How not to write to investors

by | Feb 2022 | Early-Stage Capital

I’m sure I’m not the only early-stage investor who regularly receives cold pitches from founders via LinkedIn. Recently I received one that really stood out.

Our mission here at DQventures is to help early-stage founders avoid many of the common pitfalls involved in launching a startup. This applies to all founders, not just the working professionals with whom we cofound companies. So, I took some time to write back to the founder (let’s call him Henry).

Although I admit to being a little mischievous here, my intention was to help. For all I know, Henry’s startup could be the very thing the world is crying out for – it’s sustainable, some kind of agritech, and has taken five years to develop. Perhaps Henry will go on to build the next big thing by discovering a new way to feed the planet. I certainly hope so.

The problem is that Henry is unlikely to get an investor’s backing unless he changes the way he writes to investors.

I’ve removed any details that might identify Henry, and am sharing our correspondence below in case it’s useful to other founders struggling with a poor investor response rate.

Henry’s cold investor approach

Below is Henry’s email, with mark-up and comments from me. I sent this to Henry, highlighting the points I believe many investors will find off-putting, accompanied by the longer explanation below:

What not to put in your pitch emails

This was my reply to Henry:

Hi Henry,
I get the impression you haven’t raised money before, as there are a lot of things in your email(s) and deck that are likely to put off investors. I believe in helping founders, as entrepreneurship is not only hard but also essential. Please take this feedback in the spirit in which it is intended (slightly mischievous but hopefully helpful). I’m afraid I’m not interested in investing, but if you’d like me to point you towards some useful resources, I’d be happy to help you improve your pitch.
All the best,

Here’s the feedback, which relates to the attached image (your email, marked up):

1. First impression: punctuation and grammar are all over the place. Not much care has been taken and/or a very poor eye for detail. Either way, this doesn’t seem like the type of founder I like to invest in.

2. “Mega” x2: come on, how old are you, 5? I understand English isn’t your first language, but this email is potentially crucial to your business. Couldn’t you ask someone to read it for you before you clicked “send”?

2a. “mega big”. Not just bad English, but what does it even mean?

2b. “mega sustainable”. This ticks all the boxes, where do I sign?!

3. Firstly, this sounds like a lie. If so, it doesn’t send a great signal about how you intend to manage your investors. Secondly, if it IS the truth, don’t I deserve to know which one? My impression is that, in fact, you’ve scraped together a list, spammed it, and somehow I’m on it. I can’t think of many worse ways to contact an investor than lying to them. Cold emails are fine (warm intro’s are better) as long as they’re honest, simple, and capture why your idea is exciting (for me, by quoting impressive early growth stats).

4. New investors? What happened to the old ones? Another negative signal.

5. “Pre-IPO”.

5a. You’re “a” pre-IPO? There’s no such noun.

(5b) Repeating it, as though it’s the most compelling part of the pitch, is awful. Of course you’re pre-IPO. This tells me you’re not very clear about equity investment. Fundraising is hard, and investors are generally not looking for founders who won’t do basic research.

6. Expecting a minimum 10X ROI is fine, but putting that in a mass marketed email is a bad idea, not to mention legally questionable.

7. So the first impression you want to give me is a picture of a guy making dinner?

8. Not only is this a very precise and unconvincing argument, but also this confuses the pitch. Ideally, based purely on your email, I should be able to explain your pitch to my investor friends, telling them exactly what you do, how excited I am, and why.

9. To me, “5 years of development” isn’t necessarily a good thing. In fact it suggests progress has been slow and you haven’t been able to excite people thus far (whether that be investors, customers, sponsors, or partners). Combining this with point 4, it sounds like your existing investors may have given up on you?

10. This tells me you’re going to burn through my cash and essentially find yourself in the same position you’re in now. You’re building and researching, not validating the market, and driving demand. Investors like me want to know there’s a (huge) market for this product. We don’t necessarily care about the product itself. What proof are you creating that your business can deliver revenue?

11. This is a strange call to action. My time is precious to me – I’m never going to click on that link.

12. Or is this the call to action, perhaps? This one (i.e. unsubscribe) I’m far more likely to do, because this sentence tells me you’re running your fundraising process like a poorly segmented email marketing campaign, based on quantity not quality. You would do far better to identify investors who seem to share your passion, then make a personal approach to them.

I hope the above helps, but there’s one more thing. Investment decks are almost never just PDFs of a Word document. A simple Google search will provide endless examples of what investors expect to find in a deck. One I frequently recommend is this one from YC.

Best of luck,

Henry’s reply

I’m pleased to say that Henry wasn’t put off by my teasing and replied saying the following. You’ve got to give it to him, for continuing to pitch by subtly asking me for referrals…

Hi James

Yes, we have never before raised venture capital. You are correct and I really appreciate your feedback.

Thanks a lot!!

I would like to mention that Pepicon, where we have published our Investment Memorandum, have a feature named Pepicon Partner/Rainmaking function which means that anybody, organization or private individual have the opportunity to support a start up company looking for capital and get an agreed “finders fee” of 10%.

And it’s fully transparent!

I have enclosed the document “Investor Sourcing” which explains more in detail.


Asking for referrals from people who don’t invest

This is something founders ask often – maybe 50% of the time. I’m always a combination of a) impressed, and b) surprised by the lack of understanding of an investor’s mindset.

Thanks Henry, I think it’s unlikely that you’ll get referrals via Pepicon from people who don’t already believe in what you’re doing. It’s hard to recommend something you haven’t invested in yourself, and in my experience the finder’s fee doesn’t usually make much difference. If anything, it can create an obstacle.

My advice would be to work closely with your existing investors and advocates, asking them to help you get intro’s. Meanwhile, you should also put the effort into identifying the investors who like to invest in your space (agritech?) and stage (pre-seed to seed). It will require some time and research, but writing targeted emails to the investors who are most likely to be interested will give you your best chance of a positive response.

Have a read of this Quora post from well-known investor, David Rose. It’s about scriptwriters, but as David says, it is also excellent advice for startup founders.
I wish you the very best of luck.

P.S. I get a lot of cold approaches like yours, and often give similar advice. I’m going to remove any personal data and publish this on our website. I’ll send you the link when it’s done. Thanks and good luck!

For most of us, our networks are precious – maybe our greatest asset. There’s no possible way I will refer a founder to a fellow investor if – let alone not having invested – I haven’t even spoken with them. I’m also highly dubious of paid referrals. I tried some cap intro work a few years ago, and always felt conflicted. I like making referrals to help people – ideally to bring two like-minded parties together in the hope of helping, in a small way, to make something happen. Add a payment into the mix and I felt dirty.

What’s more, so much cap intro work goes unrewarded, that you need to charge a decent fee (~5% of the amount invested) to make it work. But sometimes all you do is literally make an intro. For those involved in the simpler deals, it’s terribly poor value. They can’t believe you’re expecting payment for making an intro. But for you, through no fault of your own, this may be the only deal that worked out in several months. You need that fee, but you also feel like you don’t deserve it.

Cap intro wasn’t for me, but I understand there’s a place for it. I invest through the UK site, Crowdcube, which is a form of cap intro, and I know a number of successful businesses that have found a model that works. Anyway, I digress!

Hopefully Henry will put this advice to use. I genuinely hope he raises millions and smashes it out of the park. For other founders out there, I wish you every success. If there’s something in the above that helps you, that’s all I can ask!

Image Credit

– Lotsa Spam by Daniel Go | CC BY-NC 2.0

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