Note: This post was transcribed from this video.
Hey guys, I want to do some writing about how to get investors to say yes when fundraising for your startup.
So you’re raising money, you’re got your stuff together, you’re out there pitching. How do you get investors to say yes? Well, here’s my three tips.
Tip Number one, confidence. Nothing is going to get investors to say yes and to be interested more than your own confidence in what you’re doing.
Walking into a pitch, if you are super confident that what you’re building is going to be the next big thing. If your confidence is sky high that it’s going to be highly successful and highly profitable, people are just going to be way more likely to say yes.
And so the question is how do you walk in there with confidence? I think the number one way to get to full confidence is to have done your homework. And this is no small thing. It could take days, weeks or months. It’s really important that you spend as much time as you need to really do your homework about the market, about your team, about the opportunity, and about your business model.
This is something that too many entrepreneurs overlook: Whatever stage you’re at pitching it’s of paramount importance that you feel in your bones and in every cell of your body that what you are doing is going to work.
And if you have certainty you will persuade. Almost always in an interaction the person with the most certainty will end up persuading the rest. So doing your homework is a way for you to get certain in your body that what you are building is going to be awesome, and that you big vision is going to be realized. You want investors to feel that this rocket ship is leaving the station and that they can either get on or miss the launch. This is why confidence is so important, and the number one way to build confidence is to do your homework and get certain before you walk into the pitch.
To share from my personal experience: Too many times I walked into a pitch feeling like “it could work”, “It might work”, or “it’s not going to work”. I felt like this because there was sometimes a problem in my business that I was hiding. Ignoring. Not dealing with. This is the wrong approach that too many entrepreneurs take – they’re hiding this problem with their business and they think they just need to get money so that they can figure it out. But the problem is this is a weak place to be in when raising money. It’s much better to spend the time up front to fix or understand all the problems with your business before the pitch.
So number one is confidence. Confidence in the big picture, confidence in the pitch, confidence in this story. That’s going to go very far in getting investors to say yes.
Tip number two is have abundance. You want to be in an abundance mindset.
When you’re pitching to investors, you want to be in the mindset that there’s lots of investors out there with lots of money and you’re picking the ones that are right for your company, for the valuable opportunity that you are offering. Too often CEOs go into pitches feeling desperate, seeming desperate, feeling like this has to work, and this kind of scarcity mentality just kills a pitch and drastically reduces the likelihood that an investor is going to engage.
The opposite of Abundance is Desperation. And nobody likes that.
In a romantic relationship, in a job interview, and when pitching and selling. People hate desperation. Desperation does not engage.
So it’s super important that you have an abundance mentality when you are pitching. The way you do this is to actually create abundance with the fundraising process that you’re running. Structure the process in such a way that i) you have a lot of meetings all at once and ii) you don’t actually “start raising” until you know you have significant interest.
We go into this more in the GetFunded program, but the way to do this is to position yourself as asking for advice or feedback while you’re generating initial interest and investor demand. You make your list of investors, you target them all and you start talking to them, but you’re not pitching them yet. You’re building investor demand. Eventually when you have enough interest or demand, you flip the switch and begin your raise. You begin asking for commitments and start getting yesses.
In these initial conversations, you’re figuring out if you have enough demand to raise your round. You’ll be getting lots of feedback to improve your pitch (or your business) with.
Once you feel like you have enough demand to raise, then you actually go and start pitching. I recommend that when you reach this point you line up all your meetings in a very short compressed timeframe. So in the frame of a couple of weeks you’re doing all these pitches back to back. This accomplishes a few things.
First, it gives you an abundance mentality (and actual abundance of meetings). If you have four pitches today, you’ll feel that any one of them doesn’t really matter that much because you’ve got four of them, so you can go and get two “no’s” and still have two more meetings that day. And that feeling of abundance communicates. If you have four meetings every day for 10 days in a row, that’s just massive abundance. You’re not going to be in a desperate state. The abundance will communicate.
The great thing about abundance is that you don’t need any one person to say yes to keep you in a state of relaxed confidence. And the other very useful thing abundance does is it creates FOMO for the investors.
Whether you name it or not, Investors will know (of feel) that you are doing a lot of meetings, that there’s lots of interest. This fact lights the fire under their butt to actually make a decision and to treat your opportunity as a real opportunity that is time limited and that’s going to go away soon.
So having abundance is super important and the way to do that is to have lots of meetings all compressed in time.
Yet another strategy for abundance is not to cap the raise, so start with a lower number that you would accept, hit that number, and all of a sudden you’re in an oversubscription situation.
Being oversubscribed creates abundance. Everybody wants to get in the pool because the pool is already full. This is related to what I wrote above about not starting to raise until you have sufficient interest in the raise. Because then you start the raise with people in the pool already, and once people are in the pool, it’s a lot easier for other people to jump into the pool.
Finally the last piece of creating abundance is being willing to say “no” to investors. When you meet with investors, spend time interviewing them, qualify them, make sure that they’re the type of person that you would like to work with. Make sure you think they’re the type of person who can add value over and above the money that they’re bringing to the table. If you start interviewing them with your abundance mindset, it changes the dynamic inside a pitch and it shows that you’re really valuing what you’re building. It shows that you’re being careful about giving access to the opportunity that you’re creating.
That appreciation of your own value is going to translate into the investor’s mind as some form of “Wow, this is something of value that that I have an opportunity to get involved with”.
Investors will start to see your company as an opportunity. And I recommend you frame your entire pitch as an opportunity that you’re presenting. Instead of “trying to get money”, you’re “presenting an opportunity”.
Instead of trying to get something, you’re giving something and with what you’re giving, you can be abundant.
So step number two, abundance. Very important to get investors to say yes.
Step number three, the last step on how to get investors to say yes is: focus on what’s in it for them.
Remember that raising money and pitching is sales. You’re trying to get someone to say yes and buy shares in your company. And to do this you need to stay focused on what’s in it for them.
And this is going to be different for every investor, like some investors might just want a startup in your industry in their portfolio. Another investor might want a specific return by a specific date. Another investor might want the PR of investing in your company. And another investor might be concerned with their status inside their fund.
Everybody you talk to is going to have a different reason to say yes and a different think that they’re looking for. So it’s really important to find out what that is and the way you do that is by i) asking questions and then ii) listening to the answers and then iii) trying to repeat back what you heard.
Ex: “You know, it sounds like what you’re looking for is an exciting startup in the VR space because you believe that VR is going to be a billion dollar industry and you want to have some exposure to that upside, Is that right?”
Or you could say “it sounds like you’re feeling frustrated inside your firm because you don’t have a deal like these other partners have and you’re looking for a deal that’s really going to establish you inside this firm”.
So try and find out what it is they want and then figure out if what you’re offering, if the opportunity that you’re bringing to the table, can help them get what they want. If it can, tell them how it can. This will make it easy for them to say yes because they’re going to see what’s in it for them and they’re going to see that what they’re looking for, the problem they’re looking to solve, is solved by the opportunity you are presenting.
So those are my three steps or tips to get investors to say yes.
- One: Have confidence by doing your homework, extreme doing of the homework.
- Two: Be in an abundance mindset by running a process that generates lots of meetings in a compressed amount of time, and when you get meetings, interview the investors. Be picky and choosy.
- Three: Focus on what’s in it for them.
If you do those three things, closing your round is going to be a lot easier
I wish you success. And if you’d like to go deeper on these topics and drastically increase your chances of closing your round with the minimum amount of wasted time and effort, check out GetFunded, our program to help founders do just that.