Writing cold emails is always hard. Having some experience in B2B sales will suggest that if you want to sell to clients you need to build personal relationships. You need to know their backgrounds, context, what keeps them up at night, both professionally and personally. Since raising investments can be (somewhat simplistically) thought of as a B2B sale of startup equity to VCs, the same principles can be applied to company fundraising. This is why it’s hard to raise money via cold emails and why warm intros work much-much better, it’s also why you need to nurture your leads and send regular updates for your existing and potential investors (we covered this topic in one of our previous posts).
VC context and background
Every VC gets a lot of emails and LinkedIn messages. The stronger the brand of a VC is, the more massive the flow will be, because the barriers to send an email or write a personal message on LinkedIn are very low. The volumes of cold messages are growing every year, so VCs are often overwhelmed with that source, and since the quality is usually low, the entire channel is often de-prioritized. One can easily have close to 500 unread emails and 100+ messages on LinkedIn if not checking their email over a vacation. Even if you spend a minute per each, it will take hours just to go through it, without even understanding the fundamentals. This is the reason why Michael Siebel of YC advises founders to write emails that can be read in under 60 seconds. This is why your messages should be short and straight to the point. Keep in mind that the goal of your initial cold email is not to sell your idea to a VC, your goal is to start a meaningful conversation and schedule a followup. That’s it. Save all the details for later.
Speaking of VCs' backgrounds: the majority of them have relatively modest business or startup experience. That being said, VCs and founders have more in common than one would think. Both groups have an appreciation for technology and want to make an impact using it. Both are curious about the way the world works but also want to challenge the status quo. Oftentimes, even their formal training is similar: degrees in science or engineering or finance. VCs would like to have a meaningful conversation with someone who knows more than what they do in some area, where they can learn something new and interesting, and ideally see in you the best bet on the field they just learned about.
Unfortunately, many entrepreneurs write very long introduction letters trying to provide all the information and then some about their startups early on. To stand out among hundreds and hundreds of incoming emails and messages, it is better to write something short to help a VC understand quickly whether your startup fits in their investment focus in the first place: does it apply in terms of technology of interest, business model, sales geography, current stage and so on?
Typical mistakes to avoid in cold emails and LinkedIn messages
All VCs use email. Some also check LinkedIn. Crypto VCs heavily leverage Twitter, Discord, and Telegram. Sending an email (as old-fashioned as it may seem) is still the best option because VCs run all their business there. It’s most likely integrated with their CRM, it’s easier to forward that message to the relevant team member, it’s easier to search later for the details. LinkedIn can work too, but it has a higher barrier, and often you will be asked to send a followup / supporting materials via email anyways. When contacting on LinkedIn, it may make sense to send several follow up messages, otherwise it gets buried in all the other InMail and invites received.
Here is a bad example: a founder sends a request to connect without adding a personalized note. Some LinkedIn advisors claim that it increases conversion by adding a prospective person of interest as a contact. It probably works for growing your contact base somewhat, but it will not help as much with fundraising. Some people write general messages like “We work in the same sector, let’s connect” or “Our startup is raising money, let’s have a call to discuss details”. Those messages add zero information or incentive to connect and followup. It would be better to write a short message about what your startup actually does, what your current stage is, how much you are raising / raised in the past, why you want to connect with a specific fund and / or person within it. A simple but true advice: want a person to like you in any business relationship? Save them time. (Arguably, it is better to use InMail for the first contact, and only after a followup it could make sense to suggest a mutual networking connection when you know that there is interest there.)
Another failure mode is that after indicating an initial interest, a VC then gets several paragraphs of very generic text describing the history of the company, trends in the market, some achievements of the team like winning a startup competition, anything except for what VCs really need to know: your revenue traction, how much you are raising, if you are looking for a lead or filling out the rest of the round. It usually takes several back and forth messages to figure out if the startup is a good fit for us in terms of the stage, business model, and geography. In most cases the conversation ends because there is simply no fit with our investment focus, something that should be clear right away to save everyone’s time.
Many founders make a mistake of mass mailing to hundreds or even thousands of VCs. You are selling a premium product (shares of your company). Could you imagine someone selling a luxury car or premium real estate by spamming everyone who could potentially afford it? It is much better to focus on a smaller number of potential buyers that showed interest before in something like that (investors in that space, stage or geography) and run a personalized outreach. There is nothing wrong with using automation or management tools like Calendly to help you keep the process organized and less labor-intensive where it does not have to be, but your fundraising effort should not be carpet bombing of every investor in existence amplified by the tools you can access.
Another mistake that happens more often than one would expect is that founders sometimes do not follow up. Your message may simply get lost in the inbox. 2-3 attempts can help you get a response. If there is any material change in traction since the last email or message sent, it’s a great way to share that information, as you may grasp VC’s attention that way, giving them something dynamic to look at vs. repeat static pings.
Recommendations for writing cold emails to VCs
Let’s start with the subject of the letter. The main purpose is to show that the email is about a startup raising money, because it will get the first priority. The email subject line should be very concise characters. Here is an example: “TaxCo - B2B SaaS for Tax Professionals - Seed Round” or “TaxCo - B2B SaaS for Tax Professionals - Seed, +40% MoM, USA”. The sooner you show your fit to the investment focus of the fund, the sooner you will be recognized as such.
Now the body of the email, it should be short and straight to the point so that an investor could read and comprehend it in 60-90 seconds. The goal is to show value to a VC, we established the tangential fit in the subject line, now we need to confirm it. Don’t pitch your product. Pitch an investment opportunity. Good emails have 8-10 sentences and a call to action inviting the reader to start a more nuanced conversation.
- When possible, send your email to the person and use their first name. Nowadays it’s pretty easy to find an email of pretty much any public person within any company (and VCs tend to be pretty open and public about their jobs). If, however, you’re writing to a generic address like info@i2bf.com, you can say something like “Hi I2BF Team”. Keep in mind though that those “catch-all” emails have a lot of spam and low-effort submission. On the other hand, more eyes see them internally, so there are both pros and cons doing it that way.
- If you previously met, mention that, but don’t lie, it’s actually fairly easy to be caught. If you send a cold email after you have met with someone but did not get their contact information, focus heavily on how the startup fits in the VC mandate, not the details of your interaction.
- Describe in one sentence what exactly your startup does (ELI5 definitely applies here) mentioning again the target segment, the business model, and relevant geography. For example, “We develop a B2B SaaS product for tax practitioners in the US specializing on individual and SMB tax returns.”
- Describe the problem your clients face. For example, “49k tax professionals in the US use email, WhatsApp, and phone calls to help their clients file their tax returns. Our solution helps these professionals cut their costs by 20%.” You can also add some insights about your secret sauce that others don’t have: why are you better than the competition, why will you succeed, why shall the VC bet on you?
- Show your current traction. If you are a pre-revenue company, or you run your first pilots, be clear about it. Don’t waste your time talking to VCs which could only back you in two or five years from today. If you already selling your product, talk about 2-3 important metrics like your monthly revenue, month-over-month growth, number of customers, average checks, exceptional LTV/CAC ratios, expected revenues next year, significant clients, and so on. Do this part in bullets: it will help investors understand if your startup is a good fit in terms of the stage and their own internal metrics of what they consider “investable”. Avoid odd or silly growth statements like "Our revenue grew 12,500% last quarter. We went from $10 to $1,260..."
- Estimate and mention you Total Addressable Market (TAM) and the trends driving it but focus on SOM, this is what will be relevant for a VC investing today.
- Talk about your co-founding team and focus on the strong sides and relevant experiences, no need to brag about things that are not really helping the current venture. VCs want to understand why you are the team to back, compared to funding your competitors instead.
- In addition to #7 above, try to demonstrate why the risks of backing your team are lower: previous exits as founders, relevant lead investors, angels or accelerators, key clients or partners, team that worked at top-tier companies relevant to your startup.
- Talk about the round size, expected closing dates, the size of hard and soft commitments, if any. Like mentioned above, be clear if you are looking for a lead or followers, it will give VCs a better understanding of the dynamics and what is expected from them: if you need a lead and already have plenty of followers, talking to another potential follower is not the best use of anyone’s time.
- Finish your email with a clear call to action such as asking investors to schedule a call or ask if they would like to get any additional information about the investment opportunity.
- Add a deck (or a Docsend) teaser presentation and a one-page document for more reading if a VC is intrigued enough to do so.
Don’t use your industry’s highly specialized jargon because VCs are probably not aware of it (unless super-specialized in the same field). No need to tell a long story of how you came up with the idea (save it for a later day), at this point, VCs need facts to make a quick determination, remember, the default is a “no”, and your objective is to convince them otherwise. Send letters from your company’s email address. Don’t send follow up emails very fast, give VCs some time to respond. Avoid stuffing your email with links and images because they trigger spam filters. Pay attention to details, spell names correctly, write well. Remember that it’s better to send 50 personalized and high quality emails than 500 generic low-effort ones. You reap what you sow.
Here you can find 14 templates for your inspiration.
Hope this post will help you with the fundraising. And good luck with your growing business!