Why VCs and Angel Investors Say “No” to entrepreneurs | Alicia Syrett | TEDxFultonStreet


Translator: TED Translators admin
Reviewer: Leonardo Silva Imagine that every one of you
in this audience is an entrepreneur and you’re about to pitch
your business to an investor. Maybe over email, maybe face to face or maybe in front of millions
on national TV. And you’ve sacrificed everything
to get to this point. This is your baby, your dream. And you think, if you can
only get this outside funding, that all of your problems will be solved. Or maybe most of them. So you give your pitch
and there’s a dramatic pause. And then the investor says, “No.” But why do investors say no? And what can we do to prevent this
from happening in the first place? Well, the truth is that most investors do say no
the vast majority of the time. For every one hundred pitches
that an investor hears, he or she may say no, 98, 99% of the time. And how do I know this? Because I am that start-up investor. I have personally fielded
thousands of pitches, over email and in coffee meetings. Here I am on the set of CNBC, where I’m a regular
on their Power Pitch segment and also at MSNBC’s Your Business show, and I’ve given feedback on TV
to a hundred-some odd entrepreneurs and I promise you
hearing no on national TV is one of the most
brutal experiences ever. But I also teach entrepreneurs
at Columbia University and I’ve shared feedback to entrepreneurs
as a contributor at Inc. And today, I’m relying
on all those experiences to share with you my top five insights
as to why investors say no. Insight number one: investors say no because entrepreneurs
make rookie mistakes. Think about it. If you show up to take a test
without having done your homework first, you’re probably not going to get the A and similarly, if you don’t do your homework
before pitching investors, they’re probably going to say no. Let’s look at some examples. First, don’t pitch investors
without researching them first. They may not even invest in your industry, in your geography or your stage of growth. So if you’re not targeting
the right investor in the first place, they’re probably going to say no. Also, don’t blast out your pitch
indiscriminately to hundreds of investors. They already receive
their fair share of cold emails. So if you haven’t already
obtained a warm introduction through a mutual contact
or a personal connection, they might just pass. And don’t forget the importance of timing. You want to avoid pitching investors
in the middle of a market meltdown or in the dead of summer, when they’ve just left to go
on vacation with their family. If the investor is not receptive
to you in the first place, they might just say no. Moving on. Insight number two, character matters. All things being equal, investors prefer to do business
with entrepreneurs who are truthful, who possess integrity. So if your character is
questionable in any way, investors will probably say no. So, don’t be weird. I once had an entrepreneur
come up to pitch me and he burped in my face. I did not fund him. But similarly, if you’re
acting really cagey and you’re asking an investor
to sign a legal non-disclosure agreement before you share any information or you’ve posted nasty things
about your ex all over social media, investors will probably say no. Also, don’t be too
salesy or overconfident. Investors know that if it sounds
too good to be true, it probably is. So if you’re promising
that you have no competition or that if the investor
doesn’t give the money now, the opportunity won’t be there, they’re probably going to pass. And don’t use poor judgment
in your funding ask. Investors want their money
to go into the growth of your business. So if, instead, you’re proposing to use their money
to pay yourself a high salary or to address some legal spat
you’ve gotten yourself into or to pay down your debt, investors are probably
just going to say no. Next up, insight number three: fit matters. So there’s a running joke in the industry that the relationship between
an investor and an entrepreneur can last 10 plus years, which is longer than the average marriage. And that is all to say that the fit between the investor
and the entrepreneur matters. And investors can often say no
when that fit is lacking. So, don’t only focus
on an investor’s money. You have to say what’s uniquely
relevant about them to you. If you can’t articulate how
they can strategically help you, in addition to just the money, they may just say no. Also, don’t just focus
on your introductory pitch. Pay close attention to the way
that the conversation unfolds over time, how quickly you respond
to their diligence requests and the quality of your answers. Because if you are giving
them the impression that it’s difficult to work
with you in any way, they’re probably just going to say no. And don’t forget to get them
excited about working with you. Talk about your momentum to date and the great people
who have joined your advisory board. If you’re not generating
an authentic feeling of “FOMO,” “fear of missing out,” it may be easier for them just to say no. And now, for the most obvious insight, number four: business basics. Because no matter how much
you prepare for the pitch or how much you click with the investor, if the fundamentals of your
business itself are not strong, investors are probably going to say no. What are the key topics here? First, don’t focus on small
or highly competitive markets. This is the difference between
pitching a corner restaurant versus software that could go
in all restaurants. If you’re not presenting a big,
multibillion-dollar opportunity that competitors can’t easily replicate, investors may just say no. Also, don’t just pitch an idea. Show traction. Investors know that ideas
are a dime a dozen, but execution is what really matters. So if you’re not showing things like initial customers
or partnerships or accolades, investors might just say no. And don’t forget about the numbers. You must, must, must know your financials, revenues, gross margins,
metrics, profitability. If the numbers aren’t compelling
and core to your story, investors will probably say no. And now for the final insight. Investors make mistakes too. It’s quite possible that you’ve done
everything right to get to this point and the investor still tells you no. And the truth is investors are human. And any great investor
should be humble enough to admit that they make mistakes too. But then what? What do you do if you remain one
of the 99 out of a hundred entrepreneurs who keeps hearing no? Well, it could be a sign. It could be a sign
that you need to change course or maybe even consider
shutting the business down. Or it could be encouragement for you
to double down on your business, to refocus on the business fundamentals
and to make your company stronger. Because if you make your company stronger, the investor may eventually
change his or her mind. Or you may make your company so strong that you don’t need
that outside capital after all. And if that’s the case, then why investors say no
shouldn’t even matter to you because you will be successful regardless. Whatever path you choose,
I wish you all the best. Thank you and good luck. (Applause)

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One thought on “Why VCs and Angel Investors Say “No” to entrepreneurs | Alicia Syrett | TEDxFultonStreet

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