Forty days ago I made a huge, life-changing decision. I quit my job, leaving a company I founded in 2007.
It was a really tough decision. After all, that business was named to Inc. 5000 list of the fastest-growing U.S. private companies for four years straight, and generated $22.8 million in revenue in 2015.
Now I'm onto my next adventure starting a brand new company from scratch. And I'm super excited.
To make the dream a reality, I'm seeking venture capital.
During my great funding adventure, I've realized something important.
There are two types of VCs you'll run across: skeptics and believers.
You're looking for believers, not to convince skeptics.
In fact, you don't want skeptical VCs in your life. Here's why.
In fairness to skeptics, only two or three out of every 100 ideas they hear are truly great. The rest are donkeys.
You can waste as much time as you want trying to convince VCs who are skeptical of you. But here's the thing: no matter what you say, you will never convert them into believers (not at this point in time anyway).
Most skeptics aren't shy about sharing their objections. They might tell you:
- They don't believe in your product.
- You're too early stage.
- You don't have enough customers.
- Your company isn't big enough.
Pitching an investor is like interviewing for a job, but instead of hiring you they cut you a check for millions of dollars at the end of the process. Some VCs simply won't invest unless they decide everything is perfect for them.
You should expect some tough questions from VCs, to be sure. They want to know you know your stuff.
But when you hear a lot of objections, rejection is usually inevitable. You're probably better off just forgetting about that investor for now and moving on.
You can always come back and follow up with these investors at a later round, after you've addressed or eliminated those issues. Investors love to see that you're a professional who can handle rejection and act on their feedback or advice.
There's no way you will be able to convince a skeptical VC to do a deal with you right now if they have too many objections. And that's perfectly OK. It's their money, not yours.
Believers are kind of like unicorns - extremely rare and wonderful. You want to find someone who believes in you, your idea, and your company.
The goal of your pitch is to get a potential investor to come to the same conclusion as the thesis of your pitch:
- You have a great product.
- You're targeting the right market.
- You understand your market.
- There is enough need/demand in your market.
- You have the right go-to-market strategy.
An investor who believes in your idea is one who comes to the same conclusions as you, but of their own volition rather than just repeating back the things you've told them.
If you have the story, the passion, the numbers, the understanding, and the vision, they will buy in.
If you have all this and they still can't buy in, just run away!
When you're pitching investors, you're also interviewing them. How they act now is a good indicator of how they'll act later.
Ask yourself a simple question: can I imagine having this person on my board of directors for a couple of years?
If the answer is yes, mazel tov! You've found a believer.
It takes a good amount of time and effort to meet with VCs. Don't waste each other's time unless there's a great fit for both sides.
If people express any hesitation up front, maybe you shouldn't bother setting up a meeting. If investors don't really seem interested after hearing your pitch, don't send a copy of your pitch deck to them or follow up for now.
Your time will be better spent looking for a believer rather than trying to convince a skeptic.
You'll find as much success in trying to convince a skeptical VC as winning political arguments on Facebook!
More VC Funding Tips
Are you trying to secure VC funding? Here are some recent posts you might find helpful: