What do investors want? A guide for early-stage startups

Noa Matz
Noa Matz
Oct 21, 2018 · 5 min read

There are 3 important numbers I’ve came up with while working with VC investors:

  • 10 — Investors decide whether or not to invest in the first 10 minutes of the first meeting.
  • 5 — Less then 5% of startups will get funded by a VC.
  • 1 — Only 1% of funded startups will become a Unicorn (CB Insights, 2018).

So, what personality and team elements will make investors see YOU as the next Unicorn?

In the past 3 years I’ve been working closely with VC investors, helping them better know and understand the entrepreneurs they are about to put their fortune on. By taking part in hundreds of investment-oriented encounters, I’ve managed to create a vast reservoir of knowledge on this specific topic. It is brought here to you, formulated to the 8 DOs AND DON’Ts OF MEETING AN INVESTOR FOR THE FIRST TIME:

  1. 3 is the golden number
    Most of the investors I’ve spoken to will feel more comfortable giving their money to a 3-founders startup team. Why is that?
    4 is too much — multiplicity of opinions, difficulty in making decisions and reaching a consensus. A team of 2 — too small to handle the workload. Having your self as the sole founder — makes the investors suspect you have an issue with teamwork, delegating and sharing the glory.
  2. Long-term relationships and former acquaintance
    The Investor wouldn’t be thrilled to hear you’ve met your co-founder in a meetup the previous evening (true story). Taking the decision of walking this path with a person you barely know shows a great deal about your judgment. Aside if this, the investor has no guarantee you’ll make a strong team and manage to create a solid working relations, as opposed to a situation which you have already worked together in the past, and chosen to work together again.
    Make sure to take a mutual trial period before making any commitments or signing contracts with a potential co-founder. Share this with the investor. It’s a good tip regardless to the process of capital raising.
  3. Confidence (NOT arrogance) and enthusiasm
    See your potential investor as your biggest costumer; will you show up sleepy, moody or bored to a potential costumer? obviously not. Enthusiasm, confidence and excitement are infectious. Apart from proving the investor you can bring amazing energies to the sales pitch, you have the opportunity to convey the passion to your product.
    **Make sure to bring authentic energies and don’t over do it .
  4. Resilience
    Identifying the existence (or absence) of mental resilience is not an easy task for investors. In order to carry out an investment, they would want to see vast capacity to cope and recover quickly from failures, adapt to changing environments and maintain toughness over time and circumstances. In the first few minutes of the conversation, the investor will usually ask to present yourself, your personal and professional history. This will be a good time to integrate a short and sweet case study in which your resilience was particularly evident; a story that proves you don’t quit easily, you try again and again while using diverse techniques to achieve your goals. Try to pass a strong message — as things get harder — you get tougher and more determined.
  5. Be attentive, DON’T ARGUE!
    When the investor offers you with an advice, a tip for improving your product or a new way of looking at a problem you’re product is facing — it is also a test. The way you respond to the feedback is likely to have a profound impact on your chances of moving forward. The investor would want to see you’re truly open to suggestions/feedback, saying ‘thank you’, appreciating their knowledge and experience and finally promising to give it a serious thought. That kind of an answer (rather than an argumentative and defensive one) will signal the investor you’re humble, coachable and mentally flexible — and will make them want to work with you. Investors want to see you’re open to receiving more than their money. That you’re aware of your blind spots and limitations, possess a realistic self-perception.
  6. DON’T lie!
    Investors have a latent wish (though will never admit it) their entrepreneurs will be nothing but honest with THEM, but will cut corners and manipulate OTHERS when needed. ALL entrepreneurs lie, unproportionally magnifying and glorifying all aspects of their new-born company. It’s part of the game. Having said that, you should know dishonesty is a deal-breaker for all investors. They wouldn’t want to take a risk with someone that isn’t honest with them.
    A good way to prove your credibility during the first meeting, is by admitting when you don’t know the answer to a question; when you don’t have an answer to a question presented to you — simply say it. Promise you’ll get back to them with an answer by email, and make sure to do so within 24 hours.
  7. Show respect to your co-founders
    Don’t interrupt one another when pitching. There is no red light that flickers louder, than founders who doesn’t allow each other to speak and aggressively taking over the conversation. Make sure that each of the founders is given the opportunity to present his area of responsibility, and support one another with glances of admiration. Show the investor how well you complement each other and form an harmonious team.
  8. Last but not least: CV — what would you want to point out?
    Excellence — investors love to see indicators of excellence in your resume. It reassures them to see you were best (or better than others) at something somewhere.
    Relevance — tell a coherent professional life story, a one that will rationalize establishing a company in a specific field and industry and the position you intend to take in it.
    Leadership — Even if your position in the startup doesn’t require immediate leadership skills (CTO for example), investors will usually think a few years ahead, and will try to assess your ability to lead your own department in a large scale company. Therefore, it is important to point out your leadership experiences in former frameworks (scouts, college, army, etc.)

Remember! This meeting is your opportunity to assess whether the investor is a person you wish to work with in the long-run. While being mindful to how you behave, also by tentative to your overall experience from this person and use it as a signal.

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