I've been in private equity or investing as an angel for the past decade and hope to help entrepreneurs and sellers with some guidance to consider when meeting with Investors. Your initial meeting with a potential investor should begin with your story, your business’s story and the value your business provides to customers, employees, suppliers and your community. There is a ton of information to help you with the presentation. In this post, we attempt to address the topics of finding the right investors and how to manage yourself and your team during interactions with investors. Following is a quick list of “Do's and Don’ts” and a list of resources for your use. Good luck and contact us if we can be of help!

Don’t

• Ask for Money. Investors decline upwards of 90% of the deals at the time they are presented. Let the money come later and focus on the relationship. Clearly, you need capital, or you wouldn’t be talking to an investor. Investors are interested in your business's details, and why you are passionate about it - not just how much you need. Don’t expect an investor to fall in love your business or the investment in just one meeting. It takes time to build a relationship. Explain your business first and let them familiarize themselves with it before talking about funding and capital. Setting terms to an investor is a likely turn-off. If you’re pressed, consider the following response: "Our competitor with similar performance received a 5x EBITDA multiple or a Series A … at a $50 MM pre-money valuation. Here is why our company is better…”

• Don’t Oversell. Investors like the truth. Many deals fall apart in the diligence process because investors uncover facts that differ from what was presented. In fact, approximately ~50% of the deals “made” on the famed television show, Shark Tank, never close for this reason. So, don’t make promises you’re not sure you can keep. You won’t have answers to some question’s investors will ask. That’s OK to some degree. Highlight aspects of the business but “Under-Promise and Over-Deliver.” when discussing milestones, commitments, relationships, among other things. That way, you will have enough room to account for issues that arise, and investors will be happy when you meet or exceed expectations.

• Don’t Interrupt. “Most people do not listen with the intent to understand; they listen with the intent to reply,” according to Stephen Covey, author of The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change. We’re all busy and have been guilty of this at one time or another. Don’t be thinking about your next comment. Don’t multitask and reply to emails. And, don’t interrupt if/when the investor or their team are speaking.

Do

• Focus on the Right of Investors. Your job is to identify investors with ability and the willingness to invest. In addition to the obvious research using Crunchbase, AngelList, LinkedIn, etc. AngelList’s investor-filter will help to find investors who were already interested in your industry. In addition, consider engaging executives who are currently working in your industry. They will be quicker to understand what you’re trying to accomplish, what it will take to build the product and brand and be helpful when it comes to forming a board or pursuing valuable relationships.

• Prioritize. Consider prioritizing your contacts based upon the perception of their ability to invest, their willingness to invest in you and their willingness to contribute follow on investment. Be thoughtful in who you engage and when. Before engaging high priority contacts, you may want to engage a mix of “friendlies v hostiles” (or cold contacts) who can help you build your messaging. To warm up, you may want to engage funds who have invested in companies within your industry - they will be quicker to understand what you’re trying to accomplish, what it will take to build the product and brand and be helpful when it comes to forming a board or pursuing valuable relationships.

• Be Personal and Clear. Investors receive a ton of email and a ton of generic email pitches where someone they’ve never met is looking for capital. CRM’s, email distribution platforms (e.g. Sendgrid) and even Mail Merge are ubiquitous, and investors are quick to identify and delete bulk emails. Personalize your email content and provide evidence that you’ve done your research about the investor, and why you feel investment in your company would be of interest to them. Consider including your pitch presentation, business plan, or other materials for the investor’s review. Close with a succinct request and call to action to meet and discuss your business. Try this technique and find a style which works for you.

• Assume You Are Not The First. Assume the investor receives dozens of pitches in a single day. Not to mention, they are overwhelmed at their job, and in hurry to finish their day and pick up their kid from school or take them to piano practice. As a mentor of mine once suggested; ‘Be Brief, Be Brilliant and Be Gone!”

• Make Your Numbers Defensible. Math or Numbers don’t lie. Highlight the relevant data surrounding your business since the beginning. This helps to level set the conversation and allow everyone to understand where your business is and where it’s going. Most importantly, make your forecasts, market sizing and costs as realistic as possible and defensible. The truth will come out so, don't take this risk!

• Take Feedback without lashing out. Part of the value given to you through a conversation with is their insight. When you meet, expect investors to ask questions, provide constructive criticism, give suggestions, and relay general advice on how they believe you should proceed. Depending on how well your company and your investment fits, the investor needs time to determine if they should pass on the investment or if more diligence is needed before investing. Regardless, listen to the investor feedback and if needed, go back to the drawing board and adjust your presentation, your business or the investors you’re targeting. Remember, too, that it's best to accept rejection without being nasty to a potential investor because, who knows what the future holds, and the investor community is small!!

• Focus on the Relationship. Consider meeting with potential investors when they're not fundraising and there is no pressure to ‘close a deal’. By establishing a relationship with an investor, and one that's built on advice and feedback instead of a financial ask -- you're showing respect for the investor and demonstrating that you are interested in developing a long-term relationship. This will help you to stand apart from others, as and in my experience as an investor, I don’t hear from companies until they need something.

• Be Polite AND Confident. You’ve sacrificed a lot to get where you are and build your business. You should be confident about your business and your ability to execute. During your preparations, focus on exuding the quiet confidence of a professional with the ability to deliver! Make claims but don't trumpet them. Show that you can be confident about your company without looking insecure.

• Know How to End the Conversation. Investors decline upwards of 90% of the deals at the time they are presented. Even if the investor declines to invest, try to avoid being defensive or accuse the investor of being ignorant. It’s likely that you will cross paths again in the future, and there's no benefit to burning bridges. Keep things cordial, push forward, and if things go well, you'll be in the driver's seat the next time you meet.

• Follow Up and Provide Updates. Most investors don't invest in the first meeting. It's important to follow up with a thank you email and keep them updated as you progress. Indicate what you plan on doing and show the investor that you're doing it over time. When you show investors how you're evolving and building your track record, they'll be that much more likely to want to invest in the future.

Additional Resources

• Get Backed: Craft Your Story, Build the Perfect Pitch Deck, and Launch the Venture of Your Dreams by Evan Baehr and Evan Loomis. Entrepreneurs Evan Loomis and Evan Baehr have raised $45 million for their own ventures, including the second largest round on the fundraising platform AngelList. In Get Backed, they show you exactly what they and dozens of others did to raise money—even the mistakes they made—while sharing the secrets of the world’s best storytellers, fundraisers, and startup accelerators. They’ll also teach you how to use “the friendship loop”, a step-by-step process that can be used to initiate and build relationships with anyone, from investors to potential cofounders. And, most of all, they’ll help you create a pitch deck, building on the real-life examples of 15 ventures that have raised over $150 million.

• Business Model Generation by Alexander Osterwalder & Yves Pigneur. One of the best tools for implementing the Lean Startup methodology is the Business Model Canvas (BMC).  This book is the definitive source on how to develop a one-page model of your business (and iterate until you’ve nailed it) before (or instead of) spending months writing a full business plan.  This book is very graphical and hands-on. 

• Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld and Jason Mendelson. For more than twenty years, they've been involved in hundreds of venture capital financings, and now, with the Second Edition of Venture Deals. This reliable resource skillfully outlines the essential elements of the venture capital term sheet--from terms related to economics to terms related to control. It strives to give a balanced view of the particular terms along with the strategies to getting to a fair deal. Whether you're an experienced or aspiring entrepreneur, venture capitalist, or lawyer who partakes in these particular types of deals, you will benefit from the insights found throughout this new book

• Crack the Funding Code: How Investors Think and What They Need to Hear to Fund Your Startup by Judy Robinett shows readers how to find the money, create pitches that attract investors, and then structure fair, ethical deals that will bring them new sources of outside capital and invaluable professional advice. It will give readers the broader perspective—how funding works, how investors think, and what they need to hear to put their money where your mouth is. Every entrepreneur who reads this book will get easy-to-follow deal checklists, a roadmap of where and how to locate the best funding resources and top business mentors for their particular industry and/or geographical location, and a step-by-step process to create pitches that make their idea or business irresistible