In the venture capital world, things are not easy nowadays. According to , dealmaking activity continues at meager levels–$73 billion compared to over $105 billion last year–accentuating the declining trend that has asphyxiated the market in recent months. Pitchbook The report highlights one important reason behind this extended downturn–the lack of exits, which means that venture capital funds are still not receiving the returns they expect. Hence, this affects how much additional capital they are willing to deploy. This means that, for startups that are actively looking to fundraise, the prospects of succeeding can be dismal. Due to the tough situation in the market, many startups nowadays need to start looking for funds via cold outreach, since they have exhausted their immediate circle and contacts and couldn’t raise the money they were looking for. However, it doesn’t need to be that hard. Recently, we were helping a cleantech project find investors. We exhausted our current investors database, and decided to start with our cold outreach strategy. Surprisingly or not, we received an overwhelmingly positive number of responses from investors that we didn’t know before. Even if the market is bearish, there are still investors who are willing to look at new projects, and who have the budget to fund promising initiatives. The lesson from this is that the possibility of securing funds through cold outreach is latent, it just needs to be addressed strategically. However, if you want to reach out to investors you don’t know, we still suggest trying to get intros to the investor, as it is still the shortest way before going “cold.” 1. First, do the groundwork Many founders make the mistake of sending unsolicited proposals to investors without considering their sectors of interest. Cold outreach has a higher rate of failure when it is not targeted, which means that we need to carefully select our audience. If we have a cleantech proposal, then, we need to segment our search accordingly. Once we’ve identified who our prospective investors are, we need to effectively communicate with them. This means that our initial email should address them by name and acknowledge them. With so much automated spam content out there, this increases the odds that our email will stand out. Our initial email should be brief and concise. Ideally, it should not ask for investment outright, but rather, seek advice and talk about the company’s fundraising plans. Start talking about the investor and not about yourself. Share what you’ve learned about their background, and why you are writing to them (‘Since you invest in cleantech, we thought it might be interesting for you to look at…’). Consider including key questions like: Would you like to stay in touch when we raise funds? What do you think about our product? The irony here is that if the investor is interested, they might offer money right away. But if they don’t, you already have a lead for future rounds. By understanding what a particular investor is interested in, you will know when the time is right to approach them again. 2. Find your first investor If investors perceive you as a company that has unsuccessfully sought out investments for two years, your chances of raising capital automatically dwindle. Conversely, if you already have investors on board, this shifts their psychological state of mind in your favor, as it triggers their fear of missing out and reinforces the idea that your startup is worth investing in. Therefore, dedicate your energies to finding that initial investor that can tip the scales in your favor. Until you find such an investor (unless you are completely sure that you are ready and have very high chances to find one very soon) start by asking for advice rather than money, as mentioned above. Then, you can tell additional investors, “We already have investors committed, you have a month to decide.” This approach can help you to secure the funds that you need within your timeframe. 3. Choose VIP individuals People like to feel seen and acknowledged, and investors are no exception. Therefore, carefully curate a list of investors that you would like to approach, and design a tailored strategy to connect with them. This can be done by writing individual letters and referencing articles the potential investor has written, some of their posts on social media, or other publicly available information that resonates with you as a founder and your company’s mission. To ensure that you maximize your possibilities of success with your chosen list, remember to identify those investors who have already invested in your industry. You can leverage platforms like Crunchbase to explore this. Once you have between 10 and 20 specific investors, here’s an initial letter you can send: “Hello, Robert, I read your article. I see you conduct a lot of research in this area. Therefore, I’m interested in what you think about our product, and I’d like to share more about our startup with you. Your feedback and advice would be very valuable.” This approach opens up the door for further rapport to be developed. 4. Look for mentorship Many investors were founders once, so they have gone through what you are going through right now. This is why many of them love to mentor new entrepreneurs, and they are willing to spend a few hours talking to them about their projects. Capitalize on this. If you connect with an investor with whom you envision a potentially productive relationship in the long term, ask them if they would like to be your mentor. From our experience, 65% of the investors we talked to responded positively to these requests. In this regard, it is important to take a non-transactional approach. If you connect with a potential investor only when you need to raise funds, and neglect the relationship otherwise, they are most likely to feel used and shut down the opportunity of investing in the future. Mentoring keeps the connection alive, and it can seamlessly lead to the investor offering money for the company. 5. Don’t ask for too much Remember that the more money an investor puts into your venture, the higher the return expectations will be. Therefore, be mindful of this when valuing your startup. It is considerably better to ask for a smaller ticket per investor, but have a lot of people interested in those tickets. This way, you can say that you are oversubscribed, which will highly boost your image among the investor community, and create the perception that you are in high demand. Additional tips Once you start reaching out to potential investors, you can expect a response rate of around 10%. Therefore, if your metrics are lower, consider whether you are segmenting your audience adequately. For example, if only 2% of prospects respond, you might be reaching out to the wrong people, or your message may not be structured adequately. Revise both. Many founders often ask about how many emails they should send. My response would be to send as many as you can handle, but keep in mind that you need to respond within a working day. This will show that you’re serious about what you’re doing. If an investor does not respond, feel free to send a follow-up. Personally, I send up to five follow-ups. In the fifth one, I am very brief, and usually only says: “Final follow-up.” This can trigger them to respond, and if I still don’t hear back, I move on. Final thoughts Even in the current market where VC is at a lower level than it used to be, cold outreach works. Since we started doing it, we have connected with over 500 investors who are interested in talking to startups that are referred to by us. This success has been possible because we have followed the steps outlined above. By targeting investors by industry and stage, and studying their profiles before reaching out, we have highly increased our response rate. Therefore, don’t be afraid. People are investing, and there is capital available. It all depends on who and how you ask.