Fundraising? Here’s why you should optimise Quality Outreach Over Quantity

If you’re a founder looking for investment, you have a dilemma.

How much time to invest in identifying and building connections with investors, or to invest in immediate business traction.

Daniel Sawko, co-founder of shipshape.vc, the free to use investment search engine, shares his tips on how to maximise your chances of success.

Focus on Relationship-Building

When raising capital, a common misconception is that contacting more investors improves your chances of success.

This “spray and pray” approach—sending generic messages to numerous potential investors—has gained popularity with the rise of mass emailing tools.

However, analysis by Adam Shuaib, a Data Scientist and General Partner at Episode One Ventures reveals that this strategy is suboptimal.

Beyond a certain point, there’s no increase in the chance of success for the number of investors you contact. Instead, founders should focus on building meaningful relationships with carefully selected investors.

Research Potential Investors

The challenge lies in identifying which investors deserve your attention, as this data is often disparate and poorly organised. This is one of the problems we’re solving with shipshape.vc.

Shipshape.vc aggregates data from over 25,000 funds, identifying the types of companies that they are investing in and the individuals that work at those funds. This enables founders to significantly cut down on the research time it takes to identify relevant investors.

Identify Investors who Understand Your Niche

Beyond identifying investors who focus on, for example, Fintech, determine if they understand your specific niche. For example, if you’re developing credit decisioning technology using open banking data, look for investors with experience in related domains.

Be Aware of the Fund Lifecycle

Most venture funds operate on a lifecycle, say of 10 years. Funds deploy capital primarily in their early years to ensure returns before the fund closes. Recently raised funds are more likely to be in an active “planting phase,” while those 5+ years into their lifecycle may be in “harvesting mode”—focusing on existing portfolio companies rather than new opportunities.

Examine Recent Investment Activity

Monitor when funds last deployed capital. A fund that hasn’t invested in the past three to six months might lack fresh capital or be moving to a different phase of its lifecycle.

Target the Right Team Members

Research which individuals at the fund understand your space. See if you can deduce from the team descriptions on a fund’s website, their social media, or from a search engine, like shipshape.vc (which will often include team descriptions), with whom at the fund you should be building a relationship.

Approaching someone with the wrong specialisation signals poor research—and how you sell your equity reflects how you sell your product!

Don’t Present Investors with a Transaction aiming at an immediate “Yes” or “No”

Fundraising is not about getting an immediate yes or no. Your company is not a simple product and ‘sales discovery’ applies for potential purchasers of your equity.

Investors will almost always need multiple data points about your company over time before making decisions. The saying of “investors invest in lines, not dots” is real.

Each interaction and update (in-person or via other mediums) helps to build a trendline that either increases or decreases confidence in your venture.

Prioritise Depth over Breadth and Quality over Quantity

This approach requires depth rather than breadth. Similar to bulk mail outreach for selling products or services, founders will struggle to create sufficient data points and depth of relationship with hundreds of investors simultaneously via bulk outreach.

Focus on building relationships with a few dozen carefully selected investors you have determined demonstrate genuine interest in your sector and stage, have dry powder (e.g. via a recent fundraise for the fund) and identify those that can potentially lead a round.

By narrowing your funnel and prioritising quality connections over quantity, you’ll optimise your fundraising process and increase your chances of finding the right investment partners who truly understand and value what you’re building.

Want to share your thoughts?

If you have a question or further thoughts on this article – feel free to reach out to Daniel Sawko on LinkedIn!