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)