Convince Investors to Fund You Page 2

  A related difficulty in pitching is that entrepreneurs may be used to pitching to prospective customers, but VCs are not prospective customers. VCs generally don’t appreciate the needs the customers have and the context that the customers live in. If you don’t make that context clear to investors, they may not appreciate why what you’re doing is compelling.

  Tom: Knowing what you know now, what would you have done differently?

  Bill: (chuckles) I would have bought Tesla. I had the opportunity to be in Tesla very early—before Elon Musk took over. A friend of mine, Nancy Pfund [founder and managing partner of DBL Partners], was trying to convince me why Tesla made sense for a small fund like ours. And I was trying to convince her that she was insane. That this was ludicrous, as a small fund, investing in a car company. She invested, and I didn’t. She wound up with Model S number 2, and I didn’t.

  [Bill and Tom laugh.]

  Bill: Another one that I didn’t invest in was Lyft—before it was called Lyft. I sat down with John Zimmer, who pitched me on Zimride, and we passed on that.

  That’s in response to your phrasing the question “knowing what you know now.”

  Tom: Let me ask a follow-up. What is more of a life lesson for someone who wants to excel, who wants to make an impact?

  Bill: Now we’re into the baring your soul part of the interview.

  Tom: But I’m not Barbara Walters, so you don’t have to cry.

  [Bill laughs.]

  Bill: One of my big life lessons has been to learn when to pick your fights. When I was a callow youth, I spent more time being urgent about asserting what I considered to be the right way or the truth.

  I realized by being so urgent and pushing people harder than they, perhaps, wanted to be pushed, I pushed people away—when I didn’t need to … when it wasn’t worth the fight. It wasn’t worth being right.

  This is the lesson that young high achievers need to learn. Because we’re brought up in our culture and our educational system to always be right. The educational system puts this ultra-high premium on being right.

  Then you’re put into the work world where it’s really hard to know what is right, but you still have this overachiever/high achiever ethic that I got to be right.

  This I got to be right ethic slowed me down in a few situations.

  Finally, I learned, “Hey Bill, you don’t always have to be right.” And you don’t always have to fight for what you think is the right answer. Sometimes, it’s not worth the fight. And, guess what, sometimes you’re not right. But in school, high achievers learn that “I don’t know” is not an acceptable answer. In school, you have to always be right. The educational system focuses on individual achievement and punishes mistakes. It teaches students that there is a defined process for getting it right—for getting a good grade or a good score. But the real world doesn’t work that way. The educational system damages our ability to engage in collaborative teamwork and think out of the box.

  So, I’ve learned to pick my fights and how to collaborate better.

  Bill Reichert is co-founder and Managing Director of Garage Technology Ventures, a seed and early stage venture capital firm based in Silicon Valley. He is also a Partner at Pegasus Tech Ventures, a global venture capital firm with offices in Silicon Valley and around the world.

  Bill and his partners invest in promising emerging technology companies and work intensively with them to help them grow and succeed. Some of Garage’s most successful investments include Pandora Media (NYSE: P), Digital Fountain (acquired by Qualcomm), Coremetrics (acquired by IBM), iNest (acquired by LendingTree), and LeftHand Networks (acquired by HP).

  Bill brings experience as a serial entrepreneur to his work with portfolio companies. Prior to co-founding Garage in 1998, Bill was co-founder of Academic Systems, a software company funded by Kleiner Perkins, Accel Partners, and Microsoft. Academic Systems became the leading developer of network-based interactive instructional materials for colleges and universities and was acquired by Plato Learning after an IPO. Prior to Academic Systems, Bill was a senior executive at several venture-backed technology companies, including The Learning Company, which was the leading developer of educational software in the United States before its acquisition in 1994, and Infa Technologies, a touchscreen computer company that developed many of the concepts underlying the Newton, Palm, and iPhone devices. Bill also co-founded Trademark Software, which was subsequently acquired by Dow Jones, while in graduate school at Stanford.

  Earlier in his career, Bill worked for McKinsey & Co. in Los Angeles, the World Bank in Washington, DC, and Brown Brothers Harriman & Co., in New York. He has authored and co-authored several articles and speeches on entrepreneurship, venture capital, international trade, and monetary policy.

  Bill earned his AB in History and Science from Harvard University and his MBA from Stanford University. He is a member of the Council on Foreign Relations in New York, and is a former Chairman of the Churchill Club in Silicon Valley. He is also an Advisor to the Women’s Startup Lab, Nordic Innovation House, and the Korea Innovation Center. He lives with his extraordinary wife Michelle and three incredible children in Los Altos, California. You can contact Bill at reichert@garage.com.

  To continue with the focus point of being Competent:

  A great pitch answers these questions that I call

  the 6 W’s:

  What is it?

  What is the Big Idea?*

  Who’s it for? Who benefits?

  Why should I listen to you?

  What’s in it for me as the investor?

  What does this disrupt?

  * I focus on the Big Idea as something that includes unfair advantage, disruption, and big profits.

  I take this another step forward with the 4 W’s of Pushback from the Investor:

  1) Where is the traction?

  2) Where is the proof?

  3) What’s so different about this?

  4) What are you going to do if competitors [take a particular action]?

  Here is some language to deal the question, Where is the proof? You can say, “We have confirmed ____ through interviews with [focus group, ideal prospective customers and so on].”

  Show Your Competence Method #1: Have the

  Investor Know You’re Pitching to Them

  As a Pitch Judge for conferences in both Silicon Valley, California and Thailand, I’ve seen startup founders fail by giving a pitch that sounds like a pitch to the customer. That’s a big mistake. You must pitch directly to the investor. You must assess exactly what the investor cares about. In more than two decades as a professional speaker and member of the National Speakers Association, I have a lot of experience with delighting audience members. What I do is place various elements into my speech that speak directly to the diverse individuals in the audience—something for this person and something for that person …

  When it comes to your pitch to multiple investors in an audience, make sure you identify three vital things that can entice investors. Perhaps, one investor does not care about one of those details (for example, sustainability), still you catch the investor’s attention with one of your vital points.

  Make sure to directly address the investors with something like: “As investors, you’re naturally interested in a $97 billion market in ….”

  Show Your Competence Method #2: Use the

  Power of Paper and “The Next Step is …”

  Many of us have been assured that showing a good slide will prove a point to the investor. Don’t count on this. I suggest, when possible, the pitch-maker use what I call The Power of Paper. By this I mean, place vital facts and data on paper (even just one sheet) and into the hands of the investors. Say something like: “As you can see on the Facts and Opportunity Sheet in your hands ….”

  People believe what they see, not what they hear.

  – Grant Cardone

  Additionally, make sure that you “make the offer.” In sales, that means you “ask for the order.”
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br />   How do you do this?

  Say directly to investors, “The next step is …”

  You can say, “The next step is that we have a conversation after this presentation. I look forward to talking with you.”

  If you’re in the crucial meeting in which you can close the transaction, you can say, “The next step is we take care of the paperwork”—and you put the document in front of the person for their signature.

  Connection-building

  Demonstrate your finesse in building warm connections. Make the investor feel good as they talk with you. How? Listen.

  Investors need to trust that you know how to build strong relationships. Great CEOs attract great talent and retain that talent. Great CEOs build coalitions throughout the company and with the board of directors.

  Now, I’ll share a tough time that helped me learn the lesson of the essential nature of connection-building.

  A Real-Life Example: Be Careful about

  Connection-Building

  In this example, I note that if you’re not skilled with networking, you’re going to have serious trouble. And, if you’re not adept at follow-up, you’re not going to win.

  For example, some years ago, I was raising money for one of my first major projects.

  Here’s how I describe this when I give a speech about it:

  (lightly edited transcript)

  “I get invited to attend a screening of a feature film that was made with independent funding, not from a studio. So, there was an opportunity for me to be very observant. I know these folks are the investors. I should talk with them. I should at least get my brochure into their hand.

  Oh, that’ll be great. Because I think: They’ll see the brochure, and say, “Great idea! Here’s my money!”

  That’s not how it works.

  I found each investor at the celebration party. I gave every one of them my brochures. I felt really good. But then I noticed that they all said that they didn’t have a handy business card

  They said something like: “Oh, just call my office.” They were standoffish.

  That should teach me something.

  They were there to celebrate that they had participated in getting this other film made. They were NOT there to have someone impose upon them. I was not creating good relationships.

  Still, I was in my 20s when I was doing this—so it’s understandable that I lacked experience and understanding.

  The next day I get a phone call from my production budget mentor. He was teaching me how to do the production budget for making my own feature film. But he taught me nothing about how to develop rapport or network with investors.

  So, the production budget guy said on the phone, “I need to talk to you this afternoon. I’ll meet you at my home.”

  I agreed.

  He had me sit at his kitchen table. He reached into his pocket and pulled out one of my brochures. So, an investor had given it to him. He tossed that brochure on the table.

  Then he disdainfully slammed brochure after brochure on that table.

  I wanted to melt into to his flooring and just die so I didn't have to think about how embarrassed I felt.

  He said, “You will write an apology letter to my business partner.” My budget-writing mentor was a co-producer on that film. This embarrassing situation was awful.”

  This brochure massacre made a huge impression on me that lasts to this day. In fact, one of my first books was titled Be Heard and Be Trusted.

  I made it my mission to learn how to create good business relationships—relationships built on trust.

  How introverts may overcompensate and alienate an investor

  Some introverts come on too strong. I call this problem “being a bulldozer when networking.” This problem can be trying too hard. It’s like a pendulum hitting the opposite side—from withdrawn to too intense.

  Avoid coming across as too eager, overwhelming the investor. Don’t be deluded that if you just tell them the idea, they’ll be amazed and reach for their checkbook

  Here’s what is necessary. Become a great listener. To get the listening started, you need to ask suitable questions. For example, you could ask, “So, how did you get into investing?”

  The investor might reply with something like: “You know, originally I was an entrepreneur, and I started a company. I thought once I have a truly successful company, I’m going to start investing—being an angel investor in other people’s stuff. You know, just to keep the cycle going.”

  You can reply with something like: “Oh. Sounds great. Would you tell me about your first company and what got you excited about it?”

  It’s all about building rapport. What you need is something called emotional intelligence. Daniel Goleman and others have done much work related to emotional intelligence. I saw a quote from a website that reads “We define emotional intelligence as: Recognize, understand and manage our own emotions … Recognize, understand and influence the emotions of others.” (Tomer Strolight, president of the firm that offers this definition).

  This definition can be a springboard for our conversation here. Back in my 20s, when I had the snafu of my giving brochures to investors, I demonstrated that I had not developed appropriate emotional intelligence yet. I crossed the line as I tried to get investors interested in my feature film at the celebration for someone else’s film.

  This experience served as a springboard for my studies and getting mentors.

  I also learned how to move beyond a traditional viewpoint about “selling.” This part of my journey led to my writing the book, Relax, You Don't Have to Sell (which served as a textbook at Sofia University, California). In that book, I share the process of “enrolling.”

  You enroll somebody; you invite them into what you're doing.

  I shared the mess I made as a twenty-something person with my first project. I had come on too strong and self-focused with my brochures. That was in line with my then-picture of traditional selling.

  Years later, in my book, Relax, You Don’t Have to Sell, I note:

  Selling is imposition.

  Enrolling is invitation.

  You invite the person into your world. That’s the invitation part. Still, you do some great listening first. Then, the person might be interested in listening to you.

  Conflict-skilled

  “Tell me about a conflict you and your co-founders had and what happened,” I said to a young guy looking for investors. He had stepped up to me after I had served as a Pitch Judge at a conference.

  He replied, “No. We don’t have any conflicts. We get along really well. It’s great. Like we’re brothers from another mother.”

  One of my friends in Silicon Valley, California noted a top startup company breaker: co-founder conflict.

  Until you’ve had an argument with your co-founder, I don’t know if your team will survive. Investors need to know that you’re strong and skillful in leading people to a resolution when conflict arrives.

  Perhaps, you’ve noticed how several people like to control things by trying to use email or texts to state their position, and then they refuse to have a seven-minute in-person (or telephone) conversation.

  The key to handling problems and conflict within an organization is to keep the channels of communication wide open.

  – Anita Roddick

  The truth is: Mature adults and good leaders talk to people they cannot stand.

  By this I mean, the trustworthy leader, as Anita Roddick said, keeps the channel of communication wide open.

  The Conflict-Skilled Person Knows When to Say, “I’ll walk toward you.”

  The effective leader practices two important skills (among many others):

  Know when to stand your ground

  Know when to say, “I’ll walk towards you.”

  Sometimes, you must hold your ground. An investor might ask, “Have you fired anyone? Have you ever fired a friend?”

  If you can say yes to this, the investor often looks on you as a more seaso
ned professional.

  Conflict-skilled Includes Being Able to Say No and to Find the Third Alternative

  Recently, I heard a couple of people talking about strength of character. The idea was that a person needs to be able to say no. If that person cannot say no, he or she can be pushed around and even “argued into submission.”

  Even worse, I’ve seen people push others to feel guilty. How? One person says to an abusive father, “Hey, you’re insulting me.” And then a family member says, “You know that is Dad’s way. Why are you causing conflict?”

  Wait a minute. Who was abusive?—the father. But the person standing her ground is being dressed down for speaking her truth? This is trouble.

  So, in the situation when a family member defends a crazy-maker-father, there is no “nice” solution. Sometimes, you must simply state what is going on (“you’re insulting me”) and step back—to protect yourself.

  In terms of business, if you find yourself with a crazy-maker co-founder, it may be necessary to part ways.

  On the hand, a good co-founder will keep talking with you until you both find The Third Alternative. Such an alternative is likely different from your first proposal and your co-founder’s proposal. Author Steven R. Covey demonstrated the differences between the three alternatives. His example begins a conflict that co-worker have as they share an office. One co-worker wants the window open (first alternative). The second person wants the window closed (second alternative). They talk and find that the person who wants the window closed prefers to avoid having flapping papers on her desk. The other person wants fresh air. What is the Third Alternative? It’s opening a window in the adjacent office. Fresh air without flapping papers.