Approaching an investor for the first time can often be extremely daunting. Apprehensions regarding who to reach out to, how to put yourself out there, and what is the right thing to say are anxieties common to most fledging entrepreneurs.
However, it doesn’t always have to be so scary! Kassim Shroff, co-founder of Krave Mart, shared all his tips and tricks to help new founders combat the anxiety that comes with raising one’s first round.
Kassim Shroff’s Tips for Approaching an Investor for the First Time
Krave Mart has gone on to raise approximately $6 million since its inception in 2021.
Its co-founder, Kassim, boasts 10 years of eCommerce experience in both Canada and Pakistan in various leadership roles. This includes Product, Project Management, Operations, Growth, Customer and Seller Experience, Localization, Incubation, Marketing, and startups.
And he has some vital tips to help you approach an investor for funding:
The Method to the Madness
For Kassim, it was all a volumes game based on blindly contacting individuals via LinkedIn. He would set a daily target of 300 messages a day, and send messages to everyone – even prompting a LinkedIn ban at one point!
The process is grueling and requires tenacity – messaging every person who seems relevant no matter how random it may be.
“There’s only one formula – you have to be shameless. There cannot be any ego, you can’t be scared, you need to be aggressive with approaching people.”
In this case, it was a VC fund based out of Dubai that changed everything for Kravemart and Kassim. Someone he didn’t know and had met through Linkedin became a life-changer in terms of connecting him with people, taking out the time to give him detailed advice, and later even investing a small amount in the company.
This guidance was very important for the founder who was going through a very stressful time in his founder journey.
Which Investors to Approach?
The most important suggestion for founders at the beginning of their entrepreneurial journey is to understand what a product-market fit is. To raise investment one must first ask themselves:
- Will my product work?
- What makes it a successful product?
According to Kassim, first-time founders looking to raise are not realistic in their approach. People often make the mistake of reaching out to the biggest names in the ecosystem – such as Tiger Global – but overlook the importance of Angel Investors and Incubators.
Individuals and corporations that invest smaller checks are often the most valuable and can be the introductory funds necessary to build a business. Once you have achieved product-market fit and revenue, the big names approach you themselves.
Learning to Take Feedback
Another quality Kassim advises those new to the entrepreneurial journey is to cultivate patience and prepare for rejection. It’s part of the process!
Not every call with an investor will lead to something; however, feedback can be essential for growth and learning. Taking calls for feedback and reaching out to institutions and individuals within the same space are all important in order to build a pipeline.
Your company’s pitch deck (the presentation you use to secure funding) develops through learning and feedback, Kassim mentioned how he has 200+ iterations of Krave Mart’s pitch deck!
“I used to wonder why people wanted to know more about me, the business is much more important, but I was wrong. The first thing these investors look at is the people, it’s the team. Model pivots can happen 50-100 times, hundreds of companies do that.”
Kassim’s pro tip for first-time founders: invest in a professional designer to design your pitch deck – it goes a long way!
The Role of Accelerators and Incubators in Fundraising
One must never underestimate the importance of guidance. Kassim’s advice for first-time founders is to take the time to understand and learn, genuinely.
“One must have a willingness to learn. Let’s be honest: people think they know everything but they don’t know anything. This applies to me too; the learning experience is very different once you raise.”
Kravemart was at a late stage when they joined Ycombinator, with 50+ employees already under its belt. Kassim credits the incubator for helping them tweak their business model and figure out how to get on track.
He is also grateful for the support he has received, with mentors being accessible even after the cohort has graduated. However, one must put in effort in order to learn and approach the right individuals.
Kassim describes his experience at YCombinator as being back in school – but in a good way! The incubator played an important role in the co-founder’s journey by teaching him the absolute basics: how to prepare a pitch and what to include in an email approaching an investor for the first time.
3 Email Etiquettes to Remember when Approaching an Investor
Emailing an investor for the first time requires courage. The ability to press send is often preceded by hours or even months of mental preparation.
Don’t worry, Kassim has you covered! Here are some email etiquettes to keep in mind when approaching an investor for the first time:
1. Don’t be Rude or Entitled
If your initial email to an investor is rude, word will get out and it’ll sabotage your chances of raising funding in the future.
2. Keep your Email Focused and Relevant!
Brevity is key here, the first email to an investor should take less than 30 seconds to read. A person spends less than 30 seconds reading an email so all the relevant points need to be right there.
3. Tell Them Who You Are
Begin by introducing yourself and the team – your identity is the first thing investors look at. Subsequent lines can also include:
- Details about the company
- Any traction raised
- Your contact information
How to Tackle the Initial Meeting with an Investor
The day finally arrives, you set a time to meet with an investor, swallow your nerves and are ready to wow. What are some things to keep in mind during your first meeting with an investor?
Do: Have a Good Internet Connection!
This may be basic but the number one most important thing is to have a good internet connection that can be maintained throughout your meeting. If you’re saying you’re building a digital company and if your internet is not working, you’ll hardly be making the right connection.
Do: Avoid Pretension
This can not only help you tackle your nerves but also gives the investor a good idea of who you are as a person – just be yourself! You can dress smart or casual, there’s no need to be sitting in your living room in a suit and tie – the investor will see right through it, and be laid back without appearing too sloppy. While you do need to be relaxed and comfortable during your meeting, don’t take it from your bed or on the couch, but also don’t go out of your way to make an impression it can come off as trying too hard.
Do: Be Transparent about How Much You’re Raising
You need to be aware of how much you’re raising, this gives investors the confidence they need to invest in your business. Do also be transparent about how much money you need to build your business, and approach it with the right confidence. If you need a million dollars, you need to say I’m raising a million at a valuation of 4-5 million et cetera, don’t be shy just be upfront about it.
Don’t: Take the Call if You’re Unwell
If you’re unwell, reschedule the meeting. Your energy needs to be on point for this call as it is the first impression you create on your investor.
Don’t: Behave Like You’re in a Classroom Environment
The dynamics of the call need to be shaped more like a casual discussion rather than a class. Don’t ask for permission to speak or to move on to the next slide, rather build a natural rhythm through a conversational style.
The call is to get to know you so do discuss your experience and your role rather than just reading out from your slides.
Don’t: Get Stuck on the Valuation!
Your valuation depends on how attractive your business model is. According to Kassim, while valuation conversations are based on the types of people you’re talking to, roughly 20% on your pre-seed round is a fairly good number if you’re raising a million dollars.
“The most important thing to keep in mind in regards to valuation is to understand that people are taking a risk on you – one must be patient and think long-term. If you’re looking to dilute only 5% in your first round then good luck, it’s not possible. People get stuck with valuation on equity, but you can’t be a billionaire overnight, it takes years to establish a successful business”.
What Questions Should You Ask an Investor?
Now that you’re done with the meeting and have some time to build rapport with a potential investor, here are some questions that can give you direction once the call is done:
1. What other founders from your portfolio can you connect me with?
A lot of funds pick a sector or region they want to invest in. One thing to keep in mind is to ask investors who they can connect you with that they’ve previously funded.
A connection with other founders who have already built a business in a similar way can help clarify any confusions you may face as you embark on your own journey.
2. Who can you connect me with in terms of other investors?
Usually, the answer to this question is who do you want to be connected with? Have a list ready of other potential people you want to approach. Think of with investors who have already put money into your country or within your sector and see if you can be connected with them.
So there you have it! While approaching an investor for the first time can be intimidating for many first-time founders with these tips you’ll be gearing up for that first raise in no time.