Relationship Management for Fundraising

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You might have a target shortlist—the people you really, really want to make a deal with—of about 15–20 investors (who could be angel investors or individual investors at a firm, depending on your stage). But you’ll have a longer target list, too, of investors you’re interested in speaking with and learning more about. Having a longlist is especially important for early- and seed-stage companies; not all of your targets will turn into meetings, and not all your meetings will turn into deals.

​important​ It’s not uncommon for founders to speak with more than 50 or even over 100 investors before closing a single round of funding. In 2017, First Round Capital reported that one out of four early-stage founders pitched more than 20 investors during their last fundraising round.* Startup advisor Brendan Baker analyzed one company’s seed round where the founders met with 173 separate people,* and even Jeff Bezos took 60 meetings to get 20 investors for his first $1M.* In 2018 in the U.S. alone, there were 1,047 active venture firms, managing 1,884 funds.* It takes a lot of research and filtering to generate a list of realistic targets. Relationship management strategies are the smartest way to keep track of all your research and data as you develop your list, and ultimately track these relationships from first stages of research, to qualifying investors, to meetings, and on through to deals.

​Definition​ Relationship management (or customer relationship management (CRM)) is a business strategy and supporting software that concentrates on maintaining relationships with key partners, including customers, by organizing contact, communication, and usage data into an actionable format. Companies typically license a pre-built CRM platform, which may be customizable to companies’ specific needs.

Relationship management matters because of Dunbar’s number, the popular theory that most humans can only maintain relationships with 100–250 people at a time. If you work in an industry that demands a wide network, you’re likely to forget to follow up, lose someone’s name, and fail to meet the right people. CRM helps us make up for this natural deficiency with external systems we can build and improve upon to meet our needs.

Good relationship management is a combination of the people involved (you and your team); the researching, organizing, and contacting process (which you and your team build, adhere to, and iterate on); and the tools used to do so—people, process, tools. The sticky note on your desk that says “call Mom” is a really basic form of relationship management. More advanced relationship management is usually digital, and we’ll get to that shortly.

…fundraising is a sales process. The buyer is shopping for equity in startups and the seller is looking for cash in exchange for equity and shared governing control of his or her company.Mark Suster, General Partner, Upfront Ventures*

If you’ve ever worked in sales, this process will feel familiar. But founders have a tendency to over-optimize and reinvent the wheel everywhere they go. Before you go build your own sales process from scratch, you should seriously consider the fact that an entire industry—an entire field of practice—is devoted to building good sales methodology. Nearly every founder or startup salesperson will at some point in their career try to create a homegrown system that they believe will help them save time or be more efficient. We strongly recommend applying best practices here and focusing your innovative energies elsewhere in your business. Best practices for great salespeople involve creating a list of prospects, reducing that list to leads, and then further reducing that list into qualified leads. Here’s how these terms apply when we’re fundraising:

• Prospect. Any plausible investor.

• Lead. Any investor whom you have a hunch might be interested in your company.

• Qualified lead. Any investor you have confirmed will invest at your stage, in your industry, in the country in which you are headquartered, and at the desired check size.

Now you’ll gather data into a funnel that can take you from prospects to qualified leads.