But fundraising is hard. In reality, the probability for start-ups to get VC funding is much lower than 1%. Statistics show a direct introduction to an investor makes a company 13 times more likely to get to IC and secure an investment. What should you do if you do not have a ‘warm way in’?

Startup advisor and mentor Tzvete Doncheva digs into the topic of cold pitching for VC funding with the help of few of Europe’s top investors for the latest (Re)Startup Strategy article.

Plan in advance

Most deals are done through warm introductions. There is no denying that having the right connections is a great advantage in the fundraising process. Very few entrepreneurs though can leverage a university network (in the UK, nearly 1 in 3 venture capitalists graduated from Oxford, Cambridge, Harvard, Stanford or a business school) or benefit from mutual work contacts (over 41% of VCs have worked in consulting, finance or investment banking) to get in touch with investors. While early stage funding has been growing by both the amount and number of rounds, the question of access still remains. It does relate to the level of diversity in the VC industry internally and the pipeline problem (65% of London-based funds have all-male investment teams). This however is a whole topic by itself (you may see some of my thoughts here).

Back to cold pitching, most entrepreneurs start reaching out to investors only when they begin fundraising. This is the first step – pre-plan your approach. Start building connections early.

“About a year and a half ago, we received a cold email from a founding team of two that was setting-up a platform to automate corporate services for funds. Their introductory email was to the point, they knew that we invest in PropTech and clearly mentioned that while they do not have any customers in the Real Estate sector, they would like to work with us to expand into that market. “– recalls Esha Vatsa, an investor at Pi Labs, Europe's first and one of the most active property tech venture capital firms.

Partnering up with a VC fund is a long-term relationship. Naturally, two of the most important elements in any human interaction are trust and integrity. They take time to build.

“We took the meeting and were clearly impressed with their understanding of the space. At that time, we couldn’t invest but continued to build our relationship with the founders over the years, and very recently approved an investment in their most recent round.” – added Esha.

As a founder you need to put yourself out there. If your startup is in your area of expertise, you may have a strong starting point and a good personal network in the space. But if not, take it as an opportunity to establish your presence and develop the ‘ecosystem’ around your company.  

Research to stand out

Fundraising is a full-time job - you are not only pitching your business, you are selling your vision and yourself as an entrepreneur. As with any lead generation or sales approach, mass cold emails rarely ever work. Your approach must be targeted, a point touched upon in the pilot “(Re) Start-up Strategy” article and mentioned earlier by Esha.

As a senior associate at Speedinvest, one of the leading venture capital funds for early-stage start-ups in Europe, Namratha Kothapalli reviews a lot of pitches. How important is a direct referral?

 “I see warm intros as a way to prioritize my workload in a busy week, but it's not a decisive factor. I almost always respond to cold emails, even if the start-up is out of focus for us in terms of stage or sector focus.”

Esha said PiLabs receives hundreds of cold pitch emails on a yearly basis and the team intentionally reads through “each and every one as we believe that not all great teams come through our existing networks.”

She is likely to spend the least amount of time on generic emails.

“Those that you read and immediately think that exactly the same email was sent to many other investors.”

Be considerate of the reader’s time. You are quite literally a hand away from your target VC investor - so much information is available online! Have they taken part in a panel? Been a guest speaker on a podcast? Recently written a thoughtful piece? Do your research on the fund itself and on the VC you are reaching out to in particular.  

“Most VC funds, if not all, have a lot of content on Twitter, Medium, Webinars and on their Website about what they have invested in and why, and what types of companies they are looking out for. Short list those VCs that would really be the a great fit for you – from whom you are most likely to get a response or an even better an investment!” commented Esha.

Have the right email structure

First impressions are crucial and take about seven seconds to make. How long does it take you to glance through a cold email to decide if you can imagine a business relationship with this person? After you have shortlisted your target investors, it is time to structure your cold pitch email. Start with the subject line– it needs to be clear, concise and very relevant. Namratha helps me outline the following points for the email itself:

• Succinct pitch with an overview of the problem and solution 
• Relevance to the fund, stage, geo and topic focus

Has the VC made an investment in a similar company at a similar stage? 

• Why is the founding team the best to build this business?  

Highlight your skills and expertise. Make it easy to read.

• Proof of market validation (users, partnerships, pilots)

Namratha mentions that as a deep tech investor at seed stage, she often sees rather technical founders that are less commercial-minded. Clearly show the traction (you can use bullet points).

• A clear call to action with a clear ask

Why are you reaching out? Be explicit.

• Make it personal

Why this investor in particular?

During my latest ‘Ecosystem’ webinar we discussed unconscious bias in venture capital and corporate innovation with leading investors. The topic of warm intros naturally came up and Chris Smith, managing partner at Playfair Capital, a London-based early-stage fund, shared the following insight:

“A lot of cold reach is just really poor — it’s not tailored, it’s not researched, it’s not short and punchy.” He noted Playfair’s recent investment in Continuum Industries came as a result of a very well-targeted Linkedin message. You may find his top tips on closing a VC round here.

The goal of your initial pitch is to make it easier for the reader to engage with you and qualify you as a prospect. Namratha points to stay clear of buzz words and long emails, adding: “Big no-no’s for me would be obvious typos and unprofessional or rude attitude”.  

You can have a template email but ensure it is modified depending on the investor/fund you are reaching out to. A further example of a ‘cold pitch’ that led to a $2.5m seed round here.

Attachments to include

You have researched, identified and created a shortlist of VC investors to reach out to. You have crafted a sharp intro email. What attachments do you send?

“I typically ask for a one-pager before an intro call (if a deck wasn't already shared) so that I can prep beforehand and join the call with a bit more context,” said Namratha.

Your deck is a reflection of your business and of you as a founder – don’t make it sloppy. Ensure it is the best possible version it can be. As a general tip, try to fit between 10-13 slides. If you can use compelling visuals, do so. Hopefully the information you have included in the email body gives a good overview of your start up already – the deck will help explain your vision for the future.

Include your file as an easily clickable (or downloadable) link or PDF. Be mindful about sending NDAs early on.

“We’re cautious about signing NDA’s. We see thousands of new projects/companies every year, and make less than 6 investments per year. We do not have the (legal) resources to check, negotiate, and manage NDAs, especially if it is very early in the due diligence process. To be clear, we do take confidentiality seriously – our reputation is dependent on it.”- concludes Namratha.

How (NOT) to follow up

Unfortunately, even if you follow all these steps, a response is not guaranteed. It depends on the individual investor and his/her present workload- do not take it personal. Should you follow up?

“Follow-ups are fine, as long as they are motivated and respectful. I tend to be direct and transparent when we are no longer interested in the opportunity,” added Namratha.

If the answer is negative, do not ask for a referral to another VC but for feedback. If you do not hear back, give it at least 10 days before reaching out again. If you can include new, relevant information that shows progress when you follow up, it would be ideal. Try to add value with your email. It can be as simple as sending through a link with an interesting event, research, article that the investor may find useful. You are much more likely to be successful in engaging with an investor if he has a genuine interest in your space and a natural passion in what you do. Do not follow up more than twice (or wait a few months until you do!). Good luck!

Finally an ask to VC investors reading this. Opening and assessing these cold emails can be the step towards increasing the diversity of the founders in your portfolio. Great entrepreneurship can come from anywhere and look like anything - if we are open enough to see it.

If you are an early stage deep tech founder with a great vision, contact Namratha Kothapalli.

Chris Smith is interested in seed stage B2B deep tech start-ups and in the area of automation (using AI/ML/CV).

If you are an early stage proptech founder, reach out to Esha Vatsa. She is keen to hear from companies in the RE Investment Management space.

Every two weeks, the (Re)StartUp Strategy series with Tzvete Doncheva will offer insights from the VC world, bringing you a step closer in your fundraising journey. What would you like to know on investor readiness, positioning and overall growth? Submit your questions and suggestions to her here and stay up to date with her by subscribing here.