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March 22, 2021
Why Do You Get So Many Investor Cold Emails?
Growth Equity
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Here are a few reasons:

  • We don’t have your phone number.
  • We have your phone number, but you’re not replying to our texts or voicemails.
  • You’re also not replying to our LinkedIn messages, Venmo payments, or even our handwritten letters.
  • We don’t know where you go for your morning jog, so we can’t stage a chance meeting.

All jokes aside: the real issue?

Over the past decade, the number of growth equity firms has grown ~10x. In the mid-2000s, the Norwest team competed with 10 to 15 firms. Today, it’s over a hundred and each with a team of analysts and associates working 80 hours a week trying to generate deal flow.

To be competitive in this industry, you must be proactive, politely persistent and determined to identify and pursue investments in the best companies around the world. Cold calling and emailing are just parts of this process. And how have we at Norwest done this historically? Current portfolio company CEO and cofounder, Vin Vacanti from YipitData recently told us, “you personalized your cold email, which only about 1% of people do. You showed that you knew what my company actually does.” However, when we asked Joe Kudla, CEO and founder of Vuori about his first point of contact from Norwest, he said, “I don’t remember the email you sent, but I remember the first meeting at our booth at Outdoor Retailer and all the visits to San Diego after that, which put you at the top of our list when the timing was finally right to explore a capital raise.”

The reality is that timing and luck can be just as important as industry expertise to source a great investment opportunity. So in candor, if we’re emailing you, it’s for the same reason we emailed Vin and Joe: we want to find out if you might be interested in growth capital or liquidity, if you are in our investment threshold, AND to share why we’d make great partners. We know you’re not a startup praying for a VC firm to swoop in. We know you’re profitable and doing well. You might not want investment, but you might want the specific sort of help we can offer.

But these emails can start to blend together over time and all sound the same. Every founder knows the canned lines: the subject line that reads “Seeking businesses like yours…” The references to “writing a check” (is it 1985?), “taking chips off the table” (are we in Vegas?), and acquiring “additional dry powder” (I’m running a balance sheet, not an army…).

You may ask yourself, “will this ever get better?” or “will my inbox and voicemail box ever get some reprieve?” And while we hate to be the bearer of bad news, the truth is that we at Norwest will continue to reach out. Here’s why:

  • You may not know that there’s a truly suitable partner out there.
  • You may not know that there are partners who will provide capital while staying out of the way and providing resources only where you want.
  • You might be surprised to learn something new about your industry or hear an M&A idea from our investment team that could expand your portfolio.
  • You may not know there’s a third way to raise funds, besides venture financing or selling your whole company.
  •  You may be keen on the free discovery. Has anyone valued your business before? Wouldn’t you be interested to see what that looked like?

The email inboxes of CEOs and founders are often swamped because there are too many firms, and too few good companies. The result is an arms race of cold emails.

One positive thing to keep in mind:

Take it as a compliment. If we’re reaching out, it’s because – as with YipitData and Vuori – we have researched you, we understand you, and we think you’ll like us.

The last thing we’ll leave you with is a checklist to think through as you’re prioritizing your own calendars and inboxes filled with investor requests. We’re cognizant you can’t take every call, or it would end up being your full-time job. So, as you think through building relationships with investors prior to the point in time when you would be interested in growth capital and liquidity, you should think through the following:

  1. 1. What is the equity check size range and the typical investment criteria of the team?
  2. 2. What is the fund structure and available resources?
  3. 3. What is their industry expertise, and do they have a network of executives to help you scale?
  4. 4. Is there a “fit” and shared vision of the business? Remember, an investment can be a three-to-seven-year marriage, so you better like who you plan to partner with, and they better share your vision for your company.

Founders – we hope you accept our long-winded, half-apology. And if you have any questions for us or would just like to start building a relationship with our team at Norwest, either Jon or I would be happy to respond to your cold email.

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