money. If you aren’t then the conversation is much easier. If advisors/influencers aren’t willing to make an intro for you when you identify the specific type of individual you are looking for then it means you haven’t done an A+ job presenting your business. Address your failure by politely flagging it during the call. Ask for an opportunity to present what you are working on again to them in a few months once you have had an opportunity to refine the business positioning. You won’t get 3 attempts at this, but most people will give you a 2nd chance if you ask nicely. In the past, I’ve had people come on board because I’m respectfully, but relentlessly persistent.
- Defining Compensation- The most valuable item that great people have is their time. I would write a check for someone, far more easily than I would provide them with access to my time. If you believe this to be true, you should never have to pay an advisor/influencer. The compensation they will receive would be insignificant in terms of the exponential return you will realize for them through building a successful organization. The right advisor/influencer will be passionate about what you are doing, and ask if they can invest. You don’t need to bring this up. If they don’t ask it doesn’t mean they aren’t great, it just means you are only likely to have access to their time until a more exciting opportunity arises. Make sure you are able to clearly articulate to an advisor/influencer how much of their time will be required, at what interval and for what duration. Note: We are currently exploring leaving our financing open post close in order to expand the pool of people that this philosophy would appeal too.
- Architecting the Round — At some point, you will have funding constraints and will want to rapidly move forward your business. This means completing a financing. With great people around you, and strong growth metrics in place this may be as simple as making a few calls, and will absolutely be easier than if you were emailing into VCs cold. When you approach large A+ VCs you will likely experience pressure to increase the size of your round, and potentially push your influencers/advisors out. The advisors/influencers you have assembled should be considered by your VC to be an asset and not a liability. Talk through your desire to ensure that enough space is made for them to invest into the round. They will amplify the network effect of the VC. If a VC is threatened from your advisors/influencers this is a red flag and while it may be difficult to do, you may want to consider finding a more supportive partner.
The first few top advisors/influencers you attract to your bench will be the toughest. Success drives success. The great thing about being an entrepreneur is 100 no’s mean nothing when all you need is 1 yes.
I love amazingly bold visions and am actively working to transform the Canadian tech ecosystem to become more supportive of people with big visions. If you have any suggestions on strategies for attracting influencers/advisors or suggestions on approaches that could be taken to help entrepreneurs build more successful businesses through their advisor/influencer networks would love to get your input at jvangaal@soullabs.com.
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