Step 1: How to Qualify Your Investors

hi there my name is Kelly Nyland I'm the founder and CEO at a software company called Whym and I've created this fundraising series to help more Founders be successful at getting started fundraising or to apply some best practices to be more successful in the middle of a fundraising cycle so this is part one uh if you miss the introduction go ahead and and look at that video but we're going to get started here so to kick off I'm going to assume that you've already decided that you are going to start a company and that you want to raise Venture Capital uh those are two questions

you should obviously answer before you get here um and if you don't know uh how to think about those two things I will do a separate set of videos to help you think about how to get started in that pre-step because Venture Capital isn't for everybody uh so this next step is all about picking your investors and how to qualify them as a rule of thumb I've learned from other found found is that a great place to start is with a qualified list of 120 investors that 120 should yield you at least several confirmed or positive uh Investments the rest you can assume are going

to say no so that's why you need to start with a very qualified list of 120 investors and um we're going to answer these four questions or look at how to answer these four questions today which is do these investors even invest in my industry or my sector are they actually actively investing or just taking a phone call with me do they participate at my round size and are they going to lead my round or follow my round at this particular stage and that's really important to know because a lot of Founders do actually take the approach that they will initially find one key investor

who they will get close to get to know the best and will'll use that investor to help run diligence the diligence process on the investment and lead by negotiating what the valuation for the company is going to be where every other investor will actually follow now some Founders do actually set their own valuation I will try to do a separate series on that um as well but that's not what we're going to talk about today so here's how you're going to qualify your investors you're going to go into crunch base and you're going to sign up for the uh maybe free trial or initial month

to month plan on crunchbase Pro so as you start to build your initial list there are ways you could go out and Google um you know top investors in Los Angeles or top investors in cpg or beauty and you can pull down those lists from the internet that's a great place to start but what you need to do is go in and qu qualify your investors for each of those four questions that we just asked also once you're in crunch Bas you can also run a query so you can go to investors and then you can begin to inquir to query the types of industries

that they invest in so let's say I want to go down here and I want to look at consumer goods and I want to filter out for all those investors investing in Beauty I can search down by geography if I need to I can also uh search for let's say angels in the beauty industry and then this will give me an initial list of potentially Beauty Angels that I want to reach out to and how many Investments each of these people have made so I'm going to talk specifically about how to pre-qualify venture capital but these same rules would apply to any other type of

investor whether it's private Equity individual or Angel and you should definitely learn about the different types so for today I'm just going to pick actually one of my very first investors um pre Ventures so pre precursor Ventures one of the things I I will want to know is um the type of Investments That precursor makes and so I'll scroll down here under Investments and I'll look at the different Industries and the number of Investments that they actually made so this is a positive indicator to me if I'm a software company because they like investing in uh in software companies and so if you think about

where your vend diagram of uh Investments would be um that's where you're going to want to look for these industry and as sectors the next thing I always look for is how actively in how active are these investors investing or you know so are they active and the indication of that is that they've made at least five to six investments in the last year sometimes it might be a few less if they're not a huge fund um likely it's going to be a ton more if they're Lar larger active funds so as you look at the announcement date you want to just make sure that

they're actively investing um if you see someone who has not invested in the last year that's a huge red flag um if you do find an investment like that and you think wow this is just such a great investor I wonder why they're not investing it could be that they're raising more money and um it would be appropriate to maybe reach out to them so once you go here then you're going to go into um slide over uh we'll talk about lead versus follow in a minute and I'm I usually like to look at the money raised so I kind of visually scroll down here

and I like to look through okay the funding round of like let's say my preed round what is this Investor's appetite for the size of the round and does that align with how much money I'm raising in the round that I'm trying to pull together and sometimes that's a little bit of a Founders don't know where to start right they don't know if they should raise $500,000 are $2 million and so we'll get on in I think the third part that I'm going to put together for you guys your materials on how to actually um set up your investment so we can help answer those

questions later but this is usually the first thing that um Founders think about so um the the thing that I want to look at here is uh the size of the round for these Investments um and so I want to make sort of a visual calculation of is this within the range of the Target that I'm raising for the last thing here is um sorry my mouse just lost power uh so the last thing I want to look at is whether this uh investor actually leads or follows and so in this column where I can see under clutch that they have led that round then

I know that there's this is a positive indication that this could be an investor if they like me that they would be willing to negotiate with negotiate with me the valuation for for my round and also run the diligence process um with me and my data room to evaluate my investments and then the rest of my um pulling in the rest of my checks so the other half of the round should not necessarily be easy but it should be a bit easier if I get a venture capitalist who's willing to at least help me set my valuation and that's the difference between a lead investor

and a follow so I also like to see um do they only follow uh that's a good thing for me to know because I want to contact them a little bit later in my fundraising cycle once I've established what my valuation actually is with a potentially a lead investor um so those are the most important things to look at in terms of pre-qualifying so just to go back here um we've covered you know do they invest in my sector are they actively investing do they participate at my round size and are they going to lead or follow at my stage last thing I I would

mention is that you can always look up people and so this is an awesome tool so crunch face actually just released a new contact component of their software and um I do have the plan on so that means that I can click through and go directly to Charles in LinkedIn um I can reveal his uh email and his phone number and I can actually immediately send him an email or connect through my Outreach platform or my sales um Force platform every time I hit the view button it counts the number of contacts that I've purchased um and so this is actually a great way to

get the contacts for your investors as well you'll still want to run what's called a warm intro process which is what we're going to talk about in steps two and three um but that's where we're headed next so this is how to get and collect your your list of 120 investors next we're going to move into Trello and into Google Sheets um to start setting up the rest of your process thanks so much for listening if you um if this provided value I hope that you'll send this to another founder that you think could use this advice today thanks