Most pitches get rejected and I think that’s a good thing.
Hear me out.
Funding your startup is just as much about the people who are funding you as the number of zeros on your check.
If investors said yes more often, there would be far more startups aligned with the wrong investor.
This relationship between investor and founder can be a delicate one. Delicate enough to break the health of a budding business if both parties are not properly aligned.
Not All Money is Created Equal
Capable investors are not just looking for a return. They are looking for startups that need their help. Most investors look for businesses they care about, self-aware founders, and teachable teams of people.
Capable startups should be looking for investors that fill more gaps than just finance. However, founders are often blinded by cash and jump in bed with funders that do a bad job of augmenting their weaknesses.
If done successfully, the relationship between funder and founder blossoms into a symbiotic success.
Often the unicorn-type-tech-monsters, get around this issue. The options for VCs and the absurd capital injections these startups receive tends to put them into a world of their own.
It is this everyday sort of startup that suffers the most when paired with capital injections from the wrong source, which brings me to the point of this article.
Startups always need something more than just capital.
Any founder that says otherwise is woefully unaware and should be avoided by investors.
And most are.
Generally, a pitch will cover problem, solution, market opportunity, growth assumptions, team bios, timeline ext. ext. After the pitch concludes, investors will always ask what the biggest gaps are. Most pitchers say ‘capital’.
This comes in as a major red flag for many investors, especially early stage. They are often connected to a network of resources that goes far beyond cash. Investors want to contribute their professional network, experience, and tools to give their portfolio companies a competitive edge.
Own your gaps, do your research
Every investor knows your business has gaps. Every startup does. However, if those gaps are aligned with the problems that they are equipped to fix, funding becomes much more plausible.
Founders that do their research, know the strengths of their potential investors, and craft a pitch around those areas, are much more appealing.
Finding investors that fill those gaps will pay dividends, as the investor will be confident that the company gaps are tailor-made for their fund or network to support.
When founders gloss over or leave their obstacles out of a pitch, the investors are forced to assume what those gaps are.
They often assume wrong.
It is for this reason that the best pitches I have ever heard included weaknesses.
Founders that are able to clearly define where they were lacking, as well as a plan to fill those gaps, are almost always respected and commended by the investors.
The gaps will always come out at some point in the conversation. It is up to the founder to decide when.
Don’t hide
If founders wait till Q&A or worse, due diligence, to reveal their pain points, investors get the impression they are uncovering a dirty little secret. When weaknesses are owned and brought to light by the founder it communicates honesty, respect, and self-awareness.
Hiding where you struggle most also closes the door to potential solutions, even if the funding aspect of the conversations falls through.
Investors want to help. Saying no constantly is one of the least appealing parts of investing. This is often remedied when investors feel that they can provide real value to startups outside even when funding is not an option.
The fund I work for prides itself on helping anyone that comes through the door, one way or another. We are not alone in this sentiment.
For funds, establishing a good reputation is just as important as making good investments. Helping startups that are not a good fit is a great way to accomplish this.
Of course, this only works if founders are transparent about the areas in which they need support.
Add a gaps plan-of-attack slide to your pitch
This slide includes where your weaknesses are, how you became aware of them, and the path of least resistance to overcome.
The amount of awareness this communicates can not be understated.
This slide can also be tweaked based on the investor that is being approached. Your issues should not change, but acknowledging how the investor can help remedy these issues, should be tailored to the investor.
—
Gaps and weaknesses are universal. Self-awareness is not.
Founders who show that they care about fixing problems over keeping up an appearance of perfection will, obviously, fix more problems. The business will be leaner, more honest, and ultimately more successful.
This approach can also greatly help with standing out from the dozens and dozens of pitches that most funders hear.
Investors want to see self-awareness and a willingness to do whatever it takes to succeed. If you can own your gaps and show that you have a plan of attack in place, you will be much more likely to secure the funding, or support, necessary for success.
Best of luck out there,
JP
—
Enjoyed this article? Check out a few more favorites:
Podcasts to Help you go from Zero to Funded
Recent Comments