Investor Anxieties - Why Am I Seeing This Deal? + Fundraising Fieldnotes 11.7.23
How you meet really matters...
Before we get to this week's post...
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… and now on to this week’s post
If you want to get great at fundraising, you need to understand investor psychology. Today I want to help you to get clarity around one of the biggest anxieties crossing an investor’s mind every time they see a deal.
Selling and Understanding Your Buyer
Let’s consider the common sales interview question: “Sell me this pen.” The untrained salesperson often launches into raving about the craftsmanship, materials, and vibrancy of the ink, showcasing the product features until they run out of things to talk about.
Instead, the experienced salesperson first asks questions about what the buyer really needs, allowing them to tailor their pitch accordingly. If all the buyer care about is how it looks in their coat pocket, then the seller is wasting their time describing the weight or ink quality.
Founders fundraising for the first time are rarely equipped with insights into the mindset of an investor so they don’t know how to influence them and address their concerns.
“Why Am I seeing This Deal?”
At the earliest stages, it’s impossible for an investor to predict whether or not the deal in front of them will amount to the fund-returning home run they’re looking for- the lens through which they’ll view your opportunity is still very subjective. Is the investor seeing this deal because of something negative- like everyone else already passed on it and the founder couldn’t get to anyone else- or it because of something positive, such as their incredible network of founders shared the opportunity, or they’re getting the exclusive first look because they did a favor for someone close to the founder?
Because investors have this anxiety, it's the founder’s job to make sure that their communications and the motion that brought their deal to the table have a positive answer baked in to that anxiety-ridden question- “Why am I seeing this deal?”
Are Warm Intros the Answer?
While I’ve referred to warm intros as the lifeblood of fundraising, investors will sometimes have doubts about these as well. There are perverse incentives all over- maybe somebody has equity in a company that isn't doing well and needs it to raise more money. Perhaps there is some sort of payout attached to an investment. Or maybe it's just someone making good on a favor they owe and they don’t actually believe in the deal. Warm introductions may come with their own baggage and an investor who’s been burnt before will still have these anxieties coloring their perception.
What constitutes a good introduction? Having an unbiased, trustworthy individual who is not an investor mentioning the company out of genuine admiration and excitement.
Coaching Your Connector
After you’ve secured a connector, I recommend practicing light coaching before they reach out to the investor. If you're providing copy for them to use, make sure it sounds authentic and not overly salesy. The best setting is when a connector gives off a truly excited vibe about you and your business without appearing to be pushing too hard.
Addressing Investor Anxiety
This might sound a bit counterintuitive at first, but the best way for your deal to reach an investor is actually for them to feel like they discovered you organically. This can take many forms: coming across a glowing review from your customer; hearing about you from an unbiased, trustworthy third party (perhaps a founder in their portfolio); viewing a talk you gave at a conference or a thought piece you wrote demonstrating your unique insight, etc.
Wrapping Up: Tactical Takeaways
Here are a few key takeaways to keep in mind:
• Be prepared to address investor anxiety: Remember that investors will be wondering why they’re seeing your deal. Make sure the way that you reached them, or better yet the way they discovered you- feels authentic.
• Position yourself to be discovered by investors: The best way for an investor to learn about your deal is either through an unbiased, trusted source without ulterior motives AND when they feels they've discovered you organically.
• Highlight customer testimonials: Positive reviews from customers or users can be highly indicative of positive traction and persuasive to potential investors.
• Coach your connector: If you provide a template for the introduction, ensure it allows your connector's authentic tone to come through. It shouldn't be too salesy. The connection request should signal genuine excitement and not push the investor too hard.
Don't rush the process. Just like selling that pen, it's all about understanding your buyer.
Trying a small version of this with my niece at the moment... gifting her a business plan for free to start making money online. This is the way to go
I bought my 16 year-old son a small e-commerce business for $10k on . We work on it after school.
It did $6k in revenue before we purchased it in January and it just passed the $50k mark.
— Craig Fuller 🛩🚛🚂⚓️ (@FreightAlley)
Sep 8, 2023
It's always great to have more people singing the praises of process. The lesson doesn't stick until people hear it a few times from a variety of sources.
A FLOOD of startups are raising before the end of the year.
The top 10% will get it done fast, but HOW you run a process is key for the rest.
Every Primary portco creates an FAQ doc and they share it after the first meeting
Here's why + an outline that helped 1 co raise >$400M
— Jason Shuman (@JasonrShuman)
Sep 18, 2023
🍿One of the most epic things I’ve seen this year- 👑🎶🕺 vs. 🎭
A note on getting MORE LEVERAGE for your startup
I’m obsessed with outsourcing tasks in my company to EAs and I think you should be too.
If you’re into the idea of finding great talent overseas for $5-8/hr, stay tuned as I write essays on hiring EAs and develop tools to help. Until then…go on and read this short post I slapped together on the why, how and DISCOUNTS of hiring EAs. If you’re lazy and impatient or just hungry for the discounts👇
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