Raising money is an extremely painstaking process for a new founder. VCs generally prefer warm introduction from a known source to have a meeting with an unknown founder/ startup. It’s understandable- in a complicated world, they try to minimize the risk by getting a deal flow from someone who they know and trust. However, it makes the life of a founder extremely challenging, specially if this a first venture of the founder with no name recognition. So, the question is, can you get success with cold e-mail?
An average cold e-mail open rate is 1% where 5% is a good success. I just got more than 30% of my cold e-mails opened by VCs and I got meetings from 14% of cold e-mails. This is a very good strike rate for a no-name founder, and specially in this market condition.
How I did it? Not very complicated. Instead of sending e-mail to hundreds of random VCs, I created a list of VCs who invest in similar type of companies. I also found who they generally co-invest with. That gives us additional VCs to reach out to who at least once invested in the sector. Then I listed who are the partners in the deals- that’s our “target customer”. Once you create a list like that, even in niche sector, you will be able to find more than 20 contacts to reach to. I reached out to ~15 VC partners and 5 of them responded me back (I have no mechanism to track how many actually opened my e-mail). I got 2 meetings from the campaign. So, I got 33% response rate and a 14% meeting success rate. This is a big deal for a cold outreach campaign.
What was in my e-mail? First, I introduced myself and provided a 1-line elevator pitch on what we do. In second paragraph, I used 1 line to mention that s/he invested in X & Y company, and we would be a good fit for them to invest. Then in the last paragraph, I mention that I am available for a meeting, and I also attach a deck for their review. We work in hard tech/ hard science space, which needs a lot of explanation. I send a large (12-page deck with a lot of appendix pages) deck to make sure that if they want to consume the content, they will have a lot of information prior to the meeting. Actually, I found that the investors are well informed when they meet me and they like the details of the deck. This is something like qualifying a lead (similar to a sales process).
I also did A/B testing with title. I found that a little more self-explanatory title (i.e., advanced material for power-dense motor company) worked better than buzzword title (i.e., High efficiency and power-dense motors for EV company). This is part of my A/B testing with “honest marketing” campaign. I learned that if we are upfront with our weakness with target audience, they trust us more and they opt to take higher risk with us.
Here is summary of the things that you need to do-
- Find similar companies. Make a list of VC partners who invested in those companies. They are your target customers.
- Write a curated e-mail. Don’t CC or BCC anyone except your own co-founder or executive team member in the e-mail.
- Write short and effective e-mail. Mention what you do in 1-line. Then mention that how you found him/her (i.e., you invested in Co X and Y)
- End with a CTA (call -to-action) such as meeting request, review your deck, etc.
- If they don’t respond, try at least thrice (every ~7 days). After three trials, you can move on.
- If they respond with NO, politely ask for the reason and feedback. In my experience, most VCs respond to the feedback question.
- Don’t make argument on why they are wrong. Once they made their mind, it’s hard to change unless you have something substantive to prove them wrong such as a big PO or a groundbreaking data. Be polite and move on.
- Keep the relationship warm by updating them every 3–6 months if you have an important update.
Good luck!