As an M&A dealmaker, one of my pleasures lies in helping ambitious entrepreneurs improve their pitching skills.
Pitching is not an art, it’s a skill. And like all skills, it can be learned.
Indeed, rather than spending weeks designing a pitch deck, you should start bringing your awareness up about how investment decision-making processes work.
Like all decision-making processes, investing starts with a feeling, a perception, an intuition.
As Paul Graham, YC founder said :
Most investors decide in the first few minutes whether you seem like a winner or a loser, and once their opinion is set it’s hard to change. Every startup has reasons both to invest and not to invest. If investors think you’re a winner they focus on the former, and if not they focus on the latter.
To me, the most important word of this quote is “seem”. You will understand why later.
Coming back to Paul.
By “winner”, he means a person who seems like they will get what they want, regardless of whatever obstacles are on the way. In my opinion, leader is a better word as I don’t like associating winning or losing adjectives with people who take risks to live on their own terms.
Essentially, you start being good at pitching when you succeed in taking the lead in the conversation.
Seems simple, right?
However, Lead like Power is never given, it must be taken. And it’s incredibly hard to take the lead facing investors.
Bear with me a couple of seconds more, you will understand why. The brave ones will also be gifted with a 3-steps process for becoming better at pitching to investors.
Imagine a skin-in-the-game situation where you must invest all your life’s savings into two competing projects, for example sending people to Mars. One is pitched by Elon Musk and the other by a mission-driven first-time founder.
In which project are you willing to risk all of your hard-earn capital?
Sending people to Mars has both reasons to invest or not to invest. But with Elon Musk you will focus on the former and with our first-time founders the latter.
This is the power of Status.
Status is the honor and prestige attached to a person’s position in society. It’s the sum of the person’s wealth, popularity, and power.
Most people are underestimating the value of status.
In social interactions, the person who holds the highest status, ie the alpha, enjoys most of the attention. The alpha in a group is trusted and followed without a question.
To illustrate this, researchers have set up many tests in which men, dressed in high-status business suits, jaywalk across a busy street when it’s unsafe to cross. Lower-status pedestrians tend to follow the high-status decoy into the danger zone. However, they will not follow someone who is dressed badly.
You get my point.
It doesn’t matter how well you argue or how elegant your flow and logic are. If you do not have a high status, you will not command the attention necessary to make your pitch heard.
Therefore, do not underestimate the importance and value of status to your overall success, especially while pitching to investors.
Investors have better access to capital than you (Wealth). Being an investor, especially a VC is one of the hypest activities of the moment (Popularity). Also, in our collective psyche, being funded by VCs acts as a symbolic validation for a business or the only way to get big (Power).
Unless you are a homerun-exit serial entrepreneur, you will face investors from a low social position.
Fortunately, you can turn the situation around. Here is a process in 3 steps to gradually level up your status.
Disclaimer: the last one is the most effective.
Showing signs of neediness is the number one deal killer.
Plain and simple, neediness equals weakness and no one, even you, wants to invest in someone considered weak.
I’ve seen entrepreneurs becoming needy when the only way to save the company is to raise money from investors.
These life-or-death situations reinforce validation-seeking behaviors such as acting deferential, engaging in meaningless small talk, or letting yourself be told what to do.
These behaviors do nothing but confirm your subordinate’s position so don’t put yourself in such embarrassing situations.
Raise when you don’t need the money in the short-term, with over 6 months of runway.
Be unaffected by the investor status.
You should view a meeting with an investor as an opportunity to build your company using the information you get, especially with a VC.
For any given meeting with a VC, the chance it will result in funding is between 1% and 10%. Hence you have a 90+% probability of not raising money from this person. So if that is your only goal for that meeting, you are wasting 90%+ of your meetings.
Remember, a VC sees 1000s a year of companies and has invested in 10s or 100s of them over their careers. They’ve likely gathered intelligence you will never have access and this wealth of experience is sitting right in front of you.
Instead on getting their money, learn from them. This will give you a higher return on your time.
Set the frame of the meeting.
You have reached this point. You have the proper mental state to face investors.
Now, it’s showtime.
You have managed to get the first meeting with an investor. He invites you into his office for a 1-hour meeting the next week. He seems excited about your potential startup by asking for some materials in advance.
You enter the lobby of the office where you will be meeting your potential investor. You present yourself at the reception desk 5 min early. You’ve been installed in the meeting room on time but no one is there yet.
Several minutes later, your prospective investor comes in, slightly apologizes, and tells you upfront he hasn’t had the chance to get through your material. He also only has 25 min because 2 closings are taking place this week.
Instead of being polite and obeying the established power rituals of business, perpetrate an unconventional but not unfriendly act of defiance.
With this in mind, how will you react?
Hit me with your answer there or in the comments! I’ll give you my feedback.
Think of many ways you can use small acts of denial and defiance in the opening moments of meetings. The possibilities are only limited by your imagination.
When you are defiant and funny at the same time, the investor is pleasantly challenged by you and instinctively knows that he is in the presence of a leader.
Now, you understand why “seem” is the most important word in Paul’s quote.
With this 3-step process, you have built the foundation, ie a high social status, from which you can deliver the heart of your pitch with a fully engaged investor.
Delivering the heart of your pitch in a compelling way is not about some genius way of organizing and presenting the information. What you need is a way to present this material without the investor becoming too analytical about it.
I’ll explain the why and how in Part 2.
In the meantime, looking forward to finding out your reaction!