Here’s How to Impress Investors with a Perfect Fundraising Pitch
Hint: investors are never impressed by entrepreneurs who are “crushing it”
When I was first learning to fundraise, I believed I needed to convince investors of two things: 1) that my startup was awesome; and, 2) that I was an exceptional entrepreneur. In my mind, the best way to accomplish those two things was by learning how to give a perfect fundraising pitch.
I read countless articles about how to pitch investors. I spent hours practicing my pitches in front of trusted mentors. I even recorded myself giving my pitch, then I would dissect the videos like a golfer who records his swing then analyzes it for flaws.
Thanks to all this practice, I entered every fundraising pitch prepared to “wow” investors. I had a polished pitch deck. I had a killer demo. I knew exactly what I was going to say and how I was going to say it. I even had perfect “entrepreneur-casual” outfits (i.e. faded jeans, t-shirt, and a blazer). I thought if I looked like an entrepreneur who was “crushing it” and talked like an entrepreneur who was “crushing it,” investors would believe I was “crushing it” and they’d want to invest.
But I was wrong. Even worse, it took me years to figure out how wrong I was because, aside from not raising any money, the feedback I was getting from investors was all positive. Investors praised the quality of my pitch. More than a few told me I had the most beautiful pitch deck they’d ever seen. I even had one investor try to hire me to advise his portfolio companies on how to give better pitches. But not a single one of them invested in my startups.
So what was wrong? If I had such a great fundraising pitch, why did I spend years struggling to fundraise?
When things are too good to be true
I finally solved my problem during a fundraising trip to New York. After a day of unsuccessful meetings, I was hiking back to a friend’s studio apartment and the couch he was letting me crash on. While waiting for a crosswalk light to change at an intersection in one of the city’s seedier neighborhoods, I pulled out my phone to look at a map. As I did this, a scruffy man walked up and asked if I wanted to buy a Rolex. “Only $60 for you, my friend,” he said.
“Not today,” I replied, “but thanks for offering.”
“Are you sure?” he said, slipping a couple watches from his pocket and holding them out for me to inspect.
Still stuck at the light and not sure what else to do, I took one of the watches and examined it. However, having never actually looked closely at a Rolex, I didn’t actually know what I was supposed to be looking at. I just nodded my head while studying the watch and said, “Looks really nice.”
“That right there is a great watch,” he said. “One of the nicest watches you can buy. And it’s the best deal in the city, too. For $70, it’s yours.”
“I thought you said $60,” I responded. Without realizing it, I was falling into his trap. I’d been an easy target. I was obviously from out of town. I’d taken his watch when he handed it to me. I‘d started discussing price when I should have just ignored him. The man was clearly an expert at pitching his merchandise. He knew exactly what to say and when to say it.
“For you,” he responded with a smile, “I could do $60.”
The light at the crosswalk changed and I took the opportunity to escape the conversation. “No thanks,” I said, returning the watch. “I think I’ll pass.” Not waiting for a response, I stepped off the curve and into the road. Once I was around a corner and of sight, I paused to pull out my phone again and resume studying the map.
As I searched for the best route to my destination, I found myself thinking about the experience I’d just had. What a deal, I chuckled to myself. How could anyone pass up a $10,000 watch for only $60?
The answer, of course, is obvious. No matter how good his Rolexes looked, they had to be counterfeit. I didn’t need to know much about Rolexes to know that if the deal seemed too good to be true, it almost certainly was too good to be true.
That’s when I had an epiphany about my fundraising pitch. Was I doing the same thing? Was I so focused on creating the impression of a perfect startup that I was actually scaring away investors by making the deal seem too good to be true?
The problem with perfect pitches
That evening, splayed across my friend’s couch, I stayed up late reviewing my pitch deck. As I did, its contradictions became clear.
After years of study and practice, I’d built a pitch that seemed to be doing everything right: it was telling a story of explosive growth; it was showing a huge market; it was explaining how my company would dominate the competition. If my deck was to be believed, I’d created the most promising startup in history. It was, without question, going to turn into a company worth billions of dollars.
Then, on my last slide, I made my “ask”: $1.5 million at a $6 million post-money valuation. Yes, for a measly $1.5 million, an investor could own a whopping 25% of a guaranteed startup unicorn.
Hopefully you see the problem. I was trying to sell investors on a deal that was clearly too good to be true.
Perfection isn’t possible
To understand why my “perfect pitches” weren’t leading to fundraising success, I had to learn to acknowledge something about building startups that was uncomfortable to admit for an inexperienced entrepreneur: no startup is perfect.
I don’t mean I actually believed my companies were perfect. However, when talking with other people — investors, customers, fellow entrepreneurs, and even my closest friends and family — I thought I needed to hide my startup’s flaws, so I made everything seem perfect. Our product was great. Our customer acquisition was great. Our team was great. Nothing was ever broken. Nothing needed improvement. Nothing ever sucked. We were always “crushing it!”
Sure, I might have been able to fool my friends and family by telling them things were going great. But investors weren’t fooled. Investors know that no startup is perfect and no entrepreneur is perfect. Because of this, if you present yourself as a perfect entrepreneur pitching a perfect company, you set yourself up for failure. Investors will know they can’t trust you just like I knew I couldn’t trust the guy on the street corner in New York City trying to sell me a genuine Rolex for $60.
A better way to pitch
I had two more investor meetings scheduled the next day. While I didn’t feel comfortable retooling my entire pitch in a single night, I decided I’d try an experiment. The first meeting of the day, I gave my normal pitch. I was confident and articulate and told a great story. The meeting concluded the same way all my other pitch meetings had ended. The VC told me how much he liked my pitch while not bothering to ask any probing questions about my startup. He wanted to know how I’d learned to pitch so well. He asked if I’d designed my slide deck or hired someone else. All his questions were superficial, and, at the end of our conversation, he told me I should “keep in touch,” which, in case you don’t already know, is investor-speak for “I’m not interested.”
In a sense, the VC from my first meeting of the day did exactly what I’d done the previous day to the guy on the street corner trying to sell me a Rolex. He humored me for as long as he needed to, then, as soon as he could, he blew me off as politely as possible. My deal was too good to be true, so he never bothered to learn anything more about it.
At that point, I knew if I wanted to raise capital, I needed to stop trying to “wow” investors by pitching a perfect company and instead figure out how to get investors genuinely interested in learning more. Prior to my second investor meeting later that same day, I made a small tweak to my pitch by inserting two slides near the end. One slide contained a list of key assumptions I was making, and the other contained a list of risks I thought could prevent the venture from succeeding.
I met with the second investor and gave my revised pitch. While I wish I could tell you he pulled out his checkbook and wrote me a check for $1.5 million on the spot, that’s obviously not what happened. However, the dynamic of the conversation that followed my pitch was completely different than any of my previous meetings.
The investor didn’t compliment my pitch or tell me what a great job I did. Instead, he started asking probing questions about the potential problems I’d described in my two new slides. In other words, rather than the kinds of superficial responses I usually got that made me feel good about myself but didn’t actually help me fundraise, this VC was focused on trying to better understand my startup because it seemed like a legitimate investment opportunity and his job, as an investor, was to examine potential investment opportunities.
To be clear, I don’t mean he immediately wanted to invest. I just mean I didn’t scare him off by making the deal seem too good to be true. To continue my Rolex-purchasing metaphor, rather than being an obviously fake Rolex being sold on a street corner, my startup looked more like a legitimate watch inside a legitimate jewelry store. Sure, that didn’t guarantee the VC would invest in me, but it also meant he couldn’t immediately dismiss me.
Learning to be honest about your flaws
After that experience, I changed the way I pitched my startups. Rather than always trying to appear perfect, I did my best to present my startups honestly. That doesn’t mean I’d previously been lying. And I don’t mean I started building pitch decks filled with slides about how risky my companies were and how likely they were to fail. Instead I mean that I tried to do a better job of explaining what was working well for my company and what still needed improvement.
And it wasn’t just my company that I presented more honestly. I learned to present myself more honestly, too, including my flaws as an entrepreneur — of which I had (and still have) plenty.
Rather than scaring away investors, acknowledging and addressing mine and my startup’s flaws did the exact opposite. Investors started offering help. Sometimes that meant giving candid and insightful feedback that allowed me to improve my company. Sometimes that meant introducing me to potential customers or partners. And yes, sometimes that even meant investing in my startups.
When VCs did invest, they didn’t invest because I’d tricked them into thinking I was an entrepreneur who was “crushing it.” That’s not what a perfect fundraising pitch should do. Instead, a perfect fundraising pitch has to do two things: 1) get investors to believe in the difficult goal your startup is trying to accomplish; 2) get them to believe you’re an entrepreneur they can trust to tell them when things are going well and when you’re struggling.
Despite what you might think, struggling entrepreneurs don’t scare VCs. All entrepreneurs struggle. Knowing this, investors are much more impressed by the entrepreneurs who admit their struggles than the ones who try to hide them. That’s because the entrepreneurs who know how to admit their struggles are also the entrepreneurs who know how to ask for the help they need in order to succeed.