How to Create a Target Investor List

Getting in front of the right investors is a crucial step in preparing for a capital raise, but this is where most entrepreneurs tend to spend the least amount of time. Once they have marketing materials in-hand, many entrepreneurs hit the ground running, taking any meetings they can get with investors.

This haphazard approach is a mistake and a waste of time. This post will walk you through a smarter approach to identifying the right investors.

Create a Target Investor Profile

It’s a waste of time to talk with investors who will never invest in your company.  To prevent setting up meetings with these investors, first scope out your mandatory investor characteristics.  Here are the primary ones:

  • Transaction type – Does the investor invest in the kind of transaction you want to pursue (growth capital, buyout, debt, etc.)
  • Capital type – Does the investor invest with the type of capital you are looking for (equity, debt, etc.)
  • Company stage – Does the investor invest in your stage of business?
  • Investment size – Does the investor invest the size check you need?
  • Industry focus – Does the investor focus on your industry?
  • Location – Do they invest in your geographical region?
  • Hold periods – Does the investor’s investment hold strategy align with your interests?
  • Management strategy – Does the investor’s management style align with your interests?
  • Strategic opportunity – Does the investor offer more than just cash?
  • The right person – Determine which people at the firm are the most logical investors for your business.

Create a target list

With your target investor profile identified, build a target investor list.

  • Start with firms that have actively pursued you in the past.  Investors that already know you and have expressed interest in your business are the easiest investors to get in front of.
  • Add in firms that you’ve had conversations with in the past, but haven’t actively pursued you.
  • Ask your trusted advisors and fellow-entrepreneurs for recommendations on potential investors that fit your desired transaction type.  Asking contacts who spend a lot of time in the capital space (bankers, lawyers, accountants, etc.) is a great way to find connections.
  • Ask investors you know who you should reach out to.  Investors often share deal flow with upstream and downstream firms and are usually happy to pass along exciting opportunities.
  • Research local investors in your area.  Most major cities have some investor list or directory or google searches can turn up options. (here’s one of Nashville’s investor lists)
  • Research investors that specialize in your industry.  There are so many websites now that track investors who are interested in specific sectors. Google your industry and “investors,” and you’ll probably find one of these lists.

Qualify Investors

Evaluate each firm against your target criteria and classify them into four buckets:

  • Ideal targets:  These are the investors that on paper check all your boxes.
  • Potential targets:  These are investors that check most of your boxes and invest in the type of transaction you want to pursue.  Your ideal investors may not be interested, and in that case, you always want to have a list of acceptable alternatives.
  • Future targets:  These are investors who you are likely too early for.  Occasionally these investors will be willing to invest in an earlier-stage company than they typically do because it’s in a sector they are excited about, and they want a seat at the table for later transactions. It’s also good to get in front of these folks early-on so that when you are the right size, they already know who you are.
  • Not a fit:  Don’t bother doing any more work on these investors.  Delete and move on.

What is the Best Way to Stage a Capital Raise Process?

Here’s how to structure an efficient process:

Step 1: Build Your Target Investor List

Step 2: Reach out to Target Investors and get NDA’s Signed

Step 3: Conduct Qualifying Introductory Meetings with Investors

Step 4: Conduct Early Diligence Meetings

Step 5: Get and Evaluate Term Sheets

Step 6: Select Investor(s) to go Exclusive with

Step 7: Final Diligence / Documentation

Step 8: Closing

Like any sales process, you want to keep the momentum going by setting clear follow-ups and next steps after each interaction.  Each investor has different internal decision-making processes. You need to know where they are at in that process.

Let investors know the key dates, including when you expect to receive term sheets / LOIs and when you plan to close the transaction.  This will keep investors moving and working towards these deadlines vs. dragging their feet.

What Legal Documents Do I Need For a Capital Raise?

At a bare minimum, you will need the following legal documents.

  • A Non Disclosure Agreement (“NDA”): An NDA is a legal document that obligates one or both parties to keep any information shared during the process confidential.
  • A term sheet / Letter of Intent (“LOI”):  Term Sheets and Letters of Intent are non-binding legal documents that outline the key terms of the proposed deal.  Many investors will issue their versions of these, and you’ll be responding/marking up their document.
  • Transaction Docs: This is a package of documents that dictate the legal terms of the deal, including how the business will be managed going forward.  It will include an operating agreement, a purchase agreement, voting agreements, etc.

Resources to Check out For Template Legal Docs

There are a few credible online sources of free template legal docs.  These can be a helpful starting place, but you’ll want to customize the documents to suit your specific needs.

The law firm Cooley has a free resource center that includes downloadable transaction documents. It includes an incorporate package, seed stage financing docs, a non-disclosure document and several others.   Link to Cooley’s transaction documents here.

The National Venture Capital Association of America also has good template legal documents available. Link to NVCA’s transaction documents here.

Always work with legal counsel to draft and negotiate these documents.

Best Practices for Creating a Projection Model

Every business is unique and requires a different projection model; however, there are a few rules that apply to every projection model:

Number 1: The projection model should be a realistic representation of how you believe the business will perform over the next 3-5 years.  Don’t show hockey stick growth because you think that’s what investors want to see.  Show what you will actually be able to do.

Number 2: You should be able to defend every assumption in the model.  Don’t be surprised if you are asked about assumptions during an investor meeting.

Number 3: You should have a detailed revenue build that shows your assumptions for revenue growth, including pricing, # of customers, retention, etc.

Number 4: You should include a detailed headcount buildout (by department at the very least).

Number 5: Use a bottoms-up approach to projecting expenses to make sure you accurately capture all your business expenses.

Number 6: Don’t agonize over trivial assumptions.  Plug in a defensible assumption and move on.

Number 7: Forecast your actual cash needs by creating a full income statement, balance sheet and cash flow statement.  Don’t forget that working capital can have a big impact on your cash needs.

Number 8: When your building a projection model, keep it as simple and easy to follow as possible.  You don’t want to spend a ton of time explaining how to follow the model to investors.

Number 9: Create summary charts that show the high-level financial statements.

Number 10: Add in a cushion.  Things happen, revenue takes longer to come on, you need more people than you think you will. Give yourself some breathing room for the unexpected.

How to Create an Effective Growth-Focused Investor Deck

What is an Investor Deck?

An Investor Deck, also known as “a pitch deck,” “investor presentation,” or “confidential information presentation” (“CIP”), is a written high-level overview of your entire business.  Investor presentations are your most important tool when launching a capital raise process.  They should accurately reflect your business and position it an optimal way to attract investor interest.

An investor presentation should be structured like a story.  Your goal is to capture the interest of investors from the beginning and then lead investors through the merits of your business.  By the end of the story, you want investors to understand why your business is an excellent investment opportunity.

Ground Rules For Creating an Investor Pitch Deck

Rule 1: Highlight your strengths and make sure the key attributes of your business are properly explained. For early-stage companies, this is usually the market opportunity or your differentiation. For later stage companies, it’s your value prop, proof points, customer list, etc.

Rule 2: Keep it simple. Focus on providing the key information required to understand your business. You can always follow-up with more detailed information.

Rule 3: Make sure it’s easy to read.  Make sure your font color, size, and typeface are easy to read. Make sure that your presentation doesn’t get cut off or have weird formatting issues when printed and is easily readable on a mobile device.

Rule 4: Don’t put any secret sauce in your pitch deck.  Despite having NDAs in place, you never know whose hands your pitch deck will fall into.  Always err on the side of caution when including highly sensitive or proprietary information in an investor presentation.

Rule 5: Leverage professional design resources.  Whether you pay a graphic designer to create the final product or use an online template, make sure your investor pitch deck looks professional.

Rule 6: Create your investor presentation in PowerPoint or comparable online alternative.  Don’t send a massive word document business plan.

Rule 7: The investor presentation should be no more than 15-20 slides max.  You can always have detailed information ready to queue up in case you are asked questions about it, but you don’t need to include it in the initial presentation.

What Slides to Include in an Investor Deck

Below are the sections you want to include in your investor deck. The order of these sections depends on your company’s stage and strengths.  Each of the following sections should be no more than 1-2 slides in your deck.

Executive Team Overview

  • Highlight the background and experience of your executive team.
  • Include a picture, name, title, and background for each of the key executives.


  • The setup page introduces your business and sets the tone for the rest of the presentation.  Within thirty seconds of starting the presentation, this slide should tell an investor exactly what your business does.
  • One to two sentences max.

Problem / Market Dynamics Discussion

  • The problem discussion provides background information on the set of problems your customers experience and the reason your business exists.

Product / Service Offering

  • This is where you explain your product/service offering.  Ideally, this section will naturally flow with the prior section, where it’s easy to see how your offerings solve the problems highlighted in the problem discussion section.

Competitive Differentiation

  • Competitive differentiation is your chance to highlight how your product/service offering is unique and differentiated from the other alternatives in the market.
  • If you operate in a market with only a few competitors, you can do a company by company comparison.  If you operate in a market where many different types of businesses also play, it may be better to show the different types of companies you compete against.

Addressable Market / Market Opportunity

  • The addressable market would be the total potential revenue opportunity for your business if you had 100% market share.

Customer Overview

  • This is an opportunity to provide a snapshot of your current customer base.
  • Include information so investors can understand your customer mix, concentrations, retention, marquee accounts, etc.

Value Proposition / Return on Investment

  • This is where you provide an investor with proof that your product/service is driving value for your customers.

Pipeline Summary

  • This is where you provide a high-level overview of deals that are in various stages of your sales process to demonstrate visibility towards future revenue.

Revenue Model Overview

  • This is where you describe how you generate revenue from customers.  It’s your business model.


  • This is a high-level summary of your historical and projected financial statements.

Transaction Overview

  • This is where you outline the amount of capital you want to raise, key terms you are seeking, and what that capital will be used for.

Optional Page:  Company Highlights Page

  • A company highlights page can be a great way to highlight the most attractive attributes of your business.  This is a list of the key takeaways you want an investor to go away with.

Potential Appendix Slides

  • Roadmap
  • Full org chart
  • Staffing buildout
  • Detailed financial assumptions
  • Product/service detail page

What Marketing Materials Do I Need?

In order to walk potential investors through your business, you need to put together marketing materials. At a minimum, you want to create the following materials:

  • A pitch deck.  This provides a high-level, but comprehensive view of your organization.  This should be a 15-20 page deck that walks through the key attributes of your business.
  • A projection model.  This should be a reasonably detailed model that depicts what you project the business will look like over the next three to five years.

A one-page summary can also be helpful.  You can send this early on in the process to weed out investors who won’t be a fit for your business and avoid sending a lot of sensitive information.  At a minimum, a one-page summary should include:

  • A quick description of what your company does and your product/service offering.
  • Investment Highlights:  These are concise bullet points that walk through the attractive attributes of your business.
  • Date founded
  • Location
  • Number of employees
  • High-level historical and projected financial profile (revenue and EBITDA at a minimum)
  • Transaction interests
  • Amount of capital you are seeking (if growth capital)
  • Use of proceeds

What Information Do I Need to Share for a Capital Raise?

You may hear stories about businesses that raise capital after one meeting, with terms agreed to on the back of a napkin.  Those situations are the exception, not the norm.  Most capital raises require entrepreneurs to share a lot of intimate information about their business with investors.

Trying to assemble information mid-process can be chaotic.  We always recommend folks get their information organized in advance of formally launching a process.

What information will you need?

Investors need information on your business in order to determine if you fit with their criteria.  Here’s what you’ll typically need to provide before you get any indication of valuation from an investor.

  • A business overview
  • Sales and marketing materials that further describe your product/service offering
  • Historical financials for the last few years, including income statement, balance sheet, statement of cash flow (if available)
  • Projected financials
  • The current sales pipeline
  • Revenue by customer
  • Management operational reports or KPI dashboard
  • Employee census with title, salary, and start date
  • Capitalization table and funding history

While, investors may ask for additional information in order to better understand certain aspects of your business, the information outlined above is most of what an investor needs to discuss your deal with their investment committee.

Once you’ve negotiated the terms of a deal with an investor, they then move into confirmatory diligence.  During confirmatory diligence, an investor will validate everything you’ve told them up until this point.   It’s at this point in a capital raise process that you’ll be sharing a lot more information.  Investors will send you a diligence request list, which outlines all the information they expect to see.

Who Else do I Include in a Capital Raise Process?

Here are some of the other folks who should be involved in your capital raise.  Ideally, you want to let these people know about the capital raise prior to marketing in order to incorporate feedback and make sure they are prepared to field questions as they arise.

Accounting resources

Whether this is an in-house person or external position, whoever does your accounting will need to be involved in the diligence process.  They will need to walk investors through how the accounting is done and explain specific accounts and transactions.

Information Gatherers

You or someone at your company will need to compile all the information an investor will want to see during diligence.  This is a heavy lift, and it’s helpful to divide and conquer the load when chasing after this information.

Tax Advisors

There is an infinite number of tax implications when it comes to raising capital or selling a business. Find a good tax advisor and consult them early in the process to avoid surprises.

Your Senior-level Team

During a diligence process, you need to be prepared to discuss every component of your business.  Where appropriate, the senior members of your team need to be ready to participate in the process

Also, it’s hard to hide the fact that you’re raising capital and it’s usually not productive to do so when you’re a small company.  Your team is going to know something is going on.  We recommend letting at least the critical team members know about the capital raise in advance. This helps you set the internal narrative vs. allowing your teams’ imaginations and rumors run wild.

Should I Hire an Investment Banker?

There is an entire universe of advisors who specialize in helping entrepreneurs sell their businesses and raise capital. These advisors typically fall into three categories: Investment Bankers, Business Brokers, and Consultants.

411 on Investment Bankers

A good investment banker will help you manage the entire sell-side or capital raise process. They take over a lot of the heavy lifting and help ensure you get the best valuation for your business. Here are a few of the specific tasks investment banks help with.

  • They help you craft your strategy
  • They create marketing materials for you
  • They introduce you to the right investors
  • They field initial investor questions
  • They organize and assist you during investor meetings
  • They manage the diligence process
  • They help negotiate your deal

With all that support, why wouldn’t you hire an investment bank to help you through a capital raise?

First, to offer the high-touch service, quality investment bankers are expensive. You can pay anywhere from 1-8% of your deal in deal fees to the investment banker in addition to a monthly retainer in the tens of thousands.

Second, a good investment banker might not be willing to take you on as a client. Here are a few reasons why:

You’re too small, or your transaction interests won’t generate enough fees.

Like any service-based business, investment banks are limited by the number of resources they have. Each investment bank seeks to optimize the return on their staff’s time while ensuring they provide quality service to their clients.

Given the level of support investment banks provide, it takes just as much time to do a small deal as it does to do a larger deal (if not more). Therefore, these firms often have minimum fee requirements and deal sizes.

Your deal is too risky.

Investment banks live off of successfully completed deals. Investment banks make the bulk of their income when a successful capital raise takes place. If they take on a company that isn’t as attractive to buyers, there is a higher likelihood the deal will fail, and they will waste resources that could have been spent on another project. Further, each failed deal will reflect negatively on their abilities as investment bankers when seeking to gain new clients.

If your business is under $10M in revenue or $1-2M in EBITDA, you are usually too small for most investment banks to take on as a client. Also, if you’re raising a small amount of capital, (<$20M) your transaction interests are typically too small for an investment bank.  There are a few exceptions, like if you’re growing incredibly fast and have visibility into being a much bigger business.

The 411 on business brokers and consultants

Business brokers tend to play under the investment banker minimum. They typically focus exclusively on selling businesses vs. capital raises and tend to spend less time with each client. The quality of advice and service you get from a business broker varies greatly broker to broker. Many brokers will do nothing more than create a bullet point summary of your business and send it to every person in their network. Others do a better job supporting you throughout the process. Business brokers make most of their income by charging a percentage of the completed transaction.

Consultants are usually paid on a flat fee or retainer basis to help with particular aspects of a capital raise. Like brokers, the level of service you get varies greatly.  Our Capital Studio functions as a consultant and you can learn more about our offering here.

Do I need an Advisor?

Given the complexity of the capital raise process, everyone should have at least one outside advisor that they trust to help them navigate a capital raise process. Whether this is a professional advisor or an unpaid advisor, you should enlist the help of someone who understands your business and the capital raising process.

Here’s Our Typical Recommendation to Business Owners

Go with an investment banker if:

  • You want to sell your business and fall within the sweet spot for an investment bank (>$10M in revenue or $2M in EBITDA)
  • You want to sell a piece of your business and raise a meaningful amount (>$20M) of growth capital

Go with a quality business broker who will run a targeted process if:

  • You’re ready to sell now, you’re under the sweet spot for investment banks, you don’t have access to the logical buyers, and don’t have the time to do the research

Find a consultant who specializes in the type of transaction you want to pursue if:

  • You need help with your capital raise strategy, you aren’t sure if your business is optimally positioned, or you don’t know who the right investors are.

Go at it alone if:

  • You have a solid capital strategy, already know all the logical buyers or investors for your business, don’t need any help pitching your business

Should I Hire a Lawyer for a Capital Raise?

Yes.  You should always hire a lawyer to help you with a capital raise.

You don’t just need a lawyer, you need a lawyer who specializes in capital raising and has represented many similar types of deals.  Transaction-focused lawyers know the ins and outs of raising capital and can make sure you are protected and get a fair deal.

If your current legal representation doesn’t specialize in these types of transactions, you need to seek new representation.

What Should a Good Lawyer Help You do?

A good lawyer will provide legal assistance throughout the capital raise process. Here’s a general overview of what they will help you do:

  • Make sure your corporate legal documents are in good shape to share
  • Draft a template non-disclosure agreement to send to investors
  • Help you evaluate and negotiate term sheets
  • Help you prepare and negotiate transaction documents and amendments to the corporate documents
  • Provide advice on what terms are “market”
  • Ensure regulatory compliance
  • Potentially connect you with investors who could be interested in the deal