How Investors Decide Whether to Trust a Founder

The reality of early/growth stage investing for a lot of companies is that there isn’t much data for investors to go off of.

There isn’t 10+ years of $10M+ in ARR, hundreds of customer testimonials, and press coverage of the company for years on end.

What this means, is that the decisions investors are making on where to put their capital is largely based on one thing:

People.

How you frame yourself, how you build your story, what your past experience is, how do you talk about your product? Where do you plan to take things? Are you believable?

Like it or not, this is all being evaluated in every single conversation you’re having.

Part of the process of what we do at Breakout to get raises over the line is getting founders, and their stories, strong and aligned.

Here are a few examples of some less-talked-about things you can do as a founder to win over investors:

_{For clarity purposes, this is all coming from anecdotal evidence, and our own personal opinions and experiences.}

1. Perceived Need for Investment

The fundraising process is a sales process.

You are quite literally selling, usually equity, in exchange for capital.

In traditional sales, is there anything worse than a desperate salesman with commission breath trying everything in his/her power to get you to buy a product or service?

It gives off a terrible frame, and an even worse customer experience.

This holds true in the fundraising process as well.

You want to hold a strong frame that shows you have options. You are not desperate for capital. You are simply evaluating the opportunity amongst others.

Founders often lose this idea completely because the funding process can feel very transactional.

Hold a strong frame and don’t be desperate.

2. Organization

Nothing shows competence in a deal like having your materials organized.

Investor asks for access to the data room? Given within minutes.

Clarifying question needed for the financials? Advisor is on top of it.

You can lose a deal simply by being slow, sloppy, and unorganized in a DD process.

Your behavior in this process should try and prove that you are somebody worth backing, and worth placing a bet on.

3. Qualifying the Investor

Just as much as an IC is digging into you and your company, you should be showing some sort of diligence back into the groups you’re speaking with.

“Is there anything specific about your fund you look for / don’t look for?”
“How do we sit right now compared to some of the other deals you review?”
“What’s specific about your growth strategy for your portco’s compared to other venture groups?”

You are NOT trying to be over the top, or trying to grill the investors who are speaking with you.

But it would be silly to not get them to explain more about what they do, how they can help you, and what the fit is between you two.

Most of the time this is a green flag for investors because it shows you’re looking to do diligence on your side of things as well.

There is always a sales process going on in fundraising.

You’re selling you. You’re selling where you plan on taking this company. And you’re selling why an investor should be involved.

When the evidence on the financial side of things might not be fully there yet, there is one easy thing to do to make your chances of raising higher:

Present yourself as someone people would want to invest in.

Thanks for reading.

Ryan Bryden
Breakout Capital Group

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