Deal meetings don’t come with subtitles, but what if they did?

GUEST: Raising your first round of funding can be a daunting endeavor. While you’re delivering your business plan, wouldn’t it be great to able to read the minds of angel investors and VCs? Well, that may not be possible, but I can give you a few ideas of what most investors will be pondering while listening to your pitch: 1. This entrepreneur knows the technology and market but hasn’t led a growth company before. Will a new CEO be necessary to grow this company to its fullest potential? And if that turns out to be the case, how will this entrepreneur react? From the beginning, investors are thinking about life-after-entrepreneur. Early stage investors don’t put money in until they’ve thought through a path to get their equity back out. Usually that means scaling up operations and revenue until the company has enough customers and market share to be an interesting acquisition candidate. Experience predicts that entrepreneurs — especially technical ones — often don’t make good operating CEOs. It’s great if someone does, but it’s also great for a founder to become the CTO or president with a big pile of founders stock and then work with an experienced CEO to accelerate the hockey stick. 2. Why should I invest in this deal now ? Investors in deal meetings are out to narrow the field. There are more deals than money, and many of those deals are bad. It’s costly, not fun, and kind of embarrassing for an investor to find out in the middle of due diligence that a chosen deal isn’t one they want to invest in after all. Investors have money; what they don’t have is time. Succinctly show how your solution solves real problems for real companies based on your real interaction with customers. Don’t make it easy for investors to turn you down by saying that you haven’t talked to many customers yet, or that there’s no competition, or that you have an early adopter practically signed up if that customer is still on the fence. 3. Are they thinking of us as a payday loan? Don’t tell potential investors that you need financing to pay yourself (or your founding team) market rate salaries or to cover the rent on a better location. Investors know starting a company is hard financially, but they expect entrepreneurs to earn their stripes and to figure out how to manage cash; in a startup, there’s never enough. The most successful entrepreneurs spend  a dime like it was a ten dollar bill. Remember, a lot of investors were entrepreneurs, too. They sacrificed and learned valuable business skills and so can you. 4. What is this entrepreneur not telling me? Investors connect with entrepreneurs who are open and transparent. The more this is in the entrepreneur’s DNA, the better. Investors are pretty good at sensing when the story is incomplete. So if there’s a beta customer who’s teetering, a licensing agreement that hasn’t quite closed, or even some gaps in your own experience, own up to those vulnerabilities. If you aren’t able to be open and transparent with investors, use your own money to fund your company. 5. Does this entrepreneur know how to execute? Talent is the key success factor in business. The solution can be first class. The markets may be huge. Customers can be standing in line. But even with all that, faulty execution at the top can kill everything. Investors don’t expect you to know how to do it all, but they want you to know what you don’t know and be willing to as for advice and help. One more thing: From the first hello and handshake, investors are evaluating whether or not you are coachable. Coachability isn’t only about whether you will listen and accept advice, it’s also investor-speak for whether or not potential angels or VCs think they would enjoy working with you. Investors may be flinty-eyed about returns, but early stage investing is also personal. Investors and entrepreneurs can expect to be working together for three to five years or longer. Life’s too short to engage with jerks. Investors don’t put money in people they don’t like, no matter how good their team or technology may be. Ultimately, it’s up to you to check your ego at the door and tell a story that’s so compelling it drives everything else from investors’ minds. Keeping these unspoken questions in mind when you go into a deal meeting could make all the difference in whether or not your deal gets done. Tom Walker is president and CEO of Rev1 Ventures . Get more stories like this: