Among founders that have prior experience with raising venture capital, a common strategy is to identify and pursue investors that have historically followed their existing investors. As an example, a company that raises capital from YCombinator may pursue investors that most frequently invest in YC companies.
The Venture Ladder
Venture investors typically specialise in one or two very specific stages. Investors that specialise at the Seed stage tend to focus on specific types of deal flow -- they often lean on a given set of accelerators that fund companies at Preseed and that they believe have the right approach toward identifying promising companies. Similarly, investors specialising at Series A tend to focus on specific types of deal flow, targeting a specific set of Seed-stage firms that refer their best investments.
Given the above context, it can be particularly useful for founders to:
- Identify their existing_investors that have a strong brand and/or are generally well-known
- Determine the set of investors that have historically frequently followed their existing_investors
Let's look at a few specific examples.
Techstars
As one of the most active investors, Techstars has developed an incredible brand around being one of the most founder-friendly early-stage investors. With detailed programs to support founders, and with an operating model that has a strong presence in numerous geographies, Techstars has built an ecosystem of investors that love investing in companies backed by Techstars. Using Metal, we set out to identify the set of investors that meet the following criteria:
- Investor type must be "VC" or "Corporate VC"
- Specialise at Seed (I.e. at least "15%+" of total investments at Seed
- Have been reasonably active (I.e. at least "3" investments in the past 12 months)
- Have made 10%+ of their total investments following Techstars
The above search yielded 200+ VC firms that meet the above criteria. In addition, when we adapt the search to "Angels", we identified 250+ angels that love following Techstars.
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First Round Capital
Over the years, First Round has established a terrific brand as one of the top VC firms specialising at the Seed stage. The First Round Review is well known for publishing world-class content on various aspects of building high-growth startups. Using Metal, we set out to identify the set of investors that meet the following criteria:
- Investor type must be "VC" or "Corporate VC"
- Specialise at Series A (I.e. at least "10%+" of total investments at Series A)
- Have been reasonably active (I.e. at least "3" investments in the past 12 months)
- Have made 5%+ of their total investments following First Round
The above search yielded 76 VC firms that meet the above criteria. In addition, when we adapt the search to "Angels", we identified 140+ angels that love following First Round.
By adjusting the parameters, founders can identify specific investors for their subsequent round that love following their existing investors. Pursuing such investors is a terrific strategy for founders to focus their efforts on the "highest" probability financing partners.
