Do you have the traits that make investors want to give you money and support you?
If you’ve been around the startup ecosystem for even a minute, you’ve no doubt heard the saying the investors don’t invest in ideas, they invest in people. In most cases this is the truth. It’s easy to get caught up in the idea that the startup concept you have is so amazing that investors will flock to back you, the truth is that you have to be an “investable founder”.
Why do you have to be an investable founder and what does that even mean?
Let’s start with the why. It’s actually simple.
First, an investable founder will generally give you more confidence in their ability to pull the whole startup thing off. Starting a company is hard and the things that make a founder investable will probably make them seem better equipped for the challenge.
The fact is that the great majority of the time, there are at least a few people running around looking to raise money for almost identical concepts. Imagine for a moment that you were in the audience of several demo days and saw variations of essentially the same idea. If you wanted something meaningful to distinguish which one to put money into, one thing that separates the identical ideas is that they have different founders. If you found one founder to be more investable than the others, it would make it easy for you to choose which one got your money.
You need to remember that most angel investors and most venture capital firms only make a handful of investments each year. That could be from among 1,000+ ideas they’ve seen. Ideas, even good ones, don’t create successful businesses. Planning and execution does.
Second, founders who are not investable, are just not people that you will want to commit to being connected to for the next 3-7+ years. You’ll see why more clearly when you see the list of what makes a founder “investable”.
What makes a founder “Investable”?
For the sake of brevity, here are my top 5 things that make a founder investable:
- They have to be likable and charismatic. Most investors in early stage deals want to help good founders as much as they want to make money. To want to help you, they generally will have to like you. In addition, being likable and charismatic is a trait that can significantly help the business. It will help you recruit and retain key talent, close strategic partnerships, and woo investors, among other things. Founders who aren’t particularly likable might have trouble with some or all of these essential CEO jobs.
- They have to be smart. I know that everyone of you is saying “I’m smart” and you’re probably right. But investors are looking for “Smart” with a capital “S”. They want to be dazzled with the way that a founder’s mind works. How they think about strategy. How they look at their market. How they bring new insights to old problems or see patterns that other people miss. You don’t have to necessarily be a rocket scientist, but you should be smart enough to see something that most people wouldn’t.
- You have to be willing to learn. The worst type of founder is the one that comes off like they already know everything. The fact is that knowing a lot is great. But knowing what you still need to learn to become a great CEO is better. You can spot an investable founder when they get questions about their concept. The best ones show that they have thought about the question before, done the research and have an answer, or they use the question to consider new possibilities, things they missed, or new things they have to learn.
- They have to be willing to consider to new information. Startups are notorious for making pivots. Many of the best known startups began their life doing something other than the thing they became famous for. Investable founders have the ability to reassess when needed and use new data to chart an alternate course. Some founders come across as determined to follow one course until it works… new information to the contrary be damned.
- They need to show a strong tie between their history and their ability to run their particular startup. Whether it’s the years that they spent gaining the subject matter that is critical to the success of the venture, the time they spent developing the technology that powers the solution, their role leading a similar team or building another company, there should always be something that suggests that a particular founder has an advantage over other founders with the same concept.
I’m sure that some of the other investors out there will have other things to add to this list, and I invite their comments and additions.
Any traits to avoid?
On the flip side, there are some traits that quickly make a founder seem un-investable. My top 3 here would be:
- Arrogance. The type of founder that dismisses people that “don’t get” their concept.
- A lack of commitment. The founder that isn’t full time. Hasn’t invested a lot of time and at least some money in their
- A lack of diligence. The founders that don’t know what competition exists or the regulations and protocols specific to their industry or don’t fully understand the technology they plan to use. These are also the founders that don’t research which investors invest in their stage or their industry.
If you have most of the 5 investable traits and none of the 3 un-investable traits, you’ve got a better than average chance at raising money. Not necessarily for the venture that you are working on at the moment, but eventually. Investors remember the investable founders. They like them. Sometimes they want them to come back when they have a better idea. And sometimes they decide that you and you current idea will be one of this year’s investments.
If you like this post I’d really love it if you could share it on Twitter or LinkedIn.
I hope you found these tips on being an investable founder helpful. Work on making your investability clear from the start.
What other traits do you think of when you think about who is investable and who isn’t? Let me know by leaving a comment below. You can also reach me here to ask questions.
Published by Tony Clemendor
Tony has lived in the startup ecosystem of Silicon Valley for 25+ years as a founder, adviser, investor, community building, and Founder Coach. He’s on a mission to help good founders become great founders.
All advisor relationships are not created equal
If you’re like most of the startups I’ve worked with for the past 20 years, you have an advisor or two helping you out. You recruited someone who you thought could help, or someone who you thought had a pedigree that would make your team look more impressive, or you got an advisor (temporary?) as part of your participation in an accelerator.
Some of you speak with your advisors weekly. Some less frequently or not at all. Some of you send occasional updates on the progress of your company to your advisors. Some don’t. Some of you have advisors that are actually engaged with you and your company. Some don’t.
Formal startup advisors, informal advisors, and fake advisors
Good advisors are a valuable resource. You may have selected them because they have a particular functional or market expertise. You may have selected them because they are well networked. You may have selected them because they’ve raised money or are an investor and can help you understand the fundraising landscape. The bottom line is that they bring some knowledge or connections to the table to help you be a more effective founder.
But time and time again, I see founders who treat advisor names like the sponsor decals on Nascar race cars. They try to collect founder names that we recognize, or people with titles that seem to carry some type of endorsement.
Where I see this most often is on fundraising pitch decks. At this point, when I see an impressive and credible advisor in the deck, I tend to question whether what the actual relationship is.
I don’t think that these founders are trying to be deceitful, per se, but I think that most know that they are not being entirely upfront. They think of it as “marketing”. But from my vantage, it’s no better than the person whose resume says “Attended Stanford” when the reality is that they attended an extension class at Stanford, or the person that claims to have an “exit” when their one person company got a small check for an asset or as a 1-person “aquihire”. My mom used to say that a misleading exaggeration is just one flavor of lie.
Founders need to understand that investors invest in people more than they do in companies. In particular they invest in people that they feel they can trust. If you start the investor relationship by trying to sell them on your “team”, but the team isn’t genuine and involved, then that investor relationship will never make it past due diligence.
What a coincidence. She’s my advisor too!
Recently, I was working with several startups on their pitch decks and was surprised to find the same woman listed as an advisor for 3 different companies in 3 very different sectors. All of the companies added her after brief conversations with the woman at a pitch or networking event. I wondered if she even knew that she was on those decks. I asked each of the founders to follow up with their advisors and make sure that they had permission to list all of their advisors on their decks. Not surprisingly, in each of the follow up meetings, all 3 founders removed her from their decks.
If you are wondering if this is more the exception than the rule, I don’t think it is. I was once at a pitch night and was happy to see a founder I had previously met on the agenda. I was less happy when he got to his Team slide and I saw my name and LinkedIn photo as one of his “advisors”. At best, it suggests that they don’t have any true advisors. At worst, it looks like a blatant misrepresentation.
The lies can go both ways….
It’s bad enough that some founders try to collect advisors like we’re Pokemon characters, but sometimes, advisors are trying to collect startup advisor titles as well.
It seems that collecting advisor titles on a LinkedIn profile helps with street cred. Yes, I know I have some of those, but I have regularly scheduled contact with all of the founders on my profile. When the relationship is no longer active, I list an end date. Some advisors I’ve run into like to “list them and leave them”. Some don’t ever speak with the founders they are “advising”.
It’s the founder’s job to leverage the advisor relationship
When I decide to work with a founder as an advisor we establish ground rules. One of those rules is that they have an agenda for every meeting. In particular, they should come to the meeting with a question or something that they need help with. The founders I work with are great about this. They understand that no request is out of bounds or embarrassing. Helping is part of what I am there for.
Since they are so good at setting agendas with me, I’m surprised when I discover that they don’t always ask their other advisors for help. One of the frequent surprises is when they have an “Angel Investor” as an advisor in their deck and I ask if the Angel has invested or plans to and the founder says: “I didn’t ask”. When you are a startup founder who is raising money, you can’t be shy about asking for help.
When a founder says that they didn’t ask their advisor to invest, I follow up by asking if they asked their angel/advisor if they knew anyone else that might be interested in investing. Again, I get shocked when the founder says “no”. If your investor is invested in your success, engaged with you personally, and has equity in your venture, why wouldn’t you ask them for warm introductions to investors? More importantly, why wouldn’t they want to make the introductions?
Are you getting honest feedback about your Startup?
The flip side of this is when a founder does ask for introductions and the advisor gives some lame reason why they can’t make introductions at the moment. With all due respect, that’s crap. In the networked tech world, you can develop a great reputation by referring good investments to investors. If you have asked your advisor for the names of potential investors or for warm introductions, and they say anything other than “I’d be happy to”, they think that your venture isn’t ready for prime time. They think that referring you would not reflect well on their reputation.
Hopefully you have the sort of relationship with that advisor that you can honestly ask what it is about you or your company that’s keeping them from referring you to their network. There will always be an answer. Dig until you find it. You need to because you don’t want an advisor that doesn’t believe in your prospects and hasn’t been giving you feedback on the things you need to improve.
Any good advisor will tell you why they can’t refer you yet and the reasons are usually not that complicated: “You don’t have enough traction yet”, “You need to add a critical skill set to your team”, “You need to validate the pain point with customers”, etc. If you don’t know how to address some of those, one of your advisors should be able to help.
You should have advisors, but only the ones that are truly engaged
I mentioned at the outset that good advisors are valuable. Great advisors are engaged. In a good advisor relationship you have an explicit agreement with them about how they are helping, what their affiliation is, and how and where you can use their name.
Great advisors are honest with you. They give you their honest opinion. They are not cheerleaders. They are not your boss. They want to see you succeed and will do what they can to help. They will be honest even when they think that it is not what you want to hear.
If you have advisors for your startup, my advice is:
- Have an actual objective in mind for them and share that with the advisor.
- Have regular meetings and have an agenda.
- Ask them hard questions and expect constructive criticism.
- Give them equity and align your goals. There are standard advisor equity agreements.
- Don’t use advisors as window dressing. Especially in your pitch decks. You either have a relationship or you don’t.
- Don’t keep them “affiliated” with you forever. They are your advisors while they are actively advising.
- Don’t be afraid to ask them to leverage their network on your behalf.
Your advisors should be a fully utilized asset. Having the right advisors should save you time and help you avoid typical mistakes. Having fake advisors doesn’t have any positive value and can hurt your street cred in the long run.
Originally posted on LinkedIn
A good funding pitch does a lot of things. It showcases a founder’s knowledge of their industry. It shows their strategic thinking. It hints at their ability to execute on a plan. It also engages the emotions and motivations of the people watching the presentation. It has to. If you don’t engage your audience, the pitch will fail.
I review a lot of funding pitches. After a while, it’s easy to see patterns. Especially what makes a good pitch deck and what doesn’t. I can sense the moment where pitches start to lose their audiences’ full engagement. It’s painful to watch.
Funding presentations are sales pitches
When a pitch fails to engage the audience it’s usually for an obvious reason: the presenter made the presentation for themselves, or for a customer, not for an investor audience.
Funding presentations are sales pitches. Sales pitches get the prospect to imagine the benefits taking the next step. In the case of a funding pitch, the next step is getting to know more about you and your company. To give an effective pitch, you need to know what your audience would see as a “benefit”. In other words, “what’s in it for them?” Why should they care about what you are selling?
If you getting investors to imagine how investing in you will benefit them, you’ll keep their attention. After all, who doesn’t listen when you are about to tell them something that can help them?
Show them the money
What would an investor see as a benefit? The answer is simple: a good outcome… for them.
Most investors invest to make a return on their investment more than they do to “change the world”.
Founders often start companies to “change the world” or “disrupt”. As a result, they often make that the focus of their pitch. Founders need to focus the pitch on the motivations of the investors, not their own.
Pitches should show investors how they can get a return on their investment AND change the world. How do you do that?
Make the pain real
Address the investors’ emotions and motivations. Start with their empathy. Help the investor understand the pain point that your customer is feeling. They need to feel like the problem is meaningful and that your solution will help to reduce that pain. If you can’t get the investor to care about the problem you are solving, you’ve already lost their interest.
If you are solving a problem for a group that your investors are not a part of, you need to figure out how to help them understand why they pain is meaningful and the solution important. The investor doesn’t need to personally experience the pain, but they need to know that you are solving a big problem experienced by a large audience.
Address their fears and desires. Reduce their risk.
You need to address investors’ doubt. They need to feel like you and your team actually have the knowledge and skill to pull this off.
You need to address their profit motive (aka “greed”). They need to be able to see how you plan to monetize the venture. Investors want to see your plans to grow, be profitable, and become an asset worthy of a probable exit.
You need to address their desire for personal success (the flip side of which is their “fear of failure”). Show that investing in your company is a good idea. The sort of investment that will be good for their reputation and show their investing savvy.
Many founders focus too much on trying to convince investors that they have a great solution. Focusing on the product and your solution without also addressing the empathy, doubt, greed, and fear of investors is a mistake. Founders that pitch pure facts are missing the opportunity to have an investor care about them and their company.
Your only goal is to “leave the wanting more”
Your pitch is an opportunity to break through the noise of a thousand other pitches. It’s a request for an investor to give you their time and attention. It’s how you make them care enough to put you in the “consider” pile. Your goal is to get a chance to make your business case in a more focused way.
A fair number of the pitches I see focus on why the founder thinks that they have a great idea. They try to impress the investor with all the work they’ve done.
But keep in mind that many VC firms see over 1,000 decks a year to make 10 investments. All 1,000 of those founders think they have a great idea. Investors don’t have the time or bandwidth to do a deep dive on every deck they see. They make a quick call about which ones they can spend more time thinking about.
So how, specifically, do you tap into those emotions and get some of their mindshare?
Tell a great story – how you will solve a big problem for a lot of people
Make the pain point palpable for your audience. Present a strong use case or tell a story that makes the pain real. Don’t expect the investor to feel that the pain point is meaningful just because you said it is. Give social proof that this is a big deal. (address the empathy).
Show that you’re capable
Show that you and your team have the specific skills, knowledge, contacts, passion, and resources to take the idea all the way. Show that you personally have done your homework. Show why you are confident in your assertions. Show that you understand what really drives the business.
Show competitive smarts
Show that you are aware of the real competition and have a plan to compete and thrive. Show that you don’t underestimate the issues in getting users to try your product and stick with it. (address the doubt).
Be clear about how you will make money
Make it clear how the business will make money at some point. Don’t be vague. Have a plan.
The plan may change. That’s OK. For now, show investors that you understand the need to monetize the business and build value. (address the profit motive/greed)
Be the sort of well informed, confident, smart, energetic CEO that comes across as the “jockey you want to bet on”. (address the fear of failure)
This one should go without saying. People invest in people they can trust. Don’t “fudge” responses to questions. When you don’t know the answer to something, say so and commit to getting an answer. Don’t exaggerate. Exaggeration is just a form of misrepresentation. And clearly, don’t lie. Investors have Google, and due diligence will uncover lies or holes in your story. If they find any, game over. You will have created doubt where it might not have existed.
Get the meeting
Remember that the goal of the pitch is not to get funded. The goal of the pitch is to get some focused with an investor. It doesn’t have to be the investor you pitched to. Someone in the audience might recommend you to other investors. If you can engage the investors’ emotions you can get them to care. If you can get them to care they will want you to succeed. At a minimum, you’ll make a more memorable impact.
When you are competing with 1,000 other pitch decks, being memorable is a big deal.
Edited from an article I originally posted on LinkedIn
One of the frequent errors that I see first time founders make is putting wayyy too many words on a slide. If that isn’t bad enough, some founders then proceed to read every word on the slide as though it’s a script. I saw a blog post by marketing guru and former college classmate, Seth Godin, that worded an admonishment more elegantly than I ever could. He said: “don’t use Powerpoint as a sort of teleprompter”.
If you’re reading your pitch deck slides, why do I need you?
For years, I’ve been teaching students and clients that they should never read from their slides, but I’ve never seen or heard the directive so well worded. As soon as you hear it, you get it.
But even when you understand what you shouldn’t do, it’s worth reminding you why this is such an important directive. Founders that read from their slides do it for different reasons, including “they didn’t know better” and “they didn’t memorize a script”. Regardless of the reasons, founders need to know that reading from your slides sends all sorts of horrible signals to your audience and makes your presentation way less effective.
In terms of what signals you send to your audience, let’s start with why you are giving a funding pitch in the first place and what you hope to achieve. If you are the one giving the pitch, it usually means that you’re the CEO, or at the very least, one of the co-founders of an early stage company. You are trying to convince one or more people that you are a smart professional who is capable of doing hundreds of complex things to turn a small business into a big business. Almost all of those things are harder than memorizing and preparing to give a short presentation.
From an investor’s perspective, the three most obvious reasons you are reading your slides are: (1) You don’t know the basics of making presentations; (2) You didn’t put in the time to do the presentation well; or (3) You aren’t capable of memorizing your own pitch. Since growing the business will involve selling to a lot of people, including potential partners, other investors, clients, etc., a CEO’s inability to pitch doesn’t instill a great sense of confidence in that CEO.
The pitch is often the CEO’s first opportunity to make a good impression. So giving a strong pitch isn’t just important, it’s critical. This is your chance to give a small glimpse into the many things that you are capable of doing well. Don’t trip on the starting line.
Should I be listening or reading?
I also mentioned that reading from your deck makes the deck less effective. That’s because the brain can’t do two things at once equally well. When you have enough text on your slide to use it as a teleprompter, your audience gets sucked into trying to read the words on your slide as well. The fact is that they can’t read the slide and pay attention to you at the same time. Where do you want their attention? Ideally, it should be on you. The slide’s purpose is to make an impression and emphasize a single takeaway, not to steal attention away from you.
Each slide in your deck should be designed to make one point powerfully. Examples include: “This is a huge market”, “We have an experienced team”, “We’ve got customer validation”, “Our tech is bleeding edge and patented”, “Our revenues are growing”, etc. There should just be enough words or visuals on the slide to support that takeaway. Use your words to give the takeaway some texture.
Your pitch script and your pitch deck are partners. They are two different things designed to work well together. You will deliver the pitch and your slides will make sure that your most important points are the things that get remembered. Use your body language, eye contact, voice, and confidence to keep the audience engaged and show them why investing in you is a good bet. Investors invest in founders, not in pitch decks.
Now go get ‘em!
Edited from an article I originally posted on LinkedIn