In a lot of ways, raising money from investors is a lot more than just a compelling business — especially in early stage. Fundraising takes talent, salesmanship, network, product, straight up nepotism and a ton of other little nuances wrapped up in unspoken rules that can feel like a circus. I talk to founders who are frustrated because they have an amazing product, but can’t close their funding rounds while they’re sitting and watching some inane idea close twice the amount they’re seeking.
I’ve been in the San Francisco Bay Area for two years — went through 500 startups, and have learned a lot from some very smart people, and I’m still learning. I also have had the opportunity to pitch a lot of investors.
So what is that magic formula that tips the scales in your favor? Of course, having a good market, solid product, and top shelf team makes a difference. Without those three things, you’re really going to struggle. So let’s say you have all of that. What’s the secret that makes or breaks an investment deal?
I don’t know.
That’s the answer. Learning how to say, “I don’t know.”
A lot founders find themselves in their first meetings with investors, obviously nervous, and they’re sitting there being grilled on an idea that’s still in its developing stages. People look at pitching an investor as a make or break situation and want to have everything figured out — understandable. Founders are hustlers by nature. I made this very mistake in my eagerness to convey my pitch. I’m fast on my feet and could easily come up with an answer to almost any question thrown my way, as I’m sure other quick-witted people could do as well.
But what I came to realize was that even though I gave an answer, it was half-baked and investors knew it. They’re professional risk assessors. Their job is to sense if this is a founder who will take the time and have the skills or resources to find the right answers. Pride and ego have no place here. By trying to have an answer for everything, I came across as less coachable, and I limited my ability to have buy-in from someone more experienced and whose best interest is in seeing us succeed.
So how do you field a question that you don’t have an answer for? You’ve got to practice. Force yourself to identify that moment when you really don’t have a good sense of your answer, pause, and own that “I don’t know,” is a perfectly acceptable answer. (And one that will move your own agenda forward.)
If you had the answers to everything, you wouldn’t be on that side of the table, and that’s okay, you’re human.
I have personal like that’s generally along the lines of “that’s a great question. I don’t have a good answer for you right now, but I can get back to you with one.” Sometimes I’ll ask if they can suggest people who could help. When that started happening, the conversations completely changed. Not knowing an answer, or not being sure of a topic invites input from the person you’re pitching, and is a great way to begin cultivating a relationship.
Your fallibility will make you a better founder and open yourself to buy-in. Show that you have the wisdom to know what you know, and know what you don’t know, and demonstrate that you’re prepared to find the right answers.