Exclusive Research: How Startup Entrepreneurs Can Best Reach Their Target Investors

Funding is almost invariably one of the largest challenges for startup entrepreneurs. Other than what’s playfully called “friends, family, and fools,” a common source of funding, especially in the early stages, is angel investors. Another important source, generally more so in the later stages, are venture capitalists (VCs). Given how critical these two sources of funding are, any insights as to what can move the hearts and minds of these two types of investors would be invaluable. What is it that angels and VCs look for, respectively? That is what we set out to investigate, and what we learned should be tremendously useful for startup entrepreneurs who’ve often wondered about the same thing.

What the Data Says About Angels and VCs

For this study, we tapped into a vast data set of survey responses from nearly 20,000 entrepreneurs collected between 2013 and 2019 from the Global Accelerator Learning Initiative (GALI). The entrepreneurs collectively came from over 150 countries, representing a diverse set of industries—such as tech, healthcare, and financial services— and all of them were spearheading early-stage startups. They were asked a wide range of questions, including the sources of their funding and the extent of their digital and online presence. 

By rigorously analyzing the data, we were able to uncover a number of insights regarding both the similar and different ways that angel investors and VCs choose which startups to invest in, respectively. 

First, let’s look at how they’re similar. Both angel investors and venture capitalists place a lot of importance on innovation, generally indicated by the number of patents that an entrepreneur or firm has—the more patents, the more innovative they’re perceived to be.

Beyond that shared foundation, however, angels and VCs differ in which additional factors influence them more. One difference is that VCs, in general, put a higher amount of stock in objective data and historical records, such as an entrepreneur or firm’s adherence to impact standards, sets of criteria used to assess a firm’s social and environmental impacts. The UN’s Sustainable Development Goals (SDG) Impact Standards and the Impact Reporting Investment Standards (IRIS) are two specific sets of impact standards widely used by investors, organizations, and governments around the world. If a firm or entrepreneur has a strong record of adherence to any of these, that signals to VCs that they are highly competent and experienced and more likely to succeed in the new venture as well. 

On the other hand, despite the shared trust in innovativeness, angel investors tend to rely more on “soft information,” or “gut feel.” And what is it that most inspired a strong gut feel for angel investors? In an age of omnipresent digital media, it probably won’t be surprising that the answer was a firm’s online presence: its website and social media activity. So long as the basic innovativeness factor, beyond that, it wasn’t so much objective data that moved angel investors (as with the VCs) as it was the startup’s website and social media activity.

Putting the Findings Into Practice

So what does this mean for startup entrepreneurs looking for funding? As our research suggests, a lot of this depends on what stage you’re at and who you’re targeting. If you’re targeting venture capitalists, which probably means you’re in the later stages, then you will need the objective data to reflect favorably on you. In particular, you’ll need to show a strong record of adherence to impact standards. Hiring compliance consultants to help you navigate the process of meeting impact standards (and other objective measures) might therefore be worth considering. 

If, on the other hand, you’re in the earlier stages of pre-seed and seed funding, there’s a good chance you’re targeting angel investors. While you would still need to signal innovativeness, you can go a long way by creating the best digital online presence you possibly can. To start with, you’ll need a strong, high-quality website, ideally one that’s regularly updated. It’s beyond the scope of this article to describe what that would look like, but given the difference it can make, it may be worth hiring an experienced website designer and someone to update it.

Next, you’ll need to be active on social media, not just haphazardly posting here and there but posting regularly using a cohesive strategy. Again, it might be worth hiring a dedicated social media manager with a proven track record of engagement. Which social platforms should you focus on? Our research mainly looked at LinkedIn and Twitter. Being active on both platforms made it more likely to sway angel investors’ investment decisions in your favor. However, we do want to add the caveat that our data goes up to 2019, and the world of social media can change fast (as most recently demonstrated by Elon Musk’s takeover of Twitter). It’s, therefore, up to each firm or entrepreneur to do their due diligence in assessing which platforms would be most beneficial at a given time.

As a general rule, we’d recommend LinkedIn as an absolute must for every entrepreneur. Beyond that, it would really depend on who you’re targeting. Although they weren’t included in the data we used, many firms make excellent use of more consumer-oriented platforms such as Instagram and TikTok. If you’re targeting Gen Z, for example, then you should probably consider using TikTok. Even if angel investors themselves are not active users of these platforms, many of them are probably savvy enough to understand the importance of using the right platforms to reach target audiences, and they might take this into consideration. 

Startups typically have limited resources in terms of money and staff. Because of this, it’s often necessary to channel your resources where they can make the most impact. Our research shows that there are real differences in how angel investors and VCs decide which ventures to invest in. Depending on who you’re targeting, by focusing on strengthening either your objective measures (if you’re targeting VCs) or your online digital presence (if you’re targeting angels), you’d be tapping into what the data reveals as being the most effective ways to reach them.

If you’re a startup looking to secure angel investment through press coverage and a deep online footprint, reach us at Grit Daily.

Contributing to This Research

Michael Obal, Associate Professor of Marketing, Entrepreneurship, and Innovation in the Manning School of Business at the University of Massachusetts Lowell.

Atthaphon Mumi is an Associate Director of the Office of General Education at Mahasarakham University. He is also a Ph.D. Program Director at Mahasarakham Business School, Mahasarakham University, Thailand.

Rangapriya (Priya) Kannan, Associate Dean of Faculty & Accreditation in the Knauss School of Business at the University of San Diego. She is also a professor of strategic management, innovation & entrepreneurship and the founding director of the Entrepreneurship and Innovation Catalyzer.