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