How to Approach an Investor (and How Not to)

How to Approach an Investor (and How Not to)

As I’ve said before, there’s nothing like the rush of that lightbulb moment when a great idea arrives. I’ve experienced it myself several times. It’s the best part of being an entrepreneur. Everything that follows is hard work.

The two hardest things to talk someone into are their vote and their investment. On the heels of closing PebblePost’s Series B funding, it seemed a good time to offer some suggestions on how to approach investors and — just as important — how not to.

Your idea is not about you
The first thing you need to do if you’re a serious entrepreneur is check your ego. You have to become your own toughest critic. Just because you think your idea is a home run doesn’t necessarily mean everyone else will. You don’t want to come across like this guy.

Even more important, you can’t take negative feedback personally. Arrogance never plays well with potential investors. 

Building a company is about building relationships
Respect was inherent in the entrepreneur–investor relationship when I started raising money for my first stand-alone venture in 1998. There wasn’t much of an angel market in the New York community back then, so basically you networked with friends and family.

One friend I approached was John Roberts, whose nickname was Jocko. (He’s since passed away.) John was one of the four founding members of Woodstock, the landmark music festival in 1969. My dad, who was in the music business, was also at the founding Woodstock meetings and served as a key advisor to the Woodstock venture, as well as many of the bands and labels.

John wasn’t the stereotypical rock impresario. (His New York Times obituary noted that his “taste in music favored Gershwin over the Grateful Dead.”) But as an early venture capitalist, he was looking not just for an investment but also for an extraordinary experience. Woodstock was certainly both. John also financed a recording studio in Manhattan called Mediasound. He always said he had a vested interest in my career because he gave me my first job as a studio gofer and later an assistant engineer.

When I was looking for people to back my first venture, John was naturally one of the first people I thought of.

Even a “no” can be valuable
John and I met every couple of months at diners in Midtown in the music industry district. After a while, he noticed the strain I was under. By then I already had some employees, but I had no money in the bank to pay them for any length of time. I was stressing.

“Don’t worry,” John said. “You’re going to get your money.”

I felt a wave of relief. “Great!” I said. “So, you’re investing?”

His answer caught me off guard. “No, I’m not,” he said. “But you’re going to get your money.”

John had been a venture capitalist long enough to be able to tell which deals would get initial capital and which wouldn’t. And although my venture — a free online investment site and newsletters — was too far outside the scope of his interest for him to get involved, he could tell that it had promise and would get funded. Just as important, he could tell that I was both determined enough and open-minded enough to give it the best shot possible.

Along the way I met Paul Hirschbiel, a seasoned professional investor who was on the board at Dell.

Actually, it was my second meeting with Paul Hirschbiel that made it happen. The first one got canceled. But that reinforces my point that you can’t take rejection personally if you want to make it as an entrepreneur. 

If at first you don’t succeed, reschedule
My first meeting with Paul was at his office on the east side of Midtown. Now, maybe it sounds like I’m asking for little violins to play, but working your way across Midtown from 8th Avenue to 3rd Avenue at midday in the heat of summer is miserable. There’s no good transportation, the sidewalks are jammed and it’s probably an asphalt-adjusted equivalent to 110 degrees. But it was an important meeting, so I put on a jacket and tie, grabbed my business plan and ventured over.

When I got there, Paul was tied up on the phone because of a major issue that he had to sort out. After 45 minutes, a woman came out and told me that Paul was incredibly apologetic, but he couldn’t take the meeting with me that day.

There are two ways to deal with a situation like that. The first is to act annoyed and take it personally. Had I done that, my relationship with Paul would have been over before it began.

The second way to react is to be gracious because you realize, as I did, that a prospective investor owes you absolutely nothing — not even their time. I thanked the woman and prepared to leave. She told me she would reach out later.

Later that afternoon, she called and relayed an offer from Paul. He would meet me for lunch within the next two weeks at any restaurant of my choosing (on my side of town, no less) and by then he would have read every page of my business plan. Class act.

And that’s what he did. We met for sushi at Mount Fuji on 56th Street, and Paul ended up investing.

Not that he wrote me a check over lunch that day. He actually grilled me pretty good, playing devil’s advocate and poking holes in my plan. Mostly, he wondered how a kid like me could have the access and special relationships needed to get the deal done. But, over time, he became convinced that I had the enthusiasm to will it into being.

Beyond his initial investment, Paul proved incredibly valuable. His name helped push things beyond the “friends and family” stage and attracted other professional investors. It confirmed Jocko’s point that I would get my money if I kept plugging away at it.

Later, I saw the same thing in my portfolio. I could tell which deals were going to work and which weren’t. And a lot of it came down to simple karma in the community of entrepreneurs and investors. Mutual respect matters as much as money, regardless of outcome.

#Funding  #venture capital  #startup  #entrepreneur  #investor

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About Lewis

Lewis GershCurrent Chief Stamp Licker (a.k.a. CEO) at PebblePost, former VC in adtech, long-time endurance athlete, happy dad to “The Heathens.”

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