Pause for a moment and pretend: You're an entrepreneur seeking investment in your venture - what do investors really care about?
Oh wait, you're not an entrepreneur? Just somebody with an idea you want to see succeed? Stick around. Why, you ask, should you care what investors think? Because of the bigger idea they represent: Someone you want to see enough value in you and your idea that they'd choose to add their value to it. In truth, the investors in your venture or idea are many - partners, employees, customers, to name a few. What turns them on or puts them off is information worth knowing.
Trouble is, we rarely hear what smart investors really want. Beyond the obvious (e.g. proof of concept, a viable market, a thoughtfully conceived business plan, and sales), what really tips them for or against you? While it may surprise you, in my years on the investment side of growing ideas, we spent a lot less time on the business idea, and far more seeking a clear sense of the person tasked with making it all real. Truth be told, so few entrepreneurs possessed the essentials truly needed to succeed that the lack of these essentials could be reduced to a veritable shorthand for "this isn't going to happen."
6 Things To Consider Before Betting On An Idea Or Its Champion
While many things factor into the decision to bet on an entrepreneur, 5 things always stood out. Their importance applies to far more than seeking to secure financial investment. Indeed they are 5 pivotal factors in realizing any idea:
- Commitment. Harsh as it may sound, one of the strongest warning flags an investor gets to not bet on you or your venture is that you haven't quit your day job. Without a doubt, there are lots of risks involved in starting a new venture. No one, especially you, should contemplate them lightly. Really you should only commit fully when the risk is calculated - in other words, when you've reached the point where the greater risk lies in not going all in on your big idea. If you're not there, why would you expect anyone else to be?
- Realism. There's an old investor adage that goes like this: "Now that you've told me how much money it's going to take to get you into trouble, let's talk about how much is it going to take to get you out? You may be able to fool yourself that every step on the way to realizing your vision will be a step forward, but anyone who's walked the path knows that's pure fantasy. Good investors are realists far more than dream chasers. They want you to reflect that balance too, not promise the moon. Your realism sells far better than a fairy tale.
- Humility. On the whole, entrepreneurs are vastly different from one another. Yet when they sense their idea isn't landing with an investor, they share a refrain: "But you don't know how hard it is to do this!" they say, referring to the perceived brilliance of their idea. But for every true breakthrough, regardless of field, a brilliant idea is never enough. In truth, ideas accumulate, they never appear fully formed, and they do not strike like lightning. If all you've got is one big idea, the only guarantee that comes with it is that no one worth his or her salt will invest in it. What good investors want most is for you to have the humility to not be wedded to one idea, and the sense to know you'll have to keep coming up with new ones.
- Confidence. There's a necessary twin to humility: confidence. And a good investor tests for it. Here's how the test often goes: Mere minutes into the entrepreneur's pitch, the wise investor interjects with a "better" idea. The investor doesn't really have a better idea. They just want to see how much you believe in yours. Will you hold your ground? Can you back up your idea when challenged? Can you distinguish between being open to other views and caving? Humble they like. A lack of confidence however is a deafening signal to walk away.
- Staying Power. Inevitably, investors ask about your market, that is who's going to buy your big idea in the literal sense. While understandable, it's remarkable how often entrepreneurs mishear the question. They hear "how big" and answer saying things like, "The potential market for this product is $2 billion. We figure if we can just get 2%..." and they've already lost the investor. Sure investors want to know how big, but what they really want to know is if you understand that it's a long journey from zero to 2%, or anything. Realism, humility, and confidence are ultimately support to your ability 'to go the distance." But first and foremost, you have to know and embrace that there's a distance to be traveled. When you say "easy", investors hear "write off", as in an investment unlikely to return value.
As much as any investor wants a good return, what they know most increases the odds is perspective. That's really what their interest in your commitment, realism, humility, confidence, and stamina adds up to - a check they run to see if your ability to see bigger is greater than just having a big idea. When you consider the fact that no one makes a bigger investment in your idea than you, it argues for taking your own turn at asking the question: Would you bet on this?
Larry Robertson is the award-winning author of A Deliberate Pause: Entrepreneurship and its Moment in Human Progress, and The Language of Man. Learning to Speak Creativity.