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How to Convince Investors

paulgraham.com

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Re: How to Convince Investors

#61

Post by badclient »

wellboy wrote: post #17

The only thing you need is traction. Anything else doesn't matter. It seems insane, but investors are blinded by traction. If you are a startup that has low scalability, but you have traction, you will get funding If you are insanely scalable, a great idea, but you don't have traction, you just won't get funding. It doesn't matter how awesome your team is. Investors just can't see good ideas through the traction curt…

The only thing you need is traction.

You're only saying that because you've never tried raising funding for a company with traction. But except for very rare exceptions, even when you have traction there are a whole new set of questions about the nature of the traction.

Re: How to Convince Investors

#62

Post by joonix »

theorique wrote: post #52
keiferski wrote: post #30

Earlier quoted context omitted.

I feel like this may be a tech-centric phenomenon, unfortunately. In a lot of industries, omitting the right keyword from your CV will exclude you from interviews.

I feel like this may be a tech-centric phenomenon, unfortunately. In a lot of industries, omitting the right keyword from your CV will exclude you from interviews. Thing is, past the first N years of your career, your CV / resume doesn't (or shouldn't) matter much. Ideally, you are connected to important people in your industry, who know what your work (or portfolio) is, and what you are best suited to do. In such a…

Some people do great work but aren't connected to others. They don't immerse themselves in their field, they aren't vocal publishers or active members of organizations.

Re: How to Convince Investors

#63

Post by pg »

rmason wrote: post #46

There's one error: Microsoft did raise venture capital. They did it a matter of months before they went public. https://news.ycombinator.com/item?id=2339287

Yeah, I know. But that was not fundraising in the sense I'm talking about. That was just to support the IPO price.

Re: How to Convince Investors

#64

Post by solistice »

jt2190 wrote: post #60
larrys wrote: post #48

Earlier quoted context omitted.

Similar also to "the method" in acting: http://en.wikipedia.org/wiki/Method_acting I use this in negotiation as well. You convince yourself that you are playing a role and do what is consistent with the role you are playing. You are an actor. Takes quite a bit of practice.

I'm having difficulty squaring what you do with what pg is recommending: > And by convince yourself, I don't mean play mind games > with yourself to boost your confidence. I mean truly > evaluate whether your startup is worth investing in. Isn't "playing a role" a form of mind games?

I think it's reconciliable over the fact that by setting out to become a certain kind of person/startup/something, you become it. After you're there, it'll be the truth, and not a mind game anymore.

As a personal example, I started dancing, and after watching the movie Step Up 3, I decided that this guy (http://youtu.be/EKIgbR_V8fs?t=1m2s) danced really well. So I set out to dance just like him. At the beginning, it was me akwardly dancing in front of my bathroom mirror at 3 in the morning. Now I can do what he does, and more.

So yeah, fake it till you make it, and then go get some investors.

Re: How to Convince Investors

#65

Post by GFischer »

theorique wrote: post #52
keiferski wrote: post #30

Earlier quoted context omitted.

I feel like this may be a tech-centric phenomenon, unfortunately. In a lot of industries, omitting the right keyword from your CV will exclude you from interviews.

I feel like this may be a tech-centric phenomenon, unfortunately. In a lot of industries, omitting the right keyword from your CV will exclude you from interviews. Thing is, past the first N years of your career, your CV / resume doesn't (or shouldn't) matter much. Ideally, you are connected to important people in your industry, who know what your work (or portfolio) is, and what you are best suited to do. In such a…

"Ideally, you are connected to important people in your industry"

That's why being suckered into backend positions with little or no contact with customers or other parts of a company is often not a good idea, even if the pay is good and the tech interesting.

Doing postgraduate studies, participating in events, speaking, all of those are very important, yet, at least in my case, I only learned about those relatively recently.

I know some good people that don't do this, and they get outsmarted in the career ladder by the more gregarious types (which, in some cases, did worse work, or even worse, some sociopathic/liar types). That's also a reason not to work in big companies :) unless you're a good hand at self promotion and office politics yourself (and there are some toxic companies where not even that can save you. Usually monopolies or oligopolies).

Re: How to Convince Investors

#66

Post by bqe »

jt2190 wrote: post #60
larrys wrote: post #48

Earlier quoted context omitted.

Similar also to "the method" in acting: http://en.wikipedia.org/wiki/Method_acting I use this in negotiation as well. You convince yourself that you are playing a role and do what is consistent with the role you are playing. You are an actor. Takes quite a bit of practice.

I'm having difficulty squaring what you do with what pg is recommending: > And by convince yourself, I don't mean play mind games > with yourself to boost your confidence. I mean truly > evaluate whether your startup is worth investing in. Isn't "playing a role" a form of mind games?

That's not how I see it.

It's more like, if you can't truly convince yourself that your startup is worthwhile (or becoming the character via method acting), then your startup/character/acting method should be changed because other people won't believe it either.

Re: How to Convince Investors

#67

Post by arnoldwh »

It's a bit like a game. It's the investors job to eliminate false positives and vs. a first time founder, investors will typically have an advantage in that they've been through this many times before.

Trying to "beat the system" is like trying to beat investors at what they would on average be the best at doing and potentially sending inadvertent false positive signals caused by the nervousness of being new to fundraising.

If you focus on what PG recommends, you eliminate a lot of that friction since you eliminate the nervousness.

My tl;dr: In the fundraising lottery, it's easier to sell investors a ticket than trying to convince them you have the winning combination.

Re: How to Convince Investors

#68

Post by wellboy »

badclient wrote: post #61
wellboy wrote: post #17

The only thing you need is traction. Anything else doesn't matter. It seems insane, but investors are blinded by traction. If you are a startup that has low scalability, but you have traction, you will get funding If you are insanely scalable, a great idea, but you don't have traction, you just won't get funding. It doesn't matter how awesome your team is. Investors just can't see good ideas through the traction curt…

The only thing you need is traction. You're only saying that because you've never tried raising funding for a company with traction. But except for very rare exceptions, even when you have traction there are a whole new set of questions about the nature of the traction.

Sure, not all startups that have traction will get funding.

The point I wanted to make was that there are just so many startups that got funding because of traction, but that have such a low scalability. I always think to myself when I see read these stories: "Dude, this can be worth $50M/a 10x return max. Blinded by traction again."

Re: How to Convince Investors

#69

Post by RogerL »

salimmadjd wrote: post #47

That's the secret. Convince yourself that your startup is worth investing in, and then when you explain this to investors they'll believe you. This is one of the best advice for both fund-raising or anything else in life and it's basically the same strategy Arnold Schwarzenegger used to become the "number one star" in hollywood [1] as explained by Steve Chandler: * ...Then I asked just how he planned to become Hollyw…

I don't quite buy it. We may just be seeing selection bias How many thousands do that and fail miserably? We never hear about it. How many luck into things? We hear about them, but don't then discount Arnold's story by some Bayesian amount of doubt. And how many get completely burned by trying to live as if they are something they are not, and get ostracized as a result?

Hollywood is filled with people trying to act like they are a great star. Almost none of them are, nor will they ever be one.

Re: How to Convince Investors

#70

Post by joshu »

wellboy wrote: post #17

The only thing you need is traction. Anything else doesn't matter. It seems insane, but investors are blinded by traction. If you are a startup that has low scalability, but you have traction, you will get funding If you are insanely scalable, a great idea, but you don't have traction, you just won't get funding. It doesn't matter how awesome your team is. Investors just can't see good ideas through the traction curt…

understand that even the best investors have to pay heed to the Pattern because it tells you when things are different. it is very, very hard to evaluate, from scratch, every opportunity that comes your way. (I myself have been pitched a thousand+ times. Augh.)

the Pattern is helpful because it is the differences that make companies succeed or fail; bad investors automatically think that differences from the Pattern are automatically bad.

that said, traction is one fact that makes all other hesitancies and issues disappear. that is why so many investors have their minds changed by it. "I don't love this idea but the graph goes up and to the right, so I'd better talk to them."

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