Finding Investors Often Feels Like Searching for a Needle in a Haystack RazeTeam June 20, 2024
finding investors is like searching for a needle in a haystack

Finding Investors Often Feels Like Searching for a Needle in a Haystack

“The Struggle is Real”

Let’s be honest: nearly every founder faces this uphill battle. The journey to find investors who not only believe in your vision but are also willing to back it financially is tough. Less than 10% of first-time founders close their goal of new capital, and 90% of new businesses go out of business in the first 5 years. And now the market conditions of 2024 have ushered in a “flight to quality,” where investors are becoming increasingly selective, favoring pedigree startups with strong fundamentals, clear market differentiation, and sustainable growth prospects. These challenges make it increasingly difficult to find, pitch, and close unknown investors or “cold contacts”. 

So let’s look at the root cause of why this issue exists…

CEOs and Founders Lack a Network & Real Connections

You might have the next big idea, but without a broad reach, finding investors can feel like searching for a needle in a haystack because the founder’s network is limited or they burnt past relationships. If you’re not already in the right circles, building those crucial relationships can seem almost impossible when you launch a round to raise capital. Why? Because it’s already too late. Those connections should have happened months or years prior.

Every contact you make throughout your professional journey—whether a customer, partner, advisor, former customer, past business co-worker, past boss, or previous board member—holds potential as an investor prospect. By neglecting to nurture these relationships, you miss out on valuable opportunities for both current and future funding rounds.

It’s crucial not to pigeonhole people into rigid categories like “investor” or “not an investor.” Instead, view them as valuable contacts who could connect you to the funding you need at different stages of your startup’s growth. Someone who may not seem like an investor today could become a pivotal connection tomorrow, especially if they see the significant work you’re doing and want to support your vision. By maintaining and cultivating these relationships, you build a robust network that can provide support, advice, and financial backing when you need it most.

How to Correct the Past Mistake and Build a Network

Attending events in person is still the tried and true way of building a network. This provides opportunities to meet new people, share your vision, and expand your network with individuals who could become future investors or introduce you to other potential backers. Founders are shocked when they really think about how many connections they have came from in-person relationships, even in today’s social and AI driven world. Regularly engaging in these activities can only produce new opportunities if events are strategically selected combined with a budget-friendly approach.

business professionals shaking hands and meeting together to raise capital from investors

Leveraging Your Social Network

You might think you don’t know any investors, but your social network is a valuable resource. Start with friends and family, and then explore connections on LinkedIn. Even if your direct contacts aren’t investors, they might know someone who is. This is often how many startups land their first professional investor.

For example, by updating your LinkedIn profile and running keyword searches for terms like “investor” and “funding,” you can uncover potential connections. Also, consider asking your contacts for introductions to investors they know. These warm introductions can make a significant difference in getting your foot in the door.

LinkedIn has evolved from a simple resume-sharing site to a dynamic hub where professionals connect, share insights, and learn from each other. Your presence on LinkedIn can significantly influence real-world opportunities, making it essential to approach this platform strategically.

Adding Value Through Content

Think of LinkedIn as a place to cultivate relationships rather than just accumulate contacts. Sharing valuable articles, insights, and experiences can showcase your expertise and help others grow. Thoughtful comments and genuine engagement on others’ posts can further strengthen your professional network.

Engaging in Meaningful Conversations

Real relationships are built through meaningful conversations, not just likes. Engage deeply with posts by asking questions, offering insights, and showing genuine interest. These small interactions can lead to fruitful collaborations and partnerships.

Consistency is Key

Regular activity on LinkedIn enhances your visibility. You don’t need to post daily, but maintaining a consistent presence shows your network that you are engaged and invested. Ensure that your online persona accurately reflects your real-world self across all interactions on the platform.

Exploring Incubators and Accelerators

Incubators and accelerators can be fantastic resources for early-stage startups and for later stage depending on the model. These organizations not only provide small amounts of capital but also offer mentorship and valuable connections to a larger network of investors. By participating in an incubator or accelerator program, you gain access to a built-in network of potential investors who are already interested in supporting startups.

Utilizing Research Databases

Research databases like Crunchbase are essential tools for finding potential investors. Crunchbase provides profiles of nearly 100,000 investors, detailing their investment history and social network contact information. This database is an invaluable resource for broad research and can help you identify investors who have funded companies similar to yours. However, a tale of caution on these databases – spamming people will rarely work. This data is great for long-term networking and campaigns to connect with people vs. pitching cold investors.

Joining Angel Investor Groups

Angel investor groups consist of wealthy individuals who collectively review and make investments. These groups have formal processes for pitching and can provide significant capital and valuable connections. It’s beneficial to start with local groups, as they are more likely to invest in nearby startups. However, you have to meet these people, develop a relationship and connect with them on your vision before they invest. Angels are always going to be the most critical of your details because it’s typically their money they are investing compared to a venture capital firm with other people’s money.

How Raze Can Help

At Raze, we understand just how critical it is to build an effective investor network. We’ve designed our platform specifically to help you overcome these hurdles. Whether it’s expanding your reach, building your offer, raising with alternative forms of capital, or connecting you with the right investors, we’re here to support you every step of the way.

Our tools and services are crafted to provide the edge you need to stand out in a crowded market. From automated investor outreach to advisory support, we offer comprehensive solutions to help you build and leverage your network effectively.

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