Why an Investor Gave Me $10,000 Without Knowing Anything About My Startup
Some fundraising pitches don’t require a slide deck
The first time I met my favorite angel investor, I was an inexperienced entrepreneur working on my first startup. At the beginning of the meeting, the investor asked me the following question:
“What’s the most important factor in determining a startup’s outcome?”
I didn’t hesitate for a moment. “How good my product is,” I told him.
“Ok,” he replied. “Tell me about your product.”
We spoke for an hour and had what felt like a great conversation about my startup, but he didn’t invest. A few months later, the company I pitched ran out of money and failed.
A year after that, I was meeting with the investor again to tell him about a new venture. And I was surprised when he began our meeting asking the same question:
“What’s the most important factor in determining a startup’s outcome?”
I remembered him asking me before, and I knew I’d given the wrong answer. At the time, I’d thought my product was most important; however, after struggling to raise capital with my last company and running out of cash, I knew money was more important. “A startup can’t survive without money,” I told him. “So the most important factor in determining a startup’s outcome is how much money it can raise. If it raises lots of money, it’s more likely to be successful. If it doesn’t, it’s more likely to run out of cash and fail.”
“Ok,” he replied. “I do some angel investing. Pitch me your startup.”
I spent the next hour talking through my funding deck. He never invested, and the company failed.
The third time I met that same investor, I was pitching him yet-another startup. I also remembered the question he’d asked at the start of our other two meetings, and I was curious if he’d ask it again. As I’d expected, within the first few minutes of our third meeting, he did just that:
“What’s the most important factor in determining a startup’s outcome?”
I sighed. “You’ve asked me that question every time we’ve met,” I told him. “Clearly, I don’t know. If I did know the most important factor in determining a startup’s outcome, I wouldn’t be showing you my third startup in three years.”
“That’s good,” he responded with a smile. “You said the magic words.”
“Please and thank you?” I joked.
“Not those magic words,” he said, “In this case, the magic words aren’t please and thank you. The magic words are: I don’t know. You admitted you don’t already know the answer to something, and that means you’ll finally be able to listen to advice.”
“But I’ve always loved getting advice,” I assured him.
“No, you haven’t,” he replied. “You’ve always loved finding people who confirmed what you already believed.”
“How do you know that?” I asked.
“How did our previous conversations go?” he replied.
I thought back to our prior meetings. “I answered your question,” I said. “I told you what I thought was the most important factor influencing my startup’s potential outcome, and then we talked about that thing. The first time, it was my product. The second time, it was my fundraising.”
“Exactly,” he said. “You were excited to talk about whatever thing you were focused on. How well did that work out for you?”
“Not so well,” I acknowledged.
“Think back to those conversations,” he said. “What if I’d try to tell you we needed to talk about something else other than whatever things you wanted to discuss?”
“I probably wouldn’t have listened,” I admitted.
“Then you see my point,” he said. “I wasn’t going to waste your time or my time trying to convince you to see something you weren’t ready to see, so I didn’t. But, I’m impressed. Despite failing multiple times, you didn’t quit. Instead, you’ve continued working, and you’ve continued maturing as an entrepreneur. It took a while, but it seems like you’re finally ready to listen.”
He took out his checkbook and wrote me a check for $10,000. I hadn’t even told him what I was building yet.