Most of us Founders have never raised capital, so when we dig in for the first time, we’re mostly guessing at how the game is played. And friends — it is indeed a game. The problem with this game is that as Founders, the odds are stacked way against us.
We actually make matters worse when we don’t understand the rules, and instead revert back to our base instincts, which range from carpet bombing the investor with follow-ups to trying to translate “I think it’s interesting” into 50 potential meanings, like a 16-year-old after their first date.
What we need is to be able to read the signals for what they are, and when we do, take our foot off the pedal if the signal says “stop” and jam the pedal when the signal is “yes.”
Anything that’s not “Yes” is “No”
The worst answer we can get from an investor is anything that’s not “Yes” or “No.” Everything in between, even if it sounds like “maybe” is a “no.” We’re inevitably going to hear two things from investors “That sounds really interesting” (they love to call things “interesting”) and “We’d love to talk when you see a bit more growth.”
Those both mean “No”
They don’t sound like “no” — but that’s 100% what they mean. When investors want to do a deal, they don’t use any of that language. They use phrases like “We’d like to get seriously involved” and “We’d like to put a term sheet together.” Again, anything that isn’t an overwhelming yes, is just a diluted version of no, and it’s our job to take that hint.
Real Deals Happen Fast
If an investor isn’t chomping at the bit to close our deal — it’s probably not happening. Now, a lot of Founders don’t know this because most of us have never raised capital before. We assume that the investor is just “taking a few weeks to get back to us.” If we’re not immediately getting blown up by the investor, there’s a 99% chance it’s not happening (investors do get busy, but usually not too busy to close deals!)
When investors find a deal that they really like — they go all in quickly. They have to because good deals are very hard to find. That means they jump into due diligence, asking for detailed financial forecasts, product demos, and aspects of our business plan. They want to know as much as possible so they can get this deal done.
Conversely, if we’re getting “hey that sounds interesting, let’s stay in touch” it just means no. The investor isn’t hoping that over this time period we inundate them with follow-up requests. If the deal is real, we won’t be sending follow-ups — they will. If our phone isn’t ringing, it just means no.
Please Stop Harassing Investors
Investors don’t need to be reminded that our deals exist. They have a very short list of what they want to follow-up on, and they focus the balance of their time trying to get those deals across the finish line. It’s not like they are waiting for our 10th email that reads “What’s our status?” to say “Oh man, I totally forgot I wanted to close that deal! Thank heavens this Founder reminded me!”
Follow-ups are appropriate for getting an initial meeting and following up after a meeting. After that, we’re just harassing the investor. That said, it’s reasonable to check in maybe 6 months or a year later when we’ve had substantial progress (if lightning has struck our growth) but short of that, let’s leave these poor bastards alone!