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Read between the lines for how an investor (really) feels about your pitch

Updated: Aug 12, 2021

Fundraising is somewhat of a false equivalency for founders. Yes, capitalization is necessary to afford yourself the time to create and grow value for your venture, but that clearly doesn't mean fundraising is the end-all-be-all of your company’s goals. Nethertheless, pitching your business (to one stakeholder or another) is a mostly fundamental step for scaling up. Sometimes founders get lucky and the fundraising phase is relatively brief but for most part (especially for early stage startups) the process takes way longer than anticipated. There are a lot of reason why this can happen, but the truth is that your venture is not going to fit the profile of interest for every investor out there (nor should it be your goal to make it so.)

Whether it is pre-seed, seed, post-seed or Series A+, it’s surprising for a lot of entrepreneurs how opaque the decisioning process is once they’ve made their pitch to a potential investor. Seperate from the “why” of an investor’s decision to fund or not fund (more on THAT in coming posts) it is amazing how rare it is for a founder to hear an unequivocal “no” at the conclusion of their pitch. The affirmative interest is usually expressed more transparently, but some investors (for a multitude of reasons) do not or cannot deliver their denial in clear declaration. What’s important to know is that 1) this is more common than you think and 2) based on that, you need to figure out how to interpret the real level of interest from an investor so you can proceed accordingly.

The good news is there are some ways for entrepreneurs to read between the lines and get a sense of where they stand relative to the investor(s) they are courting. There is no absolute scorecard, but a general framework of questions to ask yourself after you pitch:

  • How many other investments has this investor has made into the sector/industry/space you’re targeting.

  • How much of a “smart money” investor is this person/group likely to be? Is there a clear and compelling pathway for them to contribute to the growth of your company beyond even the check they would write? And if so, did you clearly establish that link for them in your pitch?

  • How does the size of the round you’re raising (and their likely level of participation) intersect with other past/current investments they have made?

  • Did you share materials for them to review ahead of the pitch (and if so, do you have any indication whether or not they reviewed them?)

  • What were the style and substance of the questions they asked after you pitched?

Some of these questions are better considered before the pitch happens, but it’s this last one I want to focus. Sometimes the only way to know where you stand with an investor (and also what you need to do to get them over the “yes” line — if that’s even possible) is based on your analysis of what they asked you after the pitch was over. Again, there isn’t one golden rule to live and die by here, but I’ll lay out a few quick thoughts on how to think about what you’ve been asked.

  • Simple questions are good and natural. Sometimes an investor has a cadre of standard items they like to go through with any founder. But too many “easy” questions could be an indication they are just showing an abundance of politeness and have already decided whether or not they are investing.

  • Tough questions are good and natural too. Investors love playing devil’s advocate, and also using tough questions to establish what I call “founder’s efficacy” — making sure you know and are committed to the path ahead. But starting off with or hitting too long of a series of tough questions could mean the investor is not picking up on the real “why” of your venture. And without that your chances of getting a check drop precipitously.

  • What about questions around missing or fundamentally importance pieces of information (i.e. unit economics, projections, business model etc)? Most investors will ask for this in a follow-up if you didn't present it during the pitch, or have it included in your appendix (HINT: always include an appendix of info like projections, cost tables etc.) This is usually a decent sign as they are expressing interest in a follow-up exchange of information or wanting more clear detail on things that could impact the dimensionalization of their investment.

  • Questions that forcefully push back on your stated assumptions (especially with finances): this is a tough one. Generally speaking it can go either way since the investor could be setting you up for negotiating a different valuation based on something like your estimation of the TAM/CAC/LTC etc or argue how quickly you need to recapitalize after this round — but also pushing too hard on this and being emphatic about the off-ness your assumptions more often can mean this is a “convenient” off ramp for them to pass on the investment overall.

The key here is to avoid analyzing the questions you’re being asked in real-time; stay present in showing attentiveness to all of the questions and post-pitch conversation. But once you leave (and I mean literally leave the building, block and anywhere where people might have a chance of hearing you) then take a moment to analyze with your co-founders (or self-reflect) on how the questions you were asked might tell you about the actual level of interest.

One final piece to note here are what I like to call CBWs (aka Come Back Whens.) The truth is that few people you pitch will fall into a purely “yes” or “no” designation — the vast majority will end up in a “maybe later” category. Whether it is a tactical or polite way to avoid saying “no” they genuinely want to consider investing in your next round, these are mostly manifested through a series of CBWs. These too are tough to interpret but again as a baseline general rule the more they relate to say the momentum of your venture (i.e. launching your MVP, closing your first sale etc) the more possible it is they are legitimately inviting you to circle up with them later once that milestone is hit. The more exigent or external to your venture the qualifying CBW is the more of a toss-up it could be.

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