If you’re the founder of a seed staged company looking to get funded, know your industry, know your customers and know yourself. Let me start with industry.
I deal with first time founders to ones on their 5th company who speak at Davos and one common trait among the successful (or soon to be successful) is their respective level of expertise.
Genuinely come across as having been in the industry beyond your years.
The confidence these founders exude when I ask them pointed questions and the “wow, this guy really knows what he’s talking about” feeling I get back. It separates the funded founders from the rest of the noise filled grandiose pitches investors hear all day.
Tell an investor something he doesn’t already know. The more of an expert you talk to, the better you have to be. You may be able to pull a mediocre answer past a generalist but talk to a vertical VC (that’s a term I coined BTW) and you’ll get your behind handed to you.
Successful founders don’t know it all but they know their space very well. By virtue of (a) reading trade and trade blog posts, (b) taking the time to think through trends and their impact on the industry and their company, (c) to actively pattern match and eliminate incorrect assumptions, (d) to accurately convey facts and figure from reputable (and not always mainstream) sources, (e) to stay hyper vigilant on their competitors & potential competitors and most importantly the courage to (f) execute upon their conclusions. They attend conferences, they speak at conferences and leverage social media and blogs to embody thought leadership. They aren’t afraid to dig deep into SEC filings for research. They seek out contrarian points of view and engage in active listening. They aren’t afraid to admit they’re wrong yet aren’t afraid to argue a point without feeling defensive or making the other person feel the same way.
SUCCINCTLY COMMUNICATE YOUR KNOWLEDGE
Simply having the right information is not enough. If a little knowledge is a dangerous thing, bumbling through an explanation is arguably a close second.
You must be able to effectively communicate your point of view, with the least yet most effective number of words possible and be prepared to back your opinion up with supporting evidence.
Investors look at team and product or some combination thereof depending on the stage of company and in every scenario, they want to know you’ve done your homework on everything (the industry, competitors, trends, threats, who’s gotten funded and who hasn’t, analyst reports, social media buzz — the list goes on and on).
That you’ve thought things through. That you’ve played out ‘if then’ scenarios and not just regugitated what you’ve read on TechCrunch. From what features your product will have in 6 months or 9 months, to the headcount, to how you intend on attracting talent to what competitive advantages you seek to exploit. That you didn’t just put this startup on a whim based on a few Google searches and some “personal pain point” you wanted to fill.
- What are the pro’s and con’s of addressing your current niche versus another?
- Why does your product actually matter? How do you know that?
- What companies could come into your space that would positively or negatively disrupt your business?
- That you realize your weaknesses and have an answer for them. “We know we are overly reliant on ____ CRM package but that’s only the case for 6 months; after which we’ll have an API and can connect with SalesForce and SugarCRM”.
- If you rely on 2 key suppliers, what happens if they merge. If you rely on PayPal as your merchant provider, what happens if they turn you off one day? What % of your revenue have you set aside of chargebacks? What is the industry chargeback average and how you expect to be lower than that?
- What trends need to catch on for your business model to skyrocket or fall off a cliff? And what are you going to do about it? What threshold needs to be reached before you start to worry? Are you waiting for SaaS storage pricing to drop to 10 cents a GB versus 15 cents now.
- What truly differentiates you and what evidence do you have that others will pay you based on these factors?
- How are customers going to find you without you throwing money at acquiring them? And how you know they’ll be around after the 30 day trial is over?
Founders sometimes stop after identifying the low ball questions — if you run a CRM company, a SalesForce question is highly probable.
It’s intelligently answering the deeper dive questions that will truly separate you and tip the funding percentages in your favor.