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The First Cheque Of Investment Defines Your Future Success Probability

The First Cheque Of Investment Defines Your Future Success Probability

The inability to secure investor meetings is looked upon as a failure

Founder's ability to showcase high-velocity growth to get over rejection about market timing

100X.VC solves this big problem for entrepreneurs by believing in their idea first

Many of the unicorn founders were rejected multiple times before somebody finally decided to give them a first cheque, a chance to prove themselves. The Ring today is valued at over $1 Bn, with investors like Richard Branson on their cap table, but it was rejected an investment on Shark Tank when pitched first. After the shark tank rejection episode, founder Jamie Siminoff became untouchable for VCs. He saw hundreds of rejections before he renamed Doorbot as Ring.

In the founder’s minds, they understand that they will experience rejection in their journey to raise funds. But when that moment comes, it’s not easy to digest. Even the inability to secure investor meetings is looked upon as a failure. Founders get on a high when they get initial meetings with VCs, and then finally, they get rejected. Then they develop a deep feeling of loss due to this fear-inducing rejection experience.

Nothing is more damaging to a startup reputation than letting VC neutral recommendation inputs go unaddressed.

The longer the investor holds an opinion, the stronger that view gets and harder founders have had to fight to combat it. When VCs ask for the funding needs, valuations, or cap table, they are interested now in a transaction as they buy the idea. Most of the good deals break on valuations mismatch in early-stage at 100X.VC, we have removed that barrier by using iSafe notes where the dilution is at future priced rounds.

There are times when founders come up with a very disruptive idea which investor has never heard. Investor rejection comes with the viewpoint that why no one else is doing it. It is a complicated idea. No one will use the product. At this opportunity, founders need to prove the merit of the concept, thesis behind the business rather than pitch the business idea.

VCs use timing as one of the excuses to not do the deal; this is because they believe there is not enough momentum in the market. VC’s job is finding investable companies who are just taking off so that they can ride the growth. Founder’s ability to showcase high-velocity growth to get over rejection about market timing. VCs try to avoid investing in deals where they believe it’s a fad, which will soon die.

Founders need to get their customers speaking for the idea in front of the VC on why they will be a loyal customer. VCs are busy; hence, to get attention, go through the right introductions like a seed investor.

VCs will like to invest their time in looking at filtered deals even if they have to pay higher valuations. Yes, with social media, founders can reach out to any big-name VC but will get a rejection reply, “I am not interested.” Founders, if they go through a seed funding cheque, they get validated. They get press, advisory board, and investor who can make right connect with VCs for the next round.

Founders, when they can get a face to face meeting with VCs. Next, they hear the first hard question from VC, and they start interrupting them in between and trying to defend without listening to the argument. Founder should learn to be calm, authoritative, and give responses with a pause after a question. Instead of getting put off, VC would then want to make more conversation with the founder to understand the idea better, which opens the path to investment.

In 2017 MongoDB tech company instead of Silicon Valley pulled off a successful IPO from New York. All the VCs told them that building a database company from New York is dumb. VCs insisted them to move the company to Silicon Valley. Founders persisted, and the rest is history.

In their early days, founders had gone through 50+ rejections before they got funded. VCs are in the business of saying no. They have to say no again & again. They have limited capital to deploy in limited deals in a specific period. They have no choice but to say no to 99% of the deal’s pitched. They are trained to say no while not to ruin their reputation of being not founder-friendly. VC business is a 1% funding success business.

It brings back to the question of how do I find a right seed investor who can lead your investment deal. You never know when you will meet the right lead investor who can tell the world that this is a good deal, and I am investing.

The truth is that VCs are lemmings; hence, the journey of finding a lead investor for founders is a tough one.

Therefore founders get to hear “No” all the times. 100X.VC solves this big problem for entrepreneurs by believing in their idea first. By funding their startup as lead investor and subsequently inviting other investors to support the deal with investment. At 100X.VC, we are going to invest in 100 startups every year. We are working hard to change the seed stage landscape in India with the first cheque. Our massive offering today for Indian startup founders is I-Safe Notes, a founder-friendly investment document.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

Author

Sanjay Mehta

Influencer
Founder and Partner at 100X.VC and Early Stage Investor

Sanjay Mehta is a venture investor, founder and partner at 100X.VC, India's first fund to invest in early-stage startups using iSAFE - India SAFE Notes and aims to invest in 100 startups in a year. He also runs family office investments through a proprietary fund called Mehta Ventures.

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