Recently, I’ve noticed a trend among founders who are early on in their journey of launching a company and considering raising capital. They are understandably fixated on building an impeccable product and optimizing their business given the intense focus on metrics and growth by VCs (especially in today’s market!). 

But many founders overlook an important element in influencing investors and getting them excited to invest, their personal reputation.

The Importance of The Founder's Reputation

Founders often don't realize how any opinion or perspective of them- from the obvious, like how well they execute a product vision, down to the very minute and easy-to-ignore superficial feelings people have about them- can influence an investment decision.

When it comes to evaluating a founder and deciding whether or not they're a leader worth backing, most can anticipate the typical reference checks that investors do when considering an investment. These may include checking in on past managers and getting their opinions, or finding people in the founder's network who might have valuable insights. The softer checks to get a sense of what the community thinks of you as a person carry way more weight than most think!

Especially when there isn't overwhelming data or hockey stick-style growth driving an investor’s excitement, this stuff matters.

The Influence of Perception

I have many specific memories of this phenomenon. I’ll share one in particular that comes to mind (with some vagueness to protect identities).

Back during my Greycroft days, I started looking at a company that had some intriguing elements. The product was compelling even though it was in beta, and there was some initial customer traction. But as I started digging deeper, I began to hear murmurings and non-specific references to this founder's shady behavior. Just a single mention of impropriety was enough for me to slow down my pursuit of this company.

Even though there was no explicit evidence, the mere hint of foul play slowed my interest and made me doubt the founder. I shared my reservations with others, impacting not only our investment decision but potentially those of others in the industry.

Was this fair? Maybe. Maybe not. But it was and is a reality of how decisions get made. Something you need to be deeply aware of.

Influencing Investment Decisions

On the flip side, seemingly superficial takes on a founder can also work in a founder's favor. A casual run-in with a founder where the investor’s only takeaway from the non-business conversation is a positive feeling, can go a long way in pushing that investor’s perception of a potential investment. Simple affirmations like "She's great" or "He's a good dude" can be what propels many investment rounds across the finish line.

This SEEMS insane to rational folks outside the VC industry. How could “good dude” be a relevant contribution during an investor committee meeting?  I’ll save the deeper explanation for a future essay. For now, I’ll leave it at… I don’t know what to say, but it is.

In ventures and startups, there aren't any casual encounters. Even though you aren't being explicitly judged, you are providing data points, fair or not, that go into an individual investor's and the broader investment community's evaluation of you as a founder and your company as an investment opportunity.

Protecting Your Reputation

What’s the main point? It's critical to protect your reputation and understand that a significant part of the evaluation that goes into an investment will be non-scientific.

What can help with this? First, maintain a high standard in how you conduct yourself in all situations. This isn't just fundraising advice; it's good life advice. Think about the New York Times test: Would you feel comfortable if what you were doing or saying were headline news? Small actions, behaviors, and words can become rumors or talking points that people share about you when investors are checking you out.

Lastly, if your goal is to leave any interaction with a potential investor or a connector to an investor with a positive feeling, you can't go wrong. This isn't a push for people to be superficially sweet or fake. Sometimes, honesty and truth might not come off as positive. But overall, remember that your reputation will stick with you and will significantly influence how investors think about you, conduct due diligence, and make final decisions on whether or not to invest in you.

Takeaways

1. Don't Underestimate Your Reputation: Understand that your reputation goes beyond professional references. It extends to the seemingly insignificant opinions formed by every interaction you have.
   
2. Beware of Off-the-Record Discussions: Be aware that even unfounded or vague negative murmurs about your character can influence investment decisions. Before making an investment, investors often pick up on even minor negative hints which may slow, or entirely stop, the process.
   
3. Positive Impressions Matter: Remember that superficial interactions can leave a positive impression and contribute to a positive reputation. Positive insights about you can significantly encourage potential investment.
   
4. All Interactions are Data Points: Understand that in the venture world, there is no such thing as a casual encounter. Every interaction provides information that could factor into an investor's analysis of you as a founder and your venture.
   
5. Apply the New York Times Test: Conduct yourself as if your actions and words were to be featured on the front page of The New York Times. Small behaviors or remarks can turn into narratives about you.
   
6. Infuse Positivity In Your Interactions: Try to leave a positive feeling with every interaction you have within the ecosystem.