We specialize in working with experienced founders so the majority of pitches I hear tend to be from entrepreneurs that have every right to be confident in their background. They may have run companies before, have years of industry experience, been an early employee, or just graduated from Wharton with their MBA. So you’d think I’m jumping into the lion's den here when it comes to working with founders with big egos but truthfully, I’ve found little correlation between a founder’s background and their level of arrogance.
Unfortunately, that means this problem is pretty pervasive throughout the entrepreneurial community and it’s an important point to address because an entrepreneur’s job is primarily dealing with people and an investors job is primarily to invest in people. The impression an entrepreneur makes during a pitch can have a tremendous impact on their ability to raise funding. If even one prospective investor walks away saying “what was with that a-hole!?” that’s a needlessly missed opportunity! It had nothing to do with how lucrative your business was and everything to do with how you presented yourself. It’s an easily avoidable mistake and it all comes down to establishing empathy.
This takes a lot of self-reflection to get right. Try to take a third party perspective in how previous pitches have gone. For most experienced founders, when the conversation goes South it’s not because there is a fundamental flaw in your business (though that can be a catalyst) it’s because of how the entrepreneur handled an investor’s response. To avoid your conversation taking a turn for the worse and to make sure an investor feels confident in you as a founder, here are 4 tips I regularly use when coaching entrepreneurs on their pitch.
- DO NOT argue. No matter how much you disagree with a comment or the premise of a question. Acknowledge the validity of their point, provide the data upon which you based your decision and if needed outline your thinking about how you interpreted that data to arrive at your conclusion. Be mindful of your tone in responding and emotional state. Do not be offended. Be open to criticism and opportunities to improve your pitch and/or business.
- Search for a misunderstanding. Is there something about this topic they don’t understand or you are not explaining well? Did they not catch a point made earlier in the presentation which is causing confusion? Are you making an assumption about their baseline understanding? Perhaps you are so in the weeds that the investor is missing the high-level idea? Pitches create an artificial barrier between the entrepreneur and investor. Many investors will not admit when they don’t understand something and instead will try to call you out on a mistake. Your job is press pause and tests the waters to make sure everyone is on the same page before responding.
- Establish empathy. What are the person’s background and perspective? Put yourself in their position and see if you can figure out how they arrived at the conclusion they have. Is there a gap in their thinking? A poor assumption being made? Or perhaps you even missed something in your thinking and you can take the feedback constructively.
- Consider why a question is being asked. What are they actually looking for in the answer? Often times I will ask a question not so much because I care about the specific answer but because it provides further insight about: the entrepreneur’s abilities, they progress to date, something fundamental about the business, how potential customers view this problem/solution, etc. For example: Earlier this week I heard a pitch from an entrepreneur with an ambulance product for EMS departments. I asked, “Of the EMS departments you have spoken to, how many have asked their suppliers if they have a solution to this problem?” Her answer essentially consisted of a bunch of rambling followed by “EMS departments don’t really ask their suppliers for new products” followed by some scoffing laughter. Horrible response. Why did I ask that question? It’s not because I expected any EMS departments to be asking their suppliers for new products. It’s perfectly plausible there is a potentially successful business to be had even if EMS departments didn’t do that. I asked because if any of them were it would signify this is such a big problem for them that they’ve done something above and beyond the ordinary to look for a solution. It’s a signal not a prophecy. If the entrepreneur took the time to consider that or even asked me to clarify my thinking, that exchange would have gone a lot better.
When investors make their decisions, a huge part of that decision comes down to the founding team. An entrepreneur that doesn’t communicate well will create problems that go beyond their ability to pitch including aspects such as your ability to recruit top talent and generate sales. You do not want to the first thing that comes to mind for a prospective investor to be that the founder is hard headed and uncoachable. It’s a huge redherring that completely distracts someone about whether you are actually presenting a lucrative opportunity. I have never known a person to invest in a founder that they had a combative exchange with during a pitch presentation.
Your demeanor when approaching an investor is a tough thing to master. You need to be both confident and coachable, very well researched and transparent. It can seem like a fine line when you think about it that way but if you follow those four tips you’ll master walking the tightrope sooner than you think.