One of the most nerve wracking things an Entrepreneur can go through is the moment it comes to talking to investors. Chances are that Entrepreneur has been preparing for fundraising for 12-24 months. This is the moment it all comes down to for you, the Entrepreneur…and then…you screw it up. Well, don’t feel bad. This has happened to me plenty of times.
But why do you screw it up? After all, you’ve read all the best pitching books. In my opinion, it’s because the pitch books are wrong. To me, everyone seems to be missing the most important piece…the piece that comes long before pitching: trust & relationship building. It’s about knowing who your investor is, how to relate to him/her, and how to talk to your investor.
The key to all this is to remember…investors are just ordinary people.
So how do you talk to investors?
Different types of investors have different types of communication preferences…but I see a common communication style that resonates with most of them. And ironically, you’ll see two very different styles come from the same investor.
The investor has two modes: get sh*t done, and let’s have some fun (while still getting sh*t done).
I believe a lot of investors are naturally intuitive people…depending on the type of investor. Talk to investors with a clear, blunt tone. But gently. Being blunt is important to get to the root of the problem..quickly. It’s just honest, clear, direct answers.
Also, many Entrepreneurs assume being blunt is sticking to logical questions/answers…ha ha..it’s anything but that. There are many, many other things that must be evaluated when building a business: preserving culture, employee feelings, relationship building, evaluating others motives…these are all emotional issues that investors are more than comfortable talking about (so yes…I am challenging the status quo that investors are all logical thinkers).
Investing is a high risk, high return game. Most investors are serial Entrepreneurs (more so angels than VC’s)…and have very likely been in your shoes quite a few times. An Entrepreneur who can’t be transparent will cause an investor to stay up all night long…wondering to himself: what is this person doing with my money? Are they making the right decisions? Are they telling me the truth? And more importantly…how can I help them if they are not being honest?
Traction…it’s the all holy grail that separates you from an inventor vs. a real Entrepreneur. Good Entrepreneurs execute, with or without money. You may not get as far or fast without investment dollars, or you may have to make a choice between eliminating market risk vs. eliminating product development risk first…but at least you’re moving forward. Investors want to hear, and see, about this traction.
If you have traction, here is a great article from Brendan Baker on communicating your traction.
Ask About Them
If you’re not interested in your investor’s life, what he does, where he’s been, his personality…then the reality probably hasn’t struck you that you’re going to be married to this investor for the next 5 years.
Let an Investor Come to You
This probably sounds weird, but I honestly think it’s best to let an investor come to you. Problem is, many investors are so used to being pitched to, and bombarded with business plans that when someone doesn’t pitch to them…they’re confused. But at the same time, I hear them complain all the time about business plan overload. Statistics will show you though, 99% of their investments are either:
- Someone they found on their own.
- Someone that was introduced to them.
Remember, there are always two sides to every story. My mantra here is “seek to understand, then seek to be understood” (from The 7 Habits of Highly Effective People). If you only seek to understand, then you’ll get ran over. And if you only seek to be understood, you’ll run others over. You must do both to be a fair, good, honest leader.
There Is A Time For…
There is a time for relationship building (building trust with your investor). There is a time for creative brainstorming (believe it or not, most investors have fun with this…but not until after they like you). And then there is a time for pitching and deal making.
Preferably in that order.