Once you’ve come up with the idea for your newest venture, vetted it among like-minded leaders in the industry, and created a prototype, it’s time to pitch your idea to investors. Some companies are able to bootstrap, but many others will need to approach investors to really get their idea off the ground. The way you approach this pitch will make or break your success.
It all boils down to psychology, once you have a unique business idea (that is also viable). I just finished Adam Grant’s Originals, which I highly recommend. It brings an interesting and counterintuitive idea to light: productive pessimism has a place and, in fact, can improve your pitch.
There are countless articles on what your pitch should include and how long it should take. You may have even taken a few pointers from the hours and hours of Shark Tank you can’t help watching. But the best examples you can learn from are the ones that successful entrepreneurs prove have worked for them.
In Originals, Grant cites the “Sarick Effect” (this is a part of the secret sauce of the book and I, unfortunately, can’t give it away) and the best way to get to the heart of how it helps entrepreneurs improve their pitches is with an example of exactly how it accomplished that.
To set up the story, let’s first contemplate a hypothetical situation. An entrepreneur has jumped through all the hoops set before them to establish their idea, showed that there is a market with a need for their product, and proved that their solution truly solves the problem at hand.
Going into an investor meeting with only the rainbows and puppies of your business (i.e., how much revenue you’ve generated, the number of downloads you’ve gained in a short amount of time), means that you are setting yourself up for failure.
This seems like it is going against all the advice you’ve ever gotten from mentors and peers who have successfully raised rounds and sold their businesses. But the investors that will be at the table with you are trained to poke as many holes in your business as possible. They don’t want to sign on, invest their money thinking that what is in front of them is destined to be the next big thing, and watch you flop months later. Avoiding false positives is the name of their game.