If you want to get great at fundraising, you need to understand investor psychology. Today I want to help you to get clarity around one of the biggest anxieties crossing an investor’s mind every time they see a deal.

Selling and Understanding Your Buyer

Let’s consider the common sales interview question: “Sell me this pen.” The untrained salesperson often launches into raving about the craftsmanship, materials, and vibrancy of the ink, showcasing the product features until they run out of things to talk about.

Instead, the experienced salesperson first asks questions about what the buyer really needs, allowing them to tailor their pitch accordingly. If all the buyer care about is how it looks in their coat pocket, then the seller is wasting their time describing the weight or ink quality.

Founders fundraising for the first time are rarely equipped with insights into the mindset of an investor so they don’t know how to influence them and address their concerns.

“Why Am I seeing This Deal?”

At the earliest stages, it’s impossible for an investor to predict whether or not the deal in front of them will amount to the fund-returning home run they’re looking for- the lens through which they’ll view your opportunity is still very subjective. Is the investor seeing this deal because of something negative- like everyone else already passed on it and the founder couldn’t get to anyone else- or it because of something positive, such as their incredible network of founders shared the opportunity, or they’re getting the exclusive first look because they did a favor for someone close to the founder?

Because investors have this anxiety, it's the founder’s job to make sure that their communications and the motion that brought their deal to the table have a positive answer baked in to that anxiety-ridden question- “Why am I seeing this deal?”

Are Warm Intros the Answer?

While I’ve referred to warm intros as the lifeblood of fundraising, investors will sometimes have doubts about these as well. There are perverse incentives all over- maybe somebody has equity in a company that isn't doing well and needs it to raise more money. Perhaps there is some sort of payout attached to an investment. Or maybe it's just someone making good on a favor they owe and they don’t actually believe in the deal. Warm introductions may come with their own baggage and an investor who’s been burnt before will still have these anxieties coloring their perception.

What constitutes a good introduction? Having an unbiased, trustworthy individual who is not an investor mentioning the company out of genuine admiration and excitement.

Coaching Your Connector

After you’ve secured a connector, I recommend practicing light coaching before they reach out to the investor. If you're providing copy for them to use, make sure it sounds authentic and not overly salesy. The best setting is when a connector gives off a truly excited vibe about you and your business without appearing to be pushing too hard.

Addressing Investor Anxiety

This might sound a bit counterintuitive at first, but the best way for your deal to reach an investor is actually for them to feel like they discovered you organically. This can take many forms: coming across a glowing review from your customer; hearing about you from an unbiased, trustworthy third party (perhaps a founder in their portfolio); viewing a talk you gave at a conference or a thought piece you wrote demonstrating your unique insight, etc.

Wrapping Up: Tactical Takeaways

Here are a few key takeaways to keep in mind:

• Be prepared to address investor anxiety: Remember that investors will be wondering why they’re seeing your deal. Make sure the way that you reached them, or better yet the way they discovered you- feels authentic.

• Position yourself to be discovered by investors: The best way for an investor to learn about your deal is either through an unbiased, trusted source without ulterior motives AND when they feels they've discovered you organically.

• Highlight customer testimonials: Positive reviews from customers or users can be highly indicative of positive traction and persuasive to potential investors.

• Coach your connector: If you provide a template for the introduction, ensure it allows your connector's authentic tone to come through. It shouldn't be too salesy. The connection request should signal genuine excitement and not push the investor too hard.

Don't rush the process. Just like selling that pen, it's all about understanding your buyer.

Be chased,
Jason