Founders need to wow funders in order to get them to sign the check, and as we know investors are smart guys. This is not because they have tons of money, but it's because they're used to dealing with smart founders. They see lots of pitches day in and day out, and they've got good at being able to differentiate between good entrepreneurs and bad entrepreneurs.
Now I understand that not every investor has a good track record at selecting the right founder, but having said that, their ability to test how good an entrepreneur is has been honed by years of experience. You need to understand that you're competing with lots of other entrepreneurs when you want the investor to give you his money. What can you do to stand out ?
This is one of the reasons why founders spend so much time on polishing their pitch. They usually present very rosy projections, and try to get warm introductions to the investor to create an element of trust. However, no matter how much you rehearse, , the actual presentation is often a make or break moment - you will rarely get a second chance . It's not so much how articulate you are ; how many slides you have; and whether you finish in five minutes or ten - what's much more valuable is how well you answer the investor's questions and tackle his doubts.
Investors don't want someone who will roll over and say, "yes" and agree with every suggestion we give. We want someone who's thoughtful - someone who will push back and who will prove that he's thought through these options. While an investor's thinking is often superficial, we're looking for an entrepreneur who's given the matter deep thought because that's his domain, and he has expertise in it. This is the kind of entrepreneur we're willing to back, because he's shown that he knows his own mind and can stand his ground.
Here's a secret - if you can show the investor that something which he ( and the rest of the world) thought was true is actually false, and that you can capitalise on this misconception in order to make money, they will be happy to fund you . Investors are always looking for founders who have an edge !
We want to be convinced that the founder understands what he's talking about , because this is what he's going to have to do on a daily basis when he runs his company. He will have to be able to tell a convincing story in order to sell to his customers; keep up with competition; and convince talented people to work for him as compared to another more established company.
All these are critical skills for the success of a company. It's very hard to assess these within a short interview, and which is why investors will deliberately ask founders uncomfortable questions to see how well he responds. Can he think on the spot? Can he answer objections without being objectionable? Is he able to explain what he's thinking about? Is he willing to be humble and listen to alternative points of view? How much does he understand about real life ? Does he have a head for business? Does he have a long term perspective and is he willing to create a win-win for everyone?
-By Dr. Aniruddha Malpani