The Most Underrated Way To Convince Investors — Backchanneling

Hey y'all 👋 

I took last week off in Cape Town to celebrate both mine and my wife's birthdays.

I'm back from that one week hiatus to break down an important but rarely talked about step in the fundraising process — backchanneling.

Remember — investors are looking for reasons to de-risk your startup. They want to deploy capital, but startups are incredibly risky.

Backchanneling is one of the most effective ways to do this, even after a pitch meeting. Here's how it works and what a good backchannel request looks like 👇

Read time: 3 minutes

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⚡️ How to Backchannel with Investors

During a raise, you'll almost certainly speak directly with any investor who puts significant capital into your startup. But even if you hit on each of the many things that investors are looking for these conversations don't always address every concern an investor might have.

And even if an investor feels good about the deal, they'll want to gather opinions from people in their network either about you from mutual connections or from experts in your space that they know before writing a check.

Most founders think that there's nothing they can do at this stage and that once they've had the pitch meeting, they need to simply play a waiting game.

This is not the case. The best founders I know continue working on getting the investment by backchanneling.

What is Backchanneling?

Backchanneling is the conversations that investors have with other people about your startup that take place outside of formal meetings.

Investors rely on trusted opinions, either from mutual connections who know you better than they do, or industry experts they know, to help them de-risk the investment. Ideally, you have mutual connections reach out on your behalf to highlight why you as a founder and your startup are worth investing in.

Think about the diligence process like a reference check when you're applying for a job. You want to make sure your best references are included, so that you have the best chance of getting the job.

The exact same thing is true with your raise. Backchanneling, when done right, can significantly impact whether an investor backs your startup or not.

How to Backchannel Effectively

I get a lot of requests to backchannel on behalf of founders. There are good requests and bad requests. All good requests have a couple things in common:

First, they come from founders I have a personal relationship with. This removes the chance of any awkwardness. Anyone who backchannels for you is spending some of their social capital to help you. Don't ask someone to do this if you don't have a relationship with them and/or you don't know if they believe in what you're working on.