Why isn’t this called mental hacks? Today I feel like “hack” is a bad word because of all that it implies. Much suffering comes from a mentality of hacks and shortcuts, so you have to keep reading the whole word 😉 neuroscience.
Neuroscience, neuroscience, neuroscience.
These practices are good for the brain, and proceed from a well-intentioned soul.
Practice 1: Ask what’s appropriate to your stage
Having just turned around some startups, let me tell you that right-staging hurts. It’s a pruning of overextension. The stages are the stages because you have to go through them to find product market fit and then scale into a valuable company. They weren’t prescribed in a book.
Don’t act like a growth company without unit economics, retention numbers, CAC, LTV estimates, and target market penetration. Even if you close a premature round, you won’t keep growing like you should because the step was skipped (something I saw at 9Lenses after our $4.1M Series A without a target market).
You will likely need multiple dips into the well of investors, so no conversation is a wasted conversation.
But can’t you bend the rules? That’s what entrepreneurship is about, so I honor the idea! You totally can bend the rules and expectations of stages. But you must know them to break them.
If you want to be a rule-breaker, own that you are attempting to bend a rule. For example: “we’ve sold so much in just 8 months with 200% average monthly growth that it’s better to make a growth bet without retention numbers.”
That you are owning your meeting or not-meeting of the rules reassures the investor that you get their point of view, building trust.
Practice 2: Lay the foundation long before
It’s frustrating as a wannabe entrepreneur that other entrepreneurs seem to get huge backers with companies far less mature than yours. But that’s because trust is only built over time, and those who have won before seem most trustworthy to make good decisions again.
Since building trust takes time, start early! Finding a few investment houses that have a market thesis in your space (e.g. edtech, fintech, VR, and so on) who want to watch you progress through the milestones towards a gated fundraise is the wisest approach. You’ll earn their trust over time, instead of showing up one day knocking for a wad of cash.
A long pipeline, expecting 6-24 month VC deals, is your best alternative to having won before. (And something the winners will do automatically on their next time around.)
Practice 3: Collect more people who can give intros
Trust is the currency of this market. So the best way to funding is introduction from a trusted voice, especially a CEO who has won for that VC before. That’s why I didn’t talk to ATX Seed Fund until MapMyRun Founder Kevin Callahan introduced me. It took 3 months to meet Kevin and twice as long again to get the intro.
That’s because people who realize the financial world runs on trust do not give their trust away lightly. But they are happy to tell you exactly what it takes to earn their trust!
So that’s the question you need to keep asking: what would it take for you to introduce me to this VC?
How do you collect these people? You go to their speaking events, meet them, and then follow up with an email for a 15-minute coffee. In the case of Kevin Callahan, after our first couple missed meetings, I asked permission to text him when I’m in downtown Austin and find any time. Our best two conversations happened this way:
- One time while he was in a Taxi from La Guardia to some meeting in NYC. I had texted and he said “I’m getting on a plane to New York” so I found out when it landed and hit him with a “could you talk while you travel to wherever you’re going in NYC?”
- One time at Starbucks in downtown Austin where I’d parked, knowing it was close to where he frequents, and he stopped there between his apartment and groceries
You don’t get into these people’s worlds by cold emailing or LinkedIn messaging: you show that you’re trustworthy by showing they’re worthy of pursuit and you really believe in the conversation. And then being easy to work with.
Practice 4: Save the pitch until you understand their investment model
It’s just like selling. Don’t sell the whole enchilada, or demo the entire product, without knowing where that person is coming from and what will interest them most.
I start out all my investor calls and conversations with asking a little about their business. Here are some questions to use in conversation that help show you get their perspective, while you actually collect what you need to give an effective pitch and skip the stuff that can wait:
- What’s your investment thesis?
- What stages do you target for investment?
- What’s the current status of your fund—is it new, or are you near its end?
In some of my recent fundraising efforts, I’ve started and ended the entire “pitch” (after questions about them, see above) in about 90 seconds. It goes like this:
- We launched last October and saw 10k, then 20k, then 30k in new sales each month and have continued to book deals without a sales team
- We’re squarely in seed stage, validating a couple target market hypotheses
- I brought 15 slides plus our financials—everything you’d expect from a startup at this stage
- Where would you like to start? Market? Sales? Team?
- ::Sit down and have a conversation::
Practice 5: Don’t overstate your value
As entrepreneurs we see the world a little differently than most. An essential part of our persona is the ability to bend reality a little by living in a future where our company is already successful.
Because it helps us make decisions that create that reality.
But don’t ask others to take the sauce. And don’t believe you’re there yourself. It’s more inspiring to be invited to create a reality you can clearly describe than to be asked to believe in a reality that is a long way off, or patently not there.
So we don’t tell our team or investors that we’re more valuable today than we are. Of course the future potential is the upside of your business and why people should join and invest.
But you prove you’re a reliable and capable leader by holding space both for that future and the honest reality of exactly where you are today. I’ll say things like:
- “We don’t have enough of a pattern of deals to give a statistically significant answer to average deal size; but we have narrowed the range to $2-6k”
- “We’ve had trouble filling the sales leader role”
- “We definitely signed up several customers we should’ve have, which skew the numbers as follows…”
Practice 6: Nail your ask
What do you want? Investors do not want to be advisors. They’re full of advice, but want to believe you’re self-sufficient.
So you must propose the deal. They’ll send you back a term sheet with their own proposal later, but you must walk in there with a clear ask. That’s how executives communicate.
And when you know it’s off-stage, your ask is not cash, and that drops their guard so you can start building trust. It invites them to the same side of the table. You’ll eventually have a champion on their team promoting your deal upward, so start early with lighter asks. Here are some ranging from light to heavy:
- We want to get on your radar as a seed-stage edtech company, and learn what your milestones would be for a Series A we expect 6-18 months from now.
- I want an analyst assigned to our case to poke holes in due diligence.
- We want you to join the $400k committed with a check from $50-250k on a convertible note with XYZ basic terms.
- We want you to be the lead investor on our Seed II bridge round and help us nail down these two or three hypotheses into a firm pattern of unit economics for an eventual Series A.
- We want you to be the lead investor at a $5M valuation, and pour fuel on the fire we’ve started in sales and marketing.
Free Tool: Self-Coach Your Growth Communication
If you worked with me as a growth coach, this is literally the exact matrix we’d fill out together in about 45-90 minutes. Save yourself some cash and do it yourself, or with your co-founder, or call someone like me to help you process your thoughts and gain clarity. It’s worth the time (and even a little money) to nail a big fundraise.
Here’s a matrix of what my experience has found as the most important neuroscience-driven expectations on your growth communication. It is by no means limited to the categories in each box. Instead, the point is to be intentional in your approach to each audience, and then implement the right practices for the right moment and simply trust the process.
Keep it real enough that they’d trust you to invest their money for them. You’ll find people solving problems for you, opening doors for you, and eventually opening their wallets… Not because you had more beautiful slides, but because you invited partnership into something of value. That’s what they want. That’s what you actually want, not funding. So communicate from their point of view and you’ll eventually succeed.