How to qualify investors: three checks, and the courage to cut

Deleting a famous firm from your list feels wrong. It looked good there. It made the list feel serious. But learning how to qualify investors mostly comes down to being willing to cut, and the founders who do it early tend to have calmer, faster raises.

Our guide on finding investors for your startup is blunt about it. Wrong stage, sector or region: cut them. Padding a list with firms that won't lead your round only adds to the pile of no's.

Why a shorter list is a better list

Every name on your list costs something. Research time. A personalized "why you" line. A follow-up or two. A little hope, and then a little disappointment.

When a name was never going to invest, all of that is wasted. Worse, it crowds out the investors who might. You have a limited number of warm introductions and limited energy for careful emails. Spending them on wrong fits means spending less on right ones.

A shorter list also changes how you work. With fewer names, you can find more warm paths, write sharper first lines, and send to everyone in one tight window.

How to qualify investors: the three checks

Each investor has to pass all three. Two out of three isn't a pass.

Check 1: Stage

Does this investor invest at the stage you're raising? And ideally, do they lead at that stage?

Look at the firm's stated stage on its own site, then check the portfolio. If their recent first investments are all at Series A and you're raising pre-seed, they're a wrong fit, however friendly the partner seems. Seed funds sometimes write pre-seed checks, but many won't lead one.

Check 2: Sector

Does this investor back companies in your sector? Not "technology" broadly. Your actual market.

The portfolio is the honest answer. A firm that says it's open to everything but has never backed a company selling to, say, municipal water utilities, is unlikely to start with you. Look for recent companies near yours.

Be precise about your own sector, too. If you describe yourself too broadly, every generalist looks like a fit. If you describe yourself in the words a firm would use on its own thesis page, the real fits stand out.

Check 3: Region

Does this investor invest where you're based? Some funds only invest in certain countries or regions. Check three places: the stated geography on the firm's site, where its portfolio companies are based, and any regional offices. If none of them points to where you are, the fund isn't a fit for this round, however strong the rest of the match looks.

What about the maybes?

You'll have names that are unclear. The stage isn't stated. The sector is adjacent. The region is ambiguous.

Don't let maybes sit on your main list. Either do the research to settle them, or move them to a separate tab. If you get a lead and your round is filling, some maybes may become worth a follow-on conversation. Until then, they're a distraction.

Common reasons founders keep wrong fits

• Brand. A well-known firm feels like it belongs. Fit matters more than fame.
• A good conversation. A partner who was kind at an event still needs to invest at your stage.
• Fear of a short list. A short list of real fits beats a long list of hopefuls.
• "Just in case." Sending anyway costs you a first impression you may want later, when you do fit.

Run the checks before you research anything else

Order matters. Qualify on stage, sector and region before you spend time on partners, introductions or first lines. It's the cheapest filter you have, and it saves the expensive work for names that deserve it.

If you're starting a list from scratch, our post on building an investor list sets up the same filter with four lines written before you add any names.

How small is too small?

There's no magic number. The test is whether a handful of no's would end your round. If it would, you need more names that fit, not more names. Our post on how many investors to pitch goes into that question.

Cut kindly, keep the record

Cutting a firm from this round isn't cutting it forever. Note why it didn't fit. When you raise again, at a later stage or in a different market, that firm may be exactly right.

FAQ

What makes an investor a good fit?

They invest at your stage, ideally lead at it, back companies in your sector, and invest in your region. All three need to be true.

Should I pitch investors who are a slightly wrong stage?

Usually not as a lead. If your round already has a lead, a firm at a nearby stage may join, but don't build your list around them.

How do I check an investor's stage if it isn't on their site?

Look at the portfolio and the funding announcements for those companies. Note which round the firm first invested in.