So You Want to Get Funding for Your Startup?
If you can’t answer these four questions…then good luck
As a long-time investor, I have been exposed to every type of pitch you can imagine, and the truth is many of them have been less than inspiring. I will say, however, that an impressive CEO does play a decidedly large role in my overall impression of their company.
A lot of it boils down to “It’s not about what you say, but how you say it”. Any venture capitalist can look through a pitch deck, like what they see, then withhold funding after meeting the CEO, or the founder of the same company.
Don’t fool yourself: they’re not asking to meet with you because they want to know more about the company, or because they think you’ve withheld information. A Google search or a financial printout tells them more than they need to know. Investors seek face-to-face time with their prospective investment because they want to know who they’re working with.
We don’t invest in spreadsheets, we invest in people.
While every situation warrants its own specific approach, there are a few characteristics that I look for in a CEO during a pitch, and the answers to these four questions are the most valuable to me when deciding who I partner with.
Do you know your stuff?
Do you know your business model inside and out?
Do you know your market like the back of your hand?
Are you able to see the opportunities and challenges ahead without succumbing to myopia?
If your answer is anything but “Yes” to any of these questions. Go back to the drawing board, and don’t bother asking for any amount of investment.
It is always reassuring to see someone with a brutally honest understanding of where they are now, and where will be with full funding, given the resources they’ll need.
Do you have the ability to lead people?
I’m not talking about just managing, I’m talking about true leadership. Taking a startup from the theoretical “wave my hands in the air” idea phase to a business plan that ACTUALLY makes money is a difficult task.
It requires you to have the ability to lead others through a dark tunnel where the light is not visible on the other side, and keep everyone from jumping ship.
I am always checking to see if you possess this inherent leadership trait. It’s an intuitive judgment call on my part, but by observing your actions and how others act around you, I can usually get a solid tell on your DNA.
When I sense that a CEO is a strong leader, I feel more confident that s/he will be able to guide their team through adversity when it inevitably arises, regardless of the quality of the idea, business, or venture.
Does your business idea have a fundamentally sound economic engine?
Is there something in your idea that can realistically be turned into a business? Not a hobby. Not just a good idea. But an actionable idea that can be adjusted and tweaked as it relates to the yourself and the team you are leading.
It needs to be deeply engrained within yourself and your team, and be something that can turn into a powerful economic engine — one that can affect positive margins on any input, and that can be banked, reinvested, and compounded going forward.
Are you focused?
Is your “simple solution” really a simple solution? Or is it a mess of ideas? When sitting through a presentation, or reading a pitch deck, few things are more frustrating than hearing the CEO branch into other ideas, or “potential business” without fully explaining the one he’s here for. If you can’t stay focused during the meeting, how can I expect you to be focused while running the business?
You might have great ideas, that create great business. But…
That’s only IF they work…
That’s IF your business is successful…
And that’s only IF you get my funding…
Which isn’t looking too good right now.
Those are the four things; actually… the only four things, that I as an investor, look for in a CEO during a pitch. If you can come into a pitch and answer these questions quickly, easily, and fully, you can expect open ears and open checkbooks.
Do we care about nice suits, spiral-bound financials, prototypes, and nice working spaces? Sure, it helps. But no amount of flash or flair will help you if you can’t get these basics down.
“Wows” and “Amazings!” Make you feel good while you talk, but you can’t take those to the bank and pay your employees. “Good Luck” and “I can’t wait to see what you can do” might stoke that fire in your chest, but without funding that fire will burn out pretty quick.