Mike Lingle at Rocket Pro Forma
The Reverse Investor List
Updated: Nov 26, 2020
Work your way up to your dream investors.
I was a DJ in New York City for over a decade. I would sit home and work on my skills and I got really good. But there were some things I couldn’t practice by myself:
I felt a lot more pressure when I had an audience.
Songs I thought would work sometimes fell flat in the club. I had to learn to keep giving the crowd what they wanted, even before they asked.
It was easy to concentrate at home—but in the club there was always someone talking to me (and they were usually drunk).
So guess what? Even though I practiced a lot, my first few live performances were…choppy.
What does this have to do with raising money?
I look at a lot of pitch decks. A few are great, and most of them need work.
I go to a lot of investor meetings and I watch entrepreneurs trip over the same things that I did while DJing:
They have to learn to play to the audience
People are always interrupting and asking unexpected questions
There’s a lot more pressure.
So what’s a founder to do?
Simple: figure out a way to start with audiences that don’t matter as much. Learn from them. Make your pitch better every time.
Sometimes this is as easy as changing some text on a slide. Sometimes we have to do some homework to make our startups stronger.
We pitched 30 to 40 investors when we were raising our Series A—and all of them said no. Then, all of a sudden, we received three term sheets all at once.
Did we get lucky? No!
We got much better at pitching at the same time we were working on our business. We finally crossed the threshold where we were attractive to investors. Three of them wanted to write us a check!
Here’s a strategy I call the Reverse Investor List (check out the video walkthrough at the bottom of this post):
Start by rehearsing your pitch deck often. You don’t get to skip this step.
Next, make a list of all the potential investors you want to pitch. I like use a combination of my personal contacts, LinkedIn, AngelList, and Crunchbase for this. Look for people who have invested in startups in your space. Don’t worry if you don’t know each investor (I’ll write another article about getting personal introductions).
Prioritize the list. I like to use two factors: how much I want them to invest, and how likely they are to invest.
Reverse sort the list, so that your least likely suspects are at the top.
Start pitching to your least likely suspects first.
Learn from each meeting and update your pitch deck and financial projections as needed.
Work your way to your most dream investors. By the time you get to them your pitch will be strong!
Here’s the video walkthrough:
Your first audiences will be tough because they won’t like your idea and they won’t want to invest.
And that’s what you need at first. Let them watch you stumble over your words! Let them ask you the tough questions! Let them tell you why your business doesn’t have a chance of succeeding!
Ask them as many questions as you can. Ask them what it would take for them to be excited about investing in your startup.
Then go back to your desk and update your pitch deck. Proactively answer the toughest questions in the first few slides. Take their suggestions to find a co-founder, or get some customers, or test your marketing, or whatever.
And then go pitch the next potential investor.
What happens is that you get better each time. It’s painful at first, but it gets easier. And if you’re working on your business at the same time you’re working on your pitch deck the whole thing becomes much more compelling.
Your pitch gets stronger and stronger.
So by the time you get to your best and most likely investors you’re on fire. Your pitch deck is awesome, you know it cold, you’ve done the work to strengthen your business model, and you’re answering people’s questions before they even ask them.
And you get funded.
Pro tip: Once you’re happy with your pitch and you’re focusing on your most attractive investors, First Round Capital suggests that you “group them in batches to better evaluate and select them,” because “you want to maximize not only the number of offers, but also the chance they’ll come to you in a similar time period.” Smart.
Featured Download: Grab my Reverse Investor List template to quickly rank your investors. This strategy gives you the best chance of raising money from the people you want most.
ps- This trick also works for refining your sales pitch to potential customers.
Mike Lingle is obsessed with helping founders grow their businesses. I’m a serial entrepreneur, mentor, and executive in residence at Babson College and Founder Institute. Check out Rocket Pro Forma if you want to quickly create your startup financial projections.