Miles Jennings

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Next-Level Networking

Selling part of your company is a lot like seeing your child walk off to their first day of kindergarten and start a life without you. It’s an important moment, a time for reflection — and a little terrifying.

Finding and then attracting the right investor can feel impossible, especially if it’s your first time raising capital.

The investment community can seem like a secret, opaque society, but it’s important to realize that investors are just people. You should be vetting them as much as they are you. Ideally, you’ll want to find an investor who can offer you a lot more than money and take your business up a few notches in every area.

The process of finding the right investor will likely take at least six months and involve a lot of travel and late nights. With diligence and hard work, you can network your way in — even if you don’t live in Silicon Valley or New York City. Here are five tips to get you started:

Leverage your network. To begin the process, you’ll want to look to the people closest to you. Your circle often turns out to be a lot larger than you think when you add in your alumni networks, colleagues, relatives, clients and social media connections. Look for people who are involved in investments or have started companies themselves. Start the process of reaching out to them for ideas. If you don’t already, start having regular lunches and coffees with old friends and colleagues.

Target the right kind of investor. The first step in identifying the right investor is to step back and evaluate the stage of your business. Do you have a great idea? A marketable product? Predictable and growing revenue? Your business stage will dictate the proper kind of investor. A friends-and-family round might be appropriate if you are looking for a small amount of capital to build your first product. Angel investors (primarily comprised ofindividuals and groups of individual investors) will most likely want to see real traction and a business valuation of no more than a few million dollars. Venture-capital and private-equity firms have a very broad variety of themes and preferences; you’ll want to determine the size and stage that each individual VC focuses on by examining their past investments.

Start with the insiders. The investors that you target should first be within the broad category of your business (e.g. business software). Your real homework, though, is to find the real insiders: people who have invested in your exact business segment (e.g. social analytics software).

Find out every major investment inside your industry within the past five years, including the investments in your competitors and partners. These investors are ideal first contacts, because they already understand the mechanics of your business model and the scale of your market. Because investors want to diversify their portfolios, these insiders may not end up being your final investors, but they could be the perfect starting contacts to build your network.

Branch out, and then branch out again. When you contact an investor, your job is just like a salesperson’s: get a meeting. During the meeting, until you hear a definitive yes, the investor is saying no. Your job is to get to yes on one of two things: an investment or a referral. Investors usually love to help entrepreneurs start out — many were in your shoes at one point. Let them help you. Follow up with every referral, even if they don’t appear to be good leads at first glance.

Tailor your message. Networking within the investment community is the opposite of cold calling. Forget about efficiency or speed. If you’re emailing a new contact, treat it almost like a job interview. Take great care to personalize every communication and do heavy research on the people you’re calling. For every investor you contact, you should understand their past investments, industry focus, investment philosophy or thesis if they have one, published works, associates, and academic and work history. It’s not enough to pitch. You need to make it personal. Understand exactly why that particular person might want to invest in a company like yours, and use that in your initial contact. Even when contacting larger venture-capital firms, contact the people individually, not the company.

It’s easy to get overwhelmed during this journey. If you compare yourself to the people you meet along the way, you will shake up your confidence. You’re dealing with smart, successful people with great connections. Contrary to the media portrayal, however, you are not swimming with sharks. You’re meeting with lots of interesting people and talking about a business you believe in — and hopefully love. This is just next-level networking: a challenge hard enough to be fun.

This article, authored by Miles Jennings, was originally published on The WSJ Accelerators Blog.

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