Friday , August 19 2022

The entrepreneur play book for finding a principal investor in NYC



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“We have rounded all the capital we need for the round, apart from the leader. All we need is guidance! ”

Investors from New York hear this daily from entrepreneurs, and we understand their pain. Securing a lead investor is essential, but sometimes our foundation founders ignore a long way to the fundraising process. Most investors will not come on board without guidance in place – the company that usually writes the biggest check and negotiates the round.

The leader is the entrepreneur's financial partner and the “syndicate” of the investment syndicate. Most leading investors contribute 35% to 80% of the round and take on more responsibilities in return for their significant share. Those responsibilities usually include negotiating valuation and terms, introducing the company to investors and other distribution channels, helping to identify investors in future funding rounds, and taking a board seat. .

Lead investors are essential cornerstones of any successful fundraising campaign, providing initial legitimacy, generating confidence, and reducing perceived risk. Once the leader and management team have signed a terminology sheet, the rest of the process often falls seamlessly. The time saved can then be spent by landing lead from the start by building the business.

Fred Wilson of Union Square Ventures noted the importance of finding a lead investor well:

“’ Investors ’sit on the side line useless if you want to get funding. They do not impress the type of investors who have a conviction because investors who have a conviction are going to want the agreement all for themselves (or their friends that they bring in with them). If you are raising money of any kind, spend all your time looking for a principal investor. ”

Despite the fact that New York has enough leading investors, which spans pre-seed to growth rounds, many entrepreneurs have the idea that they need to go to the west to find & # 39 w guidance. As proud New York people, we want to break this legend and map out exactly how you should go about finding a New York leader.

The play book

First of all, your company must be powerful enough to raise money. Lead investors often have concentrated portfolios and therefore do not have to invest in every company that interests them.

For any fundraising cycle, entrepreneurs with previous investors should first prioritize verbal pro-rata commitments for the whole, as it creates positive signals. From there, finding a leader should be a direct priority. The search and negotiation process can take months, and investors can syndicate delays in committing. It is important that you have a list of target leaders and a great pitch deck from the start.

The first, and most reliable, resource for finding a lead investor is presentations from other entrepreneurs, investors, solicitors, or trusted contacts. Entrepreneurs should not hesitate to ask potential syndicate investors (who have good reasons for not leading themselves) for presentations to companies that usually lead rounds.

In the absence of presentations, you should start by drawing up a list of companies with a history of leading funding rounds. As a service to NYC entrepreneurs, we have compiled a list of the leading investors in the city through round, based on Crunchbase data and our experience in an NYC enterprise ecosystem.

(Note to County Voluntary Councils NYC: If we had lost your company in the roster, please email us to some of the NYC rounds you led and the names of the people in your NYC team. .)

The roster is intended to be a resource to start the process, but you should refine and narrow this list by identifying investors who invest in similar companies to yours first. based on criteria such as: t

  • Sector / vertical (trade, fintech, IoT, digital health, etc)
  • Type of customer (B2B, B2C, etc)
  • Revenue (pre-revenue, specific ARR / MRR benchmarks, etc)
  • Demography (geography, founder characteristics, etc)
  • Category (markets, hardware, software, etc)

Another method is to investigate similar businesses that have already raised capital and assessed their investors, bearing in mind that most VCs will not invest in competing companies.

From there, you can isolate investors with fund sizes and check properly for your fundraising stage. The size and size of the fund is broadly in line, as investors with larger funds need to write larger checks to use their capital fund in full. So an entrepreneur who is trying to raise $ 750K should delete a company whose minimum checking size is $ 5M. As a rule, pre / pre-seed reserves are <$100M, late-seed/Series A funds are $100M-$250M, Series B/C/D funds are >$ 250M, and multi-stage funds / strategy are often billions of dollars.

Some large companies have small seed practices, but not usually their main focus. Always ask VCs about their funds and check their sizes during initial conversations, or otherwise consult sources like Crunchbase.

The growth and vitality of New York's enterprise ecosystem is skating, with Savills World Research listing NYC as the world's leading technology city in front of people like San Francisco. There is no shortage of passion, creativity and collaboration between entrepreneurs and investors here. We hope to emphasize not only the importance of finding the right leader at every stage of fundraising but that the priceless companies available to New York entrepreneurs do so here in Big Apple.

Lylan Masterman a Samantha Martin Venture Capital Investors in Aberystwyth White Star Capital, early stage Enterprise Capital fund.

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