How to build an Investor Pipeline

8 Things I learned from Mark Catalano, CEO of Takeshape

Mark on Zoom

During the Techstars program, one of the founder talks was given by Mark Catalano, Founder and CEO of Takeshape. In his presentation, Mark outlined how he built an “investor pipeline” for his company in order to raise his pre-seed investment round.

An “investor pipeline” is simply a set of stages that a company uses to engage a potential investor and transition them from a qualified-lead to a member of their cap table. Here’s what I learned from his presentation.

A sketch of an “investor pipeline”. Each box represents an investor.

1. Fundraising is a numbers game. Mark argues that the key to raising a successful pre-seed round is getting in front of as many investors as possible. Intuitively, I would have thought that it is more important to bring in strategic investors with matching interests and similar vision, and I’d have guessed that this represents a relatively small cohort of investors. Mark, however, argues that there is a better way to raise your round, and that there’s way more potential investors than you’d initially think.
2. Start with the smallest checks first. Instead of chasing the “big name” funds, Mark argues that it is better to start with smaller checks from Angel investors. Not only will these be easier to close, these Angels can also be a good source of introductions and connections to well-qualified leads for other potential investors. Plus, getting an introduction from someone who has already committed to you is a super strong signal to the person to whom you’re being introduced.
3. Build the top of the funnel with 200–300 well qualified leads. The more qualified someone is, the more likely they are to respond. This is where the real leg work comes in. Mark recommends adding 25 investors at a time, each of whom has been pre-qualified as “likely to be interested.”
4. Fundraising is the CEO’s job. Mark argues that building the lead list of investors is firmly the CEO’s job and shouldn’t be delegated away, as this process will simultaneously help the CEO develop a much better understanding of their company’s marketplace. He recommends the CEO spend 100% of their time on fundraising when in “fundraising mode.”
5. “Well Qualified” = Connected to the space. While there’s no unanimous definition, Mark outlines that a well-qualified lead is probably someone who has either invested in a look-a-like company or who has founded a company with a successful exit in your industry. They also may be someone who is a keystone to unlocking bigger investors. It’s very important that the top of the funnel be filled with quality leads (e.g., probable investors) so that the overall process runs more smoothly.
6. Construct Investor Profiles. As you build your funnel, it helps to build profiles on each investor you add to your lead list. Relevant fields include: Check Size, Email, Location, Investor Type, Social Media handles, etc. Not only will this help you stay organized and comprehensive, but it will more importantly enable you to better spot patterns to identify and unlock other potential investors.
7. Use online tools to source leads for your investor pipeline. The tools Mark recommends are: Crunchbase Pro, AngelList, LinkedInPro + Sales Navigator, Airtable, Superhuman, RocketReach and Docsend. Each of these tools plays a critical role in sourcing, communicating with, and managing potential investors, and the premium versions are definitely worth the modest upfront investment.

Example of the valuable, specific filtering available on Crunchbase Pro (did this just become an ad?)

8. Put every lead through the pipeline. Mark recommends developing a series of well-defined stages that can serve as touch points throughout the interaction. These stages include: 1) request for introduction, 2) 1st meeting, 3) 2nd meeting, and 4) Term sheet discussions. Additionally, Mark includes email attempts and outreach trials as their own intermediary stages to understand where in the process he is with an investor. The goal is to continue trying to move investors through the pipeline until either 1) you disqualify them as a good investor; 2) they fail to respond after repeated outreach; 3) they say no; or 4) they send money.

As someone who has never put together an investment round across multiple investors, I found Mark’s mental model of an “investor pipeline” to be a helpful, systematic way to navigate an otherwise seemingly nebulous process!