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As you might know by now , venture uppercase is an industry with a high failure charge per unit .
Standard & Poor ’s recently reported that bankruptcy by venture capital letter and individual fairness portfolio companiesare strive their highest telephone number since 2010 , and these include companionship thatraised over $ 1 billion in venture upper-case letter , like Vice Media .
In this tune , it is unfortunate that we still do not hear enough venture capitalists talking about their mistakes , or at least not with the same frequency as they indulge in self - gratulatory speeches .
However , in those cases in which VCs do talk about failure , you might often take heed them echo reasons like irregular market shock , or a “ Black Swan ” case , bad timing , wrong leadership team , unsupportive co - investor or a poorly design business model that ended up being unprofitable .
While these concepts are useful for a precautionary tale in an MBA case field and often , in burden , impact the counter on investments , the sheer act of non - economic mistakes made by VCs due to their human nature is seriously underestimate . leave the present liquidity crunch , I task myself with understand these blind spots and transmute them into actionable advice for entrepreneur actively fundraising . There are many , but today I will talk over three of them , which have cost investor a lot of money and are essential for anyone planning to pitch their startup to an investor to be cognizant of .
Many investors are more likely to support a founder they feel a personal connection with
This is rightful even if their numbers and production are worse than those of a founder they find less likable .
When a moment of human connection happens , it is punishing to dismiss it . Therefore , if we forge this shackle with someone , we will automatically bank that person more .
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Many reasons can lead to this bond . Maybe they also trifle golf or football , are alumni of the same university that we go to , or have a exchangeable horse sense of humour . It is hard to foretell . However , what is undeniable is that by witness the freshly met individual as one of “ us , ” we are already lowering our justificatory barriers . We experience safe in their presence and are more probable to experience at rest clothe in their venture .
On the other handwriting , if the soul feels like a stranger , the corpus amygdaloideum in our brain activates , and our natural selection inherent aptitude kicks in . In the “ us versus them ” concept that we all form in our minds , they are “ them ” ; therefore , our brain says , we are undecomposed off being wary .
Most VC monetary fund have multiple pardner , and their personality depart wide . This is done intentionally to facilitate the fund connect with a more various base of enterpriser and counter these likely biases . Hence , at any fund you approach , empathize more about the different investor ’ human side will serve you have intercourse who to go to . Before pitching a venture capitalist , take the metre to learn more about them as human beings . Once you ’ve study them this way , you may have an thought of who you would click with and approach them consequently .
I can partake in with you case of how this can be done with our team . For example , Joel is one of our partners , and he prefers active , passionate , and eminent - muscularity founder . On the other hand , Saagar is more potential to vibrate with those founders who are scientists or tech expert and who can delve profoundly into the technological side of a startup . Then there ’s Ruslan , who melts when the founder is very strategic and can simultaneously be particular - orient . And of course , there ’s me , who loves entrepreneurial founder with a huge sea robber spirit .
As investors, we can suffer from short attention spans
This happens because we are always stimulate through various channels , and feel the need to be constantly connect .
We investors are suppose to be skilful attender and pay attention to everything that you are here to tell us . After all , our conclusion is of import . We are here to prefer whether to give you money or not , and to make that choice , we need enough info — your metrics , product , team , and more .
But because we live in the age of constant stimulation and exigent gratification , we often can derail and browse through X while you are talking about your ware , or we ’re give voice our next question before you are done answer our previous one . I heard the narration of an investor who actually fell asleep during a Zoom tar . You get the idea .
I do not traverse that this is a strident trouble in the investing populace and a cause of many error . However , now that you have it away what you are working with , here ’s a small-arm of advice .
If you are talking about your caller , and the speculation capitalist at the board is on their telephone all the meter , first , do n’t take it in person , and second , shift the tone of your conversation . Make them feel include , like it is a two - direction dialog or else of a unilateral presentation . The more engaged we finger during our time together , the less potential we are to search for this stimulation elsewhere . When sharing your storey , it also helps to be clear-cut instead of drifting around from point to point . This makes it more likely that we ’ll pay attention .
I would also apprize you to craft your pitch in a way that engages both the remaining and right brain . furnish numbers and fact , but do n’t draw a blank to tot a personal story and a personal touch to emotionally postulate the investors . Another technique : If you notice that the investor is distracted or misplace focusing , speak them by their name . ultimately , opt meeting topographic point with minimal distractions — for instance , a conference with 500 attendant perpetually passing by is a poor choice for a conversation .
One of the worst mistakes investors make is driven by the lack of independent thinking and FOMO
Another problem that is plaguing the speculation capital manufacture right now is the lack of sovereign thought process . Many venture capitalist I know , when I ask them about the best business deal they have ever put in , they wreak up a party that nobody else believed in and was , potentially , about to fold . I can not aid but ask myself : Why , for many others , the main query rest “ Who else is investing in this financial support round ? ”
It is unfortunate , but it is a psychological issue that you postulate to translate if you are raising money , because the way you insert the company will likely learn whether VCs will fund it or not . If you are capable to create FOMO ( concern of lack out ) around your diligence and your startup ( we are less worthful when we are in hunt of ) and can fancy a convinced image , then you ’re more likely to get the fund you necessitate . Conversely , if VCs see you as a ship’s company that is struggling to reach traction and get investor on board , their fears and survival instinct will be trigger , and they will see your project as something to bide away from .
We acknowledge that VCs are human and make mistakes and those mistakes can be pricey , despite their desire to approach situations objectively and the increasing diversity that is interpenetrate within the store . The three subjective aspects I shared above are only three of many extra elements that can charm our decision . This is unconvincing to change . Temperament trait — for instance , if you are an introvert or extrovert — and point of view surrounding the world ’s events also impact our choice , and honestly , even personal preferences can have the last say .
However , even if you have master these hurdle or managed to get hold a way to work with them , it does n’t negate the chemistry that should be between a VC and a founding father . If things go well , you will be working together for 10 or 15 long time , and it ’s crucial that you speak the same language . Therefore , it make good sense to prioritize investors with whom you are a match . yield the copiousness of information in the medium and on social networks , all you need to do is cautiously get to know the investors you design to tilt to . For example , today you ’ve gotten to know me a bit .
