I’m a $5,000 first check. But this week, I introduced a founder to a VC who offered him $800,000. This is why you should meet with small investors.
Let’s say you’re raising a $2 million seed round. At first glance, talking to a guy who writes $5,000 checks seems like a waste of time. I’d need about a billion of those to fill my round, right?
But this ignores how fundraising actually works. Networks are everything, and the small investors help you penetrate that network.
Small Investors Get You Intros
When I meet an awesome founder, I always ask him for the same thing:
“Can you send me a blurb and a link to your deck? I want you to meet some people.”
I send that blurb and deck to some VC’s I know. I tell them why I liked the company, and offer to introduce them to the founder.
They take me up on that all the time. One meeting with me could lead to a founder meeting half a dozen VC’s.
Let’s consider “Jim,” the fella who got an offer for $800,000 this week. I introduced Jim to the Managing Partner at a fund in Silicon Valley with around $200 million under management.
That VC liked Jim just as much as I did. And he’s writing checks from a much bigger pot. Hence, the monster offer.
But none of this would’ve happened if Jim hadn’t taken a meeting with me in the first place.
A Case Study from OpenVC
I’m not the only small investor helping founders raise big bucks. Take this fascinating case study, brought to my attention by Steph Nass of OpenVC.
A YC company called Freshpaint showed how its fundraise came together. One angel who wrote a $5,000 check introduced the founder to 5 more investors who wrote checks.
In turn, those 5 new investors made even more intros…
In the end, meeting that one $5k angel resulted in raising $700,000!
This is how fundraising works. One meeting leads to another, and eventually the checks start to roll in.
Honing Your Pitch
Do you want to flub your pitch with me, or with Roelof at Sequoia?
Talking with smaller investors first is a great way to hone your pitch. You can work on your delivery and address common questions.
Work out those kinks in an environment where there’s less at stake. By the time you pitch the big boys, you’ll sound terrific.
Big Minimum Investments Are a Mistake
I recently met with a company that had a $300,000 minimum investment. This is very unusual. It’s also a huge mistake.
The company was actually pretty cool. But since I can’t invest, I’m not going to spin up a bunch of intros for them.
They’re left trying to meet the big investors on their own. And as any founder can tell you, that’s not easy.
Never have a minimum investment. Instead, always include angels that are helpful, regardless of check size.
Those small investors will do more for you than most of the big funds.
Wrap-Up
The key thing in fundraising is to penetrate the network. The easiest way to do that is to start at the periphery of the network — the smaller investors.
We’re used to meeting really early stage companies. And when we see something we like, we send it on to the big boys.
The big VC’s listen to us because we’ve sent them great things before. Your odds of getting a fat check are much higher with that warm intro.
So always take a meeting with a small investor. You never know where it could lead!
Do you meet with small investors?
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