I usually tell founders that cold emails to prospective investors aren’t all that effective. But they can work provided you do extensive research and find the right fit.
A lot of founders skip the research phase, though.
Michael Bamberger is not that kind of founder.
“I’ve done a lot of cold email in my career,” says Bamberger, a serial entrepreneur whose ventures have focused mostly on the intersection of data and research. “I’ve learned a lot about what works and doesn’t work. I built my last business on cold email, basically.”
That’s why he was confident about cold outreach when he was looking for investors for his company Tetra Insights, which builds software for user experience teams.
Tetra has raised $7 million to date, beginning with $500,000 from friends and family in 2019 and a $1.5 million seed round in 2020. Michael and his co-founder Panos Rigopoulos raised a $5 million Series A that closed in September 2021, where cold emails played a pivotal role.
“When I changed my criteria to finding people who were a fit, the process was really quick.” Michael Bamberger, co-founder and CEO, Tetra Insights
Raising capital in unprecedented times
Because Michael had launched two other startups before Tetra Insights, he knew he had to validate its core offering before seeking outside capital. He invested his own money to hire Tetra’s first engineer, who built the company’s MVP. That way, when he approached friends and family to raise funds, he had a version of a product to demonstrate.
After raising the $500,000 from his inner circle, he could begin a formal seed round. By the beginning of 2020, he knew he was on to something. “We had paying customers. We had users growing their engagement and really positive feedback,” he says.
But when the COVID-19 pandemic hit, Michael worried that his R&D-focused product would be a hard sell in the tough economy. He stopped thinking about fundraising and instead focused on repositioning Tetra. However, he soon realized that pausing his search for investors was “completely wrong.” Instead, he took a new approach to fundraising: cold emails.
Michael had a strong network in the startup and venture capital community, but the investors he met often took meetings as a favor to mutual friends, not because they were actually interested in the UX research space. Meeting investors via warm intros wasn’t “working fast enough,” he explains. So he changed strategy, implementing a three-step process that allowed him to identify investors that would be interested in his startup.
His advice for cold calling?
1. Do your research to find best-fit potential investors
Michael set out to find investors who matched well with Tetra. He sought out investors who were “focused on B2B SaaS, invested outside of the coasts, had experience with businesses at our stage, and maybe [have in their] portfolio companies already dealing with video technology or some elements of what we’re doing with user experience technology,” he says.
2. Lean on network-based resources to source leads
Armed with subscriptions to CrunchBase Pro and Foundersuite, Michael built a list of prospective investors. He cold emailed five funds the first day he began his outreach. Two hours later, one of them replied with interest, proposing a call two weeks later. One of his lead investors came from that first batch of cold emails.
“When I changed my criteria to finding people who were a fit [ … ] the process was really quick,” he says.
3. Use your research to develop a compelling message
Michael thinks that the success of cold outreach depends on how well the message is crafted and researched, which helps founders understand what their prospects care about. He tailored his subject line to fit with investors’ interests.
Cold email with a warm touch
Below is an example of the cold emails Michael sent to investors that he and his co-founder identified as possible matches for Tetra Insights. A few details, such as revenue numbers, are omitted for confidentiality.
Subject line: RE: Pre-seed round? B2B, SaaS, qualitative data analysis
Hi ___,
First and foremost, I hope you and your family are safe, healthy and as comfortable as possible during these crazy times.
I’m the co-founder of Tetra Insights, a B2B SaaS startup based in Boulder. I’m reaching out to see if you’re available for a 30-minute call to learn about our company. We are raising a round of financing and I want to introduce myself to see if we might be a good mutual fit. Our transfer software transforms audio and video into business intelligence. We launched in January and generated X number of revenue while in beta RMRS from companies including LexisNexis, Yara and Segment where our technology powers their customer insights practices. We have a great team. Our customers love our products. We validate our enterprise use cases. We’re raising this round to accelerate our product development and go to market efforts. Below are links to our one-pager and deck. If you’d like some background info, please let me know if Tetra sounds like a good fit.
The power of a good story (and an open calendar)
Michael says fundraising is a lot like the sales process, and we should treat it as such:
- Run prospective investors through a funnel.
- Develop promotional materials with care.
- Create urgency.
- Be proactive.
He advises focusing on fundraising “above everything else” while actively seeking capital. It’s a time-consuming process, so keep your schedule flexible enough so you can set up meetings even at a moment’s notice.
When you do land a meeting, “the story is what sells,” Michael adds. “Once you get investors, the story doesn’t matter; it’s all about the metrics, the numbers and the performance. Before the investment, the numbers are just part of the story, so you really have to understand how you’re telling the story.”