How a start-up should write the first letter to an investor

Today, there is a very noticeable difference in how projects approach fundraising. If a project nowadays needs to ask for money, the first letter is feeling the difference.

A small fund has about 10–14 offers a day, bigger ones receive 2–3 times more. Approximately 70% of projects are rejected due to poor letter composition. You don’t want to be one of those projects, right?

💸Let’s look at a good example of a start-up to an investor letter

Good afternoon, X!

I have found your contact on Crunchbase / LinkedIn / Angellist.

After analyzing your portfolio and deals, saw that we fit your investment profile. Moreover, there could be very strong synergy opportunities between your portfolio companies A, B, and us.

My name is Christian Leshowec, I am the co-founder of project Yoba-boba (add a sentence about past relevant experience, for example: “I previously worked for 5 years in a leading e-commerce company as a senior analyst, and co-founded project Doba-Goba, which was bought by Zippo Investment in 2018”)

Then, add 1–2 paragraphs about the project itself, a general description, and noticeable market numbers, for example:

Yoba-boba is a marketplace and integrational application for home and industrial automation devices. The market for industrial and home automation today is one of the most promising today, it’s volume evaluated at $132 billion and promises to grow 3 times by 2026 (a growth rate faster than in AI technologies)

We are currently in the seed stage, the MVP of our app and store is ready, the first sales were taking place, and cooperation agreements with 30 vendors worldwide.

1–2 paragraphs clarifying stage and achieved results, for example:

After a year from the foundation, we have managed to enter 2 markets — the Netherlands and Germany. Our competitive advantage is the comprehensive solution, which combines both the delivery of goods and the installation of automation through our application. As a result, customers receive solutions 2 times faster and cheaper compared to classic marketplaces like Amazon, 60% did repeat purchases in our store.

Our monthly revenue is about $8,000k, the average bill is $360, and sales conversion is 7%. We keep growing 15% month to month.

1–2 paragraphs about investments, for example:

In order to maintain and multiply our growth, we need investments. We see a big opportunity for the company to get a solid part of the market in the medium and long term. With investment leverage, we can hire better people / open new offices/increase operational capacity. Our customers realize that implementing automation is inventable, because it improves business productivity or quality of life, in the case of households….

As a result, we aim to reach $1 million in revenue by 2026, being a positive profit company with an EBITDA margin of 40%.

In order to unleash our ambitious plans, we would like to raise an investment of $120,000.

May I ask you for a short 20–30 minute call at your convenience?

I also highly recommend that you get to know the life of our company on the blog on LinkedIn. You can also talk with our Advisory John Paul, he is working with projects relatively similar to your field of interest.

You can find Yoba-boba’s investment presentation (which contains more detailed information about products, company founders and stuff, and financial data) in the attachment.

Sincerely,

Christian Leshowec

Structure of startup to the investor letter

• Greeting
• Justify why you are writing to this particular investor
• Introduce yourself and your professional experience
• Describe your business and its target market
• Clarify the current stage of a startup, already achieved results
• Tell why you need investment, how it influences the future of startup
• Provide referential contacts and first-importance links.
• Attach investment presentation

It won’t be difficult to write such a letter. And there’s a guarantee that conversion into answers (positive or negative — it depends on the quality of the project) rather than ignoring them will be solid.

Now, let’s talk about mistakes that entrepreneurs can make in start-up to investor letters.

error 1. Silly questions

“Good afternoon! Do you invest in start-ups?”

“Good afternoon! Write your investment criteria!”

“Good afternoon! Can I send you a presentation?”

You know who and why you writing to — start to the point, and be respectful.

error 2. Copy-paste / non-personalized letter.

“Good afternoon! We like your fund, and want to work with you. Please check our investment offer in the attachments.”

Investors receive dozens of such emails and without the context, it has a high chance of not being reviewed.

error 3. Tactless short letter.

“Good afternoon, we are raising $500k at a valuation of $5m. We will hold an IPO in 2027, and the IRR of the investor is 577%. Would you be interested in such a project?”

You are trying to sell a dish that investor has not even tried.

error 4. Too difficult/overloaded with terminology.

“…we produce nano-structured Gauss-normalized alpha-particulars which help customers to find a road back to home anywhere in the world, even in the Universe!”

What?

error 5. Сomplain about other investors

“Good afternoon, I am already desperate to write and it seems that there are no investors in the world, but I will write to you anyway, just don’t act like the others — I am waiting for a detailed reply!

We have a unique project, but nobody understands us!”

To be honest, there is usually no need to invest in people who nobody understands.

error 6. Conspirator

“Good afternoon! Our project is super promising, I can’t reveal all the details to prevent leaks. Please sign an NDA before I tell you about our project.”

error 7. Humanitarian

“Good afternoon! Many investors prefer to look bluntly at business plans and financial models, but is that the main thing?

What matters most is the product and the idea, and with that, we are all right! We would like to offer you the opportunity to invest in a unique/exclusive/amazing project…”

The investor’s goal is to make a profit. Numbers and metrics are the principal backbones of the business; their absence indicates that there is simply nothing to invest in.

error 8. Excessive self-praise

“Good afternoon! Hurry up and invest in our project. There is one last opportunity left. We have already gathered a group of investors, but you were specially recommended to us and we will try to find a place on the round for you…”

Any letter that accent on self-praising is feels like a scam.

Communicating with investors doesn’t need to be difficult, but it must be rational. Good communication triggers positive reactions and back-involvement. Correctly written start-up to investor letter — increase your chances to receive funding over 70% of startups. A partnership begins with your first letter and lasts well beyond your investors’ exit.🤝