Building an Investor Pipeline that Works | Mark MacLeod

April 19, 2023 - Mark MacLeod

Building an Investor Pipeline that Works

There is so much written about fundraising, yet many founders make basic mistakes.

That was OK in the last 18 months when $ was flowing. Now, there is no room for error. You need to know how to build an investor pipeline with the right investors.

How NOT to build an investor pipeline

This list is an actual investor pipeline from a series A fundraise. The founder shared this publicly, but no need to name names. That’s not the point.

This fundraise did NOT work out. However, the founder did go on to achieve a great exit, so all is well. 🙂

What’s wrong with this investment pipeline?

It is comprised of investors with very different investment objectives and criteria. So, much of the pipeline is not a fit. Wasting the CEO’s and investor’s time.

For example:

Insight Partners: Large checks at the growth stage. Strong minority and often majority ownership positions. Like high burn as long as there is high growth. Chasing the outliers and has the capital to bag them.

M33, Stripes: Preference for capital-efficient businesses not burning their way to greatness.

The key to building your investment pipeline

There are lots of investors out there, each with their own investment sweet spot. The trick is to do your homework upfront and build a pipeline of investors that truly fit the size, trajectory, and capital needs of your business.

A pro subscription to Crunchbase will arm you with a wealth of data and enable you to create a targeted pipeline. From there, sharing that with your existing investors (if you have some) and other CEOs and looking for intros is the next step. Also, cold inbounds are increasingly accepted these days.

Targeting your fundraising pipeline

Take the time upfront to target. Many CEOs seek false comfort in numbers. They want a large fundraising pipeline. But as illustrated above, more often than not, those pipelines include investors that are not a fit. They will take the meeting because they will learn. Also, while you might not fit today, you could in the future. While it’s good to build relationships, this is a waste of your time in your actual current fundraise. Stay focused!

Photo by engin akyurt on Unsplash

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