As a founder, you know that raising money can make or break your startup, which is why this is such an important milestone. It can be intensely competitive because there are lots of founders who want funding, and not enough funders.
You need to get an investor to fall in love with you.
Think of it like playing the dating game, where you try to convince the Prom Queen that you are the Prince Charming she has been looking for. When I use the word “game,” I’m not being flippant. Like so many other things in life, this is also a game, which has both explicit as well as implicit rules.
If you learn these rules, you’re going to become a better player, and increase your chances of success.
How To Woo An Investor
Step number one is to learn to be empathetic. Put yourself in the investor’s shoes so you can see the world from his perspective. This will make it easier for you to convince him that giving you money is in his best interest.
You need to learn how to negotiate so you can create win-win situations. Before pitching, you need to do your homework about the investor, so you know exactly what he’s looking for. You need to find the right investor – the one for whom your company provides the right fit.
This is why you shouldn’t try using a machine gun and going after every possible investor under the sun. Most of them are wrong for you, and there’s no point in wasting your time (and his) by pursuing the wrong investors.
Turn A No Into A Yes
When you pitch, don’t get disheartened when investors says no. It really doesn’t matter how many turn you down, as long as you find one who is willing to back you. You need to be patient and turn over lots of rocks to find a jewel. The more often you play this game, the better you’re going to get at it.
When an angel investor meets you, he is looking for the answer to a basic question – can he trust and respect you? It takes time to build trust, and you need to be prepared for this. Investors don’t know you from Adam, and they have burned their fingers in the past by backing smooth talking slick founders.
They will naturally want to observe your behaviour over a period of time to decide if they can trust you with their money, and whether you will be able to deliver on your promises.
What Investors Are Looking For
Investors are looking for responsive and responsible founders. A responsive founder is one who is coachable – he will listen to feedback and advice because he knows this will increase his chances of succeeding.
A responsible founder is one who is proactive – he over-communicates and shares information openly and transparently, whether or not things are going well. He will not try to hide or cover up bad news.
It can be hard to earn this trust, because investors are on their guard, since they have had unhappy experiences as a result of trusting bad founders in the past. This is why fundraising is so challenging. Getting someone to trust you is a tough skill to master, but then you already know that being an entrepreneur is full of challenges.
As with anything else, there will be some false starts and you will make mistakes. The important thing is to learn from each of these. Even if an investor says no to you, continue to remain in touch and share information about how you are progressing.
Please don’t stalk him – you just need to get permission to send regular emails every month or so. Over a period of time, the investor’s attitude may change, as he sees you are persistent and have learned to overcome hurdles. The longer he knows you, the higher your chances of being funded by him.
[This post by Dr. Aniruddha Malpani first appeared on LinkedIn and has been reproduced with permission.]
