The Marketing and Sales Funnel Math VCs Use to Make Investments

When startup founders start raising outside funding, they quickly realize it’s a big sales process with a little marketing too.

Most founders are surprised to learn that investors have their own marketing and sales processes, but they are 10x more diligent about it than the founders.

An early-stage professional investor told me it takes 1000 “touches” with founders for every 1 investment they make.

1000 outreaches to qualified founders to get about 100 real conversations to get about 30 second meetings to get to 10 offers to get to 1 deal.

Many of these startup investors are very proactive about their marketing and sales. They don’t have the networks and brands that a few of the big VCs do.

This week I helped the founders in one of my Practical Founders Peer Groups understand what the investor outreaches and overtures really are:

You are just on the other side of their investment sales funnel. Their first outreaches are just their top-of-the-funnel “let’s talk” conversion steps.

  • Every investor has a top-of-funnel way to engage with them. Sometimes this is inbound, often it’s outbound. This includes LinkedIn DMs, cold emails, intros from people you both know, online content, and meetings at conferences.
  • Every investor has a middle-of-funnel way to qualify their “leads” and start selling to the ones they find most interesting. The numbers here can be huge. One investor I know talked to over 400 founders before making 1 investment.
  • Every investor has a very specific ICP (ideal customer profile). There is never a vague definition for the kinds of founders and companies and stages and investment math they invest in.
  • Every investor can tell you about their top-of-funnel “marketing,” their qualification and selling processes, their ICP, and their funnel math. It’s never not there.

But unlike growth-oriented founders, investors don’t want an ever-increasing “customer base” of investments.

They do all this marketing and sales to make a finite amount of investments. They raise a fund and invest in 10 or 30 deals over the 10-year life of their fund. Max. That’s it.

They are very picky in their qualification and final investment decisions. Way more Nos for a few precious Yeses.

Investors are looking for the same things that founders are building if they do it right:

  • happy paying customers
  • accelerating revenue growth
  • efficient outside funding so far, if any
  • a real competitive angle
  • a big market that can support their investment outcome math
  • incredible founders and teams who will do what it takes to grow the company fast and provide a big return on their investment quickly.

Of course, in most cases, you can do all of this without outside investment in the modern software industry.

Investors are selling just like founders. Especially these days.

Founders should ask investors about their ideal investment profile and how they engage with potential investments.


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