Don’t charge the hill until you are “ready.” This probably seems obvious to military types, but I see entrepreneurs violating this rule all the time. They approach key potential investors way too early, trying to talk their way up the hill, with no supporting business plan and before they have a support team around them. Needless to say, they usually get shot down and get no second chance.
The first rule is to separate your advisors from your investors. Perhaps a close personal friend can be both (the earliest stage and first tier investors should be friends and family). But for angel investors and venture capital investors, just remember that investors are not on your team—yet. You only get one chance to make a great first impression.
Continuing with my military analogy, here are some logistics, suggested ammunition and an assault strategy (each point applies to every aspect of building the business).
1. Do your reconnaissance first.
Before you meet a potential investor, check them out on the Internet and through your advisors. You need to know exactly what the investor has done before, what he is doing now and what will interest him. If you walk into the investor’s office cold and can’t convince him you meet the company’s interests, you will walk out cold.
2. Coordinate and brief your support team.
Make sure all your advisors and team members know exactly what your mission is and, if possible, have at least one of them make prior contact to set the stage. If the investor thinks you are coming to ask for domain advice, and you ask for money, your success probabilities are shot.
3. Fully prepare for the assault.
Don’t try to talk and demo your way up the hill. Talk bounces off and won’t stop any bullets. Lead with your 2-page executive summary; be prepared to give a 10-slide investor presentation. Keep your big guns (the business plan and financial model) in your holster but visible for backup.
4. Put your ear to the ground before charging ahead.
Offer to give your executive presentation, though the investor may want just the elevator pitch. Listen, and follow his lead with confidence and enthusiasm. Don’t insist on a product demo—he is buying the business, not the product. If you have an hour, use no more than 20 minutes for the presentation.
5. Follow-up to assess progress or casualties.
If possible, have someone else follow up with the investor the next day to find out what really happened. If you didn’t learn anything from the meeting, you weren’t listening. Most VCs won’t volunteer to the founder their thoughts, because that limits their options later.
By now, you are probably saying this is “old school”—when going to Sand Hill Road offices was like going to the principal’s office. There you were ushered into a gorgeously appointed conference room for a precise amount of time with a serious-looking partner. Now, some VCs and angels actually hold court in a nearby Starbucks or Paradise Bakery.
But believe me, investors are, if anything, tougher now than then. Don’t be fooled by the informality. Preparation, professional image, confidence and strategy are just as important as they ever were. The strategy of “I’ll talk to him informally and early, find out what he doesn’t like and then I’ll fix it” is pure folly. Napkins don’t really work as your business plan.
Some of the most prepared “teams” I have seen are essentially one person with a few part-time advisors who seem to overcome all obstacles. One person can look like an army charging the hill if they use all the networking facilities of the Internet and all the tools available to build business plans, financial models and product prototypes.
Don’t be afraid to use some mercenaries to back you up (i.e. outsourcing, consultants). All the shortcuts up the hill are rigged with minefields. Better safe than sorry—this is serious business.
Image credit: CC by California National Guard