Startup Entrepreneur: 10 tips for preparing for your first investor meeting

I’ve been soaking myself in #startuplife for over 20 years. I just love to be part of a story — building something from nothing with like-minded people.

I’am an entrepreneur to the core.

For the last 10 years, I have also been an investor. A role I do not so much identify myself to, but in the last 12 months alone I have gone through some 1000 pitches.

Because I focus on early stage investing (including 20+ co-founding), people keep asking me how to prepare for an investor meeting. And not just any old investor meeting — the first one. That can sometimes feel like a nightmare.

I’am not about to give you tips about how to make a killer pitch deck or what does a solid cap table look like. There’s tons of good stuff for that in the internet already. No, I will attack the black beast of fear & uncertainty that is so familiar to every entrepreneur.

It’s the nagging voice in your own head whispering you won’t make it.

My goal here is to give you strength & courage my friend. To show that the “accepted startup legend” might not always hold the correct answers. Yes, the first funding round might feel scary, but a regular human being with limited experience can manage it with excellent results.

Actually, if approached a bit differently, it may be a rewarding experience.

So let’s dig into the list. I would personally very much appreciate a pitch where these points are covered.

Tip #1: Be yourself

Whatever you think you are not and think you should pretend to be, please don’t. Just be yourself. I mean, really be yourself. Dress like you normally would, talk like you normally would and act like you normally would. No need to act like a “Duracell-bunny”, if that’s not you. No need to put on a suit and a tie, if that’s not against an official protocol.

Being yourself creates trust.

Pitching is not about creating some wild make-believe story to wow, but you telling an investor how would you make your dream (vision) come to life with your own words. It’s about chemistry and a dialog between the team and investors. Typically early-stage startup is looking for money and advice, so sparking up a discussion is a good idea.

Trust is a true competitive advantage against your investment seeking peers.

Tip #2: Be radically transparent

I have yet to meet an early-stage startup that has nothing to improve or no holes in the package. The nature of business is that there are so many variables that is highly unlikely they could be100% perfectly aligned. This is actually good news for you.

You are allowed to show the good & the bad as they are in your company.

If you try to give a flawless image of your business, you can be sure the investor will start drilling holes to your story. Investors are very good at piecing the big picture. That’s their job and they have done it hundreds or thousands of times. And if you happen to get away with some skeletons, they will be dug out, when the money hits the bank. Is that really how you want to start your investor relationship?

My advice is that do tell a story emphasizing on your strengths and market opportunity, but be also very clear what you need and what you are missing. That gives the investor a change to evaluate how can they provide help in remedying those. That is valuable information for you to learn.

Early-stage investor is typically more willing to invest if she understands the chinks in your armor.

Tip #3: Be prepared

There’s absolutely nothing wrong with having casual ad-hoc chats with investors, but if you aim to raise a round, you need to come prepared. Investors tend to be really busy people (nowadays, who isn’t?) so don’t blow up your changes by not making your homework.

Early-stage investors don’t mind that this might be your first rodeo, but they still require that you come prepared. It means that you need to have a pitch deck, a proper understanding of the market, competitors and other critical stuff prestudied. A solid place to start is to google “how to make a killer pitch deck” to acquire an understanding of the topics you should prepare for.

There is no excuse for showing up unprepared.

Tip #4: Really open up your team composition

It is criminal, how thinly the startup pitching tends to focus on the team. You might have spotted the biggest opportunity known to mankind, but the team makes it happen (or not).

The team composition and founder commitment are critical.

Typically team is pitching-wise a single slide and some bullet points from CV:s. To me that’s purely optics and does not really tell anything. It‘s too easy to come up with a few believable faces with some convincing bullets.

How long and intensively have they worked together? How do they respond when the hard times hit? Any practical examples of resiliency? One of my favorite questions to a startup team is as follows:

Who’s getting the worst sleep in your company?

The answer really tells a ton. There are teams where everyone has day jobs. That’s not really a growth startup setup, it’s more like a leisure time hobby. To those teams I have the quickest growth entrepreneur test in the world and it goes like this:

Are you willing to go to your boss tomorrow and quit?

Answer “yes” and put it into motion, you are mentally ready to become a growth entrepreneur. Answer “no” and I’ll advice you to come back later if “yes”. This can sound unbelievable harsh (people have families to feed, don’t they?), but actually this rises from a very humane perspective.

Anyone that has been being a growth entrepreneur will tell you that it was no cakewalk. If you walk into it with something other than 100% dedication, the odds are that you won’t make it. In my experience, every startup needs (at least) one person that sleeps worse than the others. That is typically the founder-CEO.

It’s not promises of hard work, it’s undeniable facts.

Make sure you tell who is working full-time, who part-time and what kind of risks each possess should the startup fail. Although early-stage investors are used to taking risks, they also evaluate the level of discomfort the team is willing to engage. Ideally, the team should have are a real pressure to steer clear of any hardships. This is where an investor is also willing to take a risk and invest.

A sound equation is where the team and investor are both taking a real risk.

Another key is team composition and how the team works together. Investor is not usually looking for singular geniuses, but a coherent team that plays really well together. One way is to arrange personality tests to every team member.

It doesn’t really matter what test you are using, the important thing is to understand how everyone behaves and thinks. This really helps in avoiding unnecessary conflicts and building a stronger communication.

The team that shows their personality test reports checks immediately several boxes: they act transparently, they have invested in knowing each others and they show vulnerability, which creates trust.

Instead of just pitch deck team slide, give out your team’s personality test scores and open them up.

Tip #5: Let your company culture shine

If the previous point gives an investor a deep understanding of current team, culture describes what kind of “company operating system” you have.

The scalable company operating system is called company culture.

Company culture is the practical toolbox on guidelines and boundaries of human behavior in a modern information company. It guides your recruiting efforts and helps in avoiding expensive misses. Yes, “culture” might sound a bit vague and not a priority in an early-stage company, but it’s one of the most important things to set up.

Let me rephrase the above. In the startup canon hardly no one is denying that you need to have a digital heart. In fact, investors will tell you to “design your business in a scalable way” often referring to a software component that gives you a backbone for scaling.

Company culture is a set of rules, filters and guidelines for scalable decision making.

Your purpose, values, mission statement, vision and such paint a clear picture who you are, how you operate and where you aim at. More specifically it offers external stakeholders a change to reflect if they share your thoughts.

It’s in your best interests to attract investors, personnel and partners matching your beliefs. The better you document your company culture, the more likely you attract the desired kind of people.

It pays to be open what’s your company culture is like.

If methodologically building a modern company culture sounds hard, don’t worry it’s totally learnable. There are ton of good tips on culture to be found.

Tip #6: Make sure your numbers make sense

To me people & culture get listed before numbers. I’am fully aware that it’s not how everyone thinks. Nevertheless, I still require numbers, so this is more or less fine tuning of priorities.

A business is numbers that right people make happen.

Even though you have the right people, you will still need the right setup (idea, market size etc.) so that those numbers have the best environment to grow. Here’s an illustrative example. Some 15 years ago, it would have been somewhat interesting just to hear a pitch about launching an ecommerce store, because there were so many holes in the market.

Nowadays anything and everything is already sold online and there’s giants like Amazon and Alibaba. The market is so crowded that having an ecommerce store is something you might need in order to get to play ball at all. If you think about pitching a children’s clothing e-com store today, you better have some real aces on your sleeve.

The above goes double for every mobile app pitch to any segment.

Let’s illustrate a positive example. If you have made an innovation in market that is doubling its’s size every year (like electric cars), you could get away with more plot holes. This is because every January you have 2 times the prospect pool you had a year before. That is an amazing advantage.

You don’t need to be an accountant, but you need to learn the basics of your business numbers-wise. MMR, ARR, CLV, CAC and Churn are just examples of terms you need to comprehend (even if you are not in a SaaS business) in a basic level.

You would be amazed how many startups don’t have their numbers ready when they come to pitch.

One thing I would like you to think twice is a traditional hockey stick growth projection. A hockey stick is just optics, unless you have hard financial data backing it up that you have reached the growth inflection point.

Typically hockey sticks are just something startups think an investor needs to see in order to make an investment. Bare in mind that the effect might be the total opposite if you are still in fact piecing the business puzzle. The reality is that often you need to be post product-market fit in order to argue a hockey stick growth.

Reality beats fantasy in numbers.

Additionally when drawing a hockey stick, investor might see that as a promise. The growth projections should be formulated in a way that presents your true belief, but also your best knowledge what is possible in reality.

It’s better to surprise investors by exceeding your yearly projections by a little than utterly fall behind.

Tip #7: Focus on communication

First and foremost, you do not have to be a polished communicator. But you do need to show you are excited about your dream and growing your company. Otherwise, why would anyone bother to invest into it?

Don’t be afraid, it’s just a discussion with a human being.

Getting funded typically requires several discussions with investors. Every discussion is a possible gold mine to pick out the brains of people that generally have a good overall perspective of the market. You can improve your deck and pitch by just asking questions and listening carefully.

Listen carefully and document any improvement points & ideas.

Don’t get offended if an investor sees your company’s biggest opportunity somewhere else than you. Investors are typically getting pitched the same stuff over and over again. They are trying their best to see your business from a fresh perspective. Or they are trying to catch better the angle that your are pitching. They might also test can you take a feedback and convert it into action.

When an investor learns that you put advices into action, it takes you one step closer to getting an investment.

Actually, if you agree on any follow-ups, it’s a good idea to handle them as fast as possible. Reply to emails and provide the additional material agreed without unnecessary delay. Besides giving a dynamic and trustworthy feeling, it pushes the negotiations further. Founders giving their best effort in investment discussions tend to be successful in other areas as well.

Tip #8: A “no” doesn’t necessarily mean “no”

First of all, there’s nothing wrong with you or your company when getting a no from an investor. Being an investor means that have you to deliver a lot more “no’s” compared to “yes’s”.

Every investor makes the judgement call based on their own criteria. It might be pure intuition or a set of strict investment criteria, but the decision is formed somehow.

What’s a clear “no” to some investor, can be a definitive “yes” to another.

In basic terms, every company can find funding, it’s just a matter of being able to take a rejection and trying again. Sometimes getting funded takes only hours, sometimes grueling months. You should mentally prepare for multiple rejections.

Pay close attention to what kind of rejection you are getting.

You have to understand that an investor cannot say “yes” until she is willing and able to invest. Until that point everything is a “no” and you will have to pay attention how’s that delivered to you. For example if the investor gives you a clear indication that the maximum valuation they can reach is 3million euros and you are still asking for 10, it’s usually a hard “no”.

On the other hand, if you seem to get along well and the investor says that your startup would fit the portfolio, but you would need a bigger team the “no” might be an encouragement to strengthen your personnel numbers. If you can make that happen, it might be worth it to ask again. As said before, investors tend to appreciate founders that can listen and turn advice into action.

Tip #9: What is your plan B?

It’s normal that the team formulates the business plan according to the success scenario, but startup usually needs a plan B.

One company was manufacturing a ground-breaking physical product, but they had made a solid plan to restructure their whole production line for a totally different product in case of a black swan. Talk about preparing for a rainy day.

By presenting a plan B you show a proof of business resilience.

The above example was maybe a bit extreme, but there’s several ways to distill a plan B. In my opinion, every startup should at least simulate what happens if the financial runway ends and they haven’t reached their business goals.

I understand that there are cases, where the only viable option is bankruptcy. That’s totally okay when it is said aloud before an investment and everyone is on board. I also know that there are cases were a vast amount of different survival moves could very well be performed— especially if planned ahead.

In my experience, income funded ramp-ups tend to naturally deal with crisis scenarios better.

I’am not all stating that you shouldn’t take external funding. I’am just saying that if you manage to start your business without (significant) external funding, things get real naturally and instantly. You either extract revenue from the market and survive or not. That is a skill that is really hard to learn without some kind of real-life bootstrapping experience.

One of the things I try to coach to startup founders is that don’t mentally rely on external problem solvers. It’s your own job. This is purely a mental model.

A startup shouldn’t externalize their problems, they should own them.

When people start to think that they cannot solve a challenge, they tend to hope and wait for a white knight coming to save the day. In a startup that’s a seriously dangerous thought. A one that could even be company ending.

You should definitively use every trick, resource and contact you have in solving a problem, but you should still own the problem. Make yourself responsible for owning every challenge and it helps you to transform your skillset while your company grows. No need to do everything yourself (actually vice versa), but being responsible ensures all problems will be eventually solved.

Taking external funding is just an example. Cash might give you a breather, but it will eventually run out. Don’t let yourself be fooled that money in a bank solves problems. It’s your team’s job. Money is just a leverage or an accelerator.

Don’t make it a about just raising money. Changing the world or building a business is a better one.

Tip #10: What’s your secret sauce?

There are tons of variables you can focus on when building a growth business: idea, the market, team, marketing, sales, size, speed, network effects, digitality et cetera. Your secret sauce can be pretty much anything, even copying stuff better than others (think China).

What is your USP / competitive advantage / differentiator?

Whatever it is, the investor wants to understand how you will harness that in order to beat the competition. Something that ensures you can penetrate the market successfully and start winning. Or if it’s a new market, how will you successfully teach your customers?

I’am not advising you to open up every secret detail of your patent portfolio, but please do explain why that is important for your business. Investor needs to understand why and how you would be more successful than others. Nowadays it’s rare to find something totally unique, so there is bound to be competition.

Explain why your company manages to better utilize the secret sauce.

Ideas are nice, but data points make them real. When you combine innovation with actual real-life observations and data, it makes a compelling story. It shows that you are not only capable of innovating, but also putting it through the rigorous and unforgiving process called the real life.

Even if you are in pre-revenue phase, you could maybe interview potential partners and customers while gathering a network of connections meaningful for your business.

Closing words

Please note that nothing on this list is meant for investors, they are all actually meant for your startup. Investor is just a conduit for taking care of important stuff that make your business grow.

Also, this is my personal top-list, but there are a plenty of thoughts many investors share. Still, please do mind that different people think differently.

This list is put together through the eyes of early-stage investing (angel, pre-seed, seed) and may not apply to later rounds. There are differences between how an angel or an early-stage VC does things (for example Due Diligence), but my list focuses on underlying themes regardless of a process.

Lastly, please use common sense. Don’t do anything that feels wrong or unnatural to you. Always trust your own instincts. It’s your company.

I sincerely hope this list helps you in achieving your goal of getting your startup funded!

p.s. If you are an early-stage startup looking more than just cash, check out Sofokus Ventures.