How can startups use their existing networks to secure funding?

1 Why networks matter

Your networks are the people who know you, trust you, and support you, such as your friends, family, colleagues, mentors, customers, and partners. These people can be incredibly beneficial for your fundraising efforts, as they can provide referrals and introductions to other investors, give feedback and advice on your product, market, and business model, endorse you to increase your credibility and visibility, or even invest in your startup.

2 How to identify your networks

Before you start reaching out to your networks, it's important to identify who they are and what value they can offer. To do this, you can use tools like LinkedIn, CRM software, or spreadsheets to map out your contacts and categorize them according to their relevance, influence, and relationship with you. When thinking about each contact, consider questions such as: how well do you know them and how often do you communicate with them? What is their background, expertise, and industry? What is their investment profile, preferences, and criteria? How can they help you with your fundraising goals and challenges? Answering these questions will help you gain a better understanding of who your contacts are and how they can help you reach your fundraising goals.

3 How to approach your networks

Once you have a list of potential investors from your networks, you need to craft a personalized and compelling message to explain why you are reaching out and what you are asking for. You can use email, phone, or social media depending on your relationship with the investor. When crafting your message, be clear and concise about your purpose and value proposition. Highlight your traction, achievements, and milestones to show your enthusiasm, passion, and vision. Ask for a specific action such as a meeting, introduction, or feedback. Lastly, politely follow up persistently until you get a response.

4 How to pitch your networks

After receiving positive responses from your networks, you need to prepare a pitch that highlights your startup and convinces them to invest. You can use different formats and channels, such as slides, videos, demos, or webinars, depending on your audience and context. Your pitch should include a problem statement that identifies the pain point or opportunity you are addressing, a solution description that explains how your product or service solves the problem or creates value, a market analysis that demonstrates the size, growth, and potential of your target market and customers, a competitive analysis that differentiates your startup from existing or alternative solutions, a business model that outlines how you generate revenue, acquire customers, and reduce costs, a team overview that highlights your skills, experience, and roles, a financial projection that estimates your income, expenses, and profitability, and a fundraising ask that specifies how much money you are raising, what valuation you are offering, and how you will use the funds.

5 How to close your networks

Once you have pitched your networks, it is essential to follow up and negotiate the terms and conditions of the investment. You can use tools such as term sheets, contracts, or online platforms to formalize the agreement and process the transaction. When doing so, consider the amount and type of investment, the valuation and dilution of your startup, the rights and obligations of the investors, the milestones and expectations of the investors, and the relationship and communication with the investors. Utilizing your existing networks to secure funding can be a wise and effective way to raise money for your startup. By following the steps and tips in this article, you may be able to find, pitch, and close investors who can support your startup journey.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?