Updated: Aug 10, 2019
I received a classical corporate finance education. SWOT analysis, cash management and unit economics, marketing 7Ps. I also used to beleive that a business was defined by its profit and loss statement and balance sheet. As a young and eager professional, I set out to apply these theories but nobody was listening...Boy did I have a lot to learn! I hope to continue learning, and I read and do as much as I can, especially when I am introduced to a new concept, way of thinking, disruptive business model or otherwise interesting philosophy about subjects that are relevant to me. So when I became aware of Lean Startup and Agile Methodologies, my world was blown apart and I craved opportunities to see these new found techniques, attitudes and cultures come alive so that I could have hands-on and personal experiences. This lead me to spend the last 5 years of my professional life dealing on a daily basis with the interactions and negotiations between investors and startup founders. As you can imagine this means hundreds of startup pitches, events, competitions and due diligence sessions. More recently I have become very interested in understanding cognitive biases, behavioral economics and mindfulness as it affects the decisions and actions of founders and investors alike. There is so much to learn and understand...and so much remains unknown. My mistaken approach (but also that of many startup founders) is that we have become reliant on technologies and platform solutions to solve many of our problems and issues. Whilst this makes for a better world on many counts, when one is involved with something as personal and consistently unique as fund raising for a startup venture, we should be tapping into our emotional intelligence (EQ). Silicon Valley´s solutionists are yet to automate this, although many efforts are being undertaken.
Fundamentally this is about understanding your strengths and weaknesses as a founder and playing to your strengths as well as to the strengths of the investors you choose to have interactions with. It is simply pointless to send a cold email to an investor when your startup is not a fit for their investment thesis. You need to maximise your effort to find a connection from someone who is seen as credible to the investor you wish to approach. Furthermore you have an understanding of the profile of investor, not from a skills base, but on a personality assessment that you want to build an 8-10 year relationship with.
Founders must understand the expectations and low probabilistic outcomes that you are dealing with as a startup founder. When you know that only 1 in 100 startups are succesful and less than 3 in 100 of startups that enage with VCs are invested in, you will learn how to not take rejection personally, move on, and better yet, find a way to create an opening for an introduction to an investor who is likely to be a better fit for you.
At this junction it is critical to point out that obtaining investment from an external investor is only one measure of valuidation. There are various and exciting stories of startups that did it all with minimal or no external finance.
Remember, you don’t raise money to build your product, but to finish it. You don’t raise money to find your market, but to own it. You don’t raise money to develop your sales process, but to repeat it over and over again - joeprocopio.com
Finally, when you eventually do get a breakthrough and you get that first introductory meeting it´s all about you and your founding team. At this early phase, the sole thing that is of any relevant importance to the investor is an intuitive personality assessment of you as a leader, and your potential to execute, against all odds, on your startup´s promise to earn improbable returns. Don´t blow this opportunity talking about technical and irrelevant details, maximise this opportunity to build the foundations to a telling relationship and take steps to stay in control. In practice, that is more likely to lead you to a second follow up meeting.
Last time I checked, the dystopian future of the Matrix or Terminator movies is yet to come upon us. Let´s keep human relationships at the centre of our business dealings.