September 16th, 2020 | By: Wil Schroter | Tags: Funding
Investors — As Founders we love you, need you and appreciate you. But the relationship feels very one-sided when we're pitching for capital. As Founders, we just need a better way to communicate not only the evil word "NO", but the equally evil word "Maybe." "Yes!" we seem to have figured out.
All we're asking for here is to be treated with respect and dignity. We don't need to be coddled, we just need a clear "No" when the time is right and ideally some basic kindness along the way. It doesn't take much, but we could really use some shifts in how we communicate these days.
I've met with and pitched hundreds of investors. If there's one thing that I could never figure out, it's why so many act like raging dicks. Not all of them — some of them are incredibly kind, and I'd kill to do business with them. But it's an obvious minority. (Point of Fact — Plenty of people think I'm a raging dick too, so I'm very aware of the behavior).
Investors — Founders like us are your customers. If you don't like a deal, you can pass - no worries. What isn't required is for you to rip the Founder apart and make them feel awful for no good reason. Let's say that you found another company that is doing the exact same thing that they were unaware of. Do you ram it down their throat or politely say "It's probably worth investigating" (a cool way of saying "You should have known that")? There's zero mileage in being a dick. Best case, no one will want to work with you — worst case, Founders will go out of their way to tell other potential customers not to work with you. Either way, you lose.
You've spent 60 minutes thinking about this problem — the Founder has spent (in some cases) their entire career on this problem. Don't pretend that your ability to write a check grants you the ability to predict the future. It's totally fair to say "I could foresee some challenges in these areas", not "Google is going to totally eat your lunch." You don't know that, you think that, so the response should be framed as such.
The problem with overstating your lack of certainty combined with lack of actual market knowledge is that inexperienced Founders often believe you do know how to predict the future. It's not a hard fix, either — just find/replace "will" with "might." Easy peasy.
As an investor, you know exactly what "maybe" means. It means "Who knows? Maybe this thing turns into something later and I don't want to miss out if it does!" And that's a totally fair sentiment for you. You see tons of deals, so saying "maybe" doesn't hurt you at all.
But it crushes Founders, because "maybe" sounds like "yes" is around the corner. We don't see "tons of deals" — only ours. So when you say "If you could just hit $1 million in sales we could talk" that leads lots of Founders to think "Oh, so long as we hit $1 million they will invest!"
A better response is "No, not now. We'd be open to talking in the future and we'd like to stay in touch, but we aren't going to do anything now." We need a hard "no," even if it's followed up by keeping the door open. That's fair, but it lets us move on.
Any ONE of these things would be a massive improvement in our communication. If you're already doing all of them — you rock — and thank you! We love you, we just need some love back.
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Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.