The Entrepreneur's Bible: Business at its Best

Don’t Make Angel Investors Say No; Give Them The Chance to Say Yes

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When my entrepreneurs ask for my fundraising advice, I often tell them that it’s best to take a low-key approach. Especially in the very early stages, rather than pressing investors for a definitive answer, I prefer to gently nudge them towards commitment.

First, investors generally prefer to make decisions based on multiple data points. While there may be investors who write a check after a single meeting (perhaps I should compile a list and sell access to it!) the bulk of investors would like to base their decision on a line they can extrapolate, rather than a single snapshot. If you push them for an immediate decision, the answer is going to be “No.”

Second, investors are human and thus subject to the same predictable irrationality as the rest of us. Once an investor says “No” out loud, he or she has psychologically committed him or herself, and it will be much harder to change that answer in the future.

Finally, a lot of entrepreneurs like to fool themselves about investor enthusiasm. They mistake positive feedback for real interest. If an investor is really interested, they’ll tell you. If an investor says nice things but doesn’t ask about terms or who else is in, go back when you’ve made more progress and try again.

There is a time and place for asking for the deal, but the ask needs to happen when you’re fairly confident of the answer, not at the first meeting.

It may feel uncomfortable to leave the loose ends untied, but would you rather feel comfortable, or would you rather maximize your chances of raising money for your startup?

Yeah, I thought so.

 

About the Author: Chris Yeh

Chris is a Co-Founder and General Partner at Wasabi Ventures. He was on the founding team of pioneering Internet companies such as United Online Services (Nasdaq: UNTD) and Merrill Lynch’s Intelligent Technologies Group.  He has founded, advised, or invested in dozens of startups, including Ustream and PBworks.

This was originally posted on Chris Yeh’s blog.

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