If this research were to uncover the ‘secret sauce’, entrepreneurs could prepare accordingly and drastically increase their probability of successfully acquiring the funding.
I was recently contacted by a graduate student working on a research project attempting to gain insight into the investment criteria for Angel investors. Last week, I attended the presentation where the results of this research were unveiled. While the student team of researchers was able to uncover several valuable pieces of data, they were intrigued by one common theme across all of the investors they interviewed.
The common theme was summed up as ‘gut feeling’.
The research team indicated that investors give heavy weight to something that their research could not quantify or measure by specific criteria. Investors go with their gut. This was somewhat shocking to the students as their assumptions expected to find a specific checklist of criteria by which an investment decision was made. While they did find that most investors have a checklist of sorts, that checklist never gets pulled out unless their ‘gut’ tells them to move forward.
“Investors have come up with ways to filter through life in a blink.”
I encouraged the students to continue their research and to dig deeper into this ‘gut’ decision making. I am confident that what we call ‘gut’ or ‘blink’ decisions are actually to a culmination of experience, knowledge, expectation, and wisdom screaming through our super-computer brains to deliver a final calculation to move forward or pull back in a matter of seconds.
A Glimpse Into Thinking Like an Angel Investor
Regardless of what goes into these ‘gut’ decisions, their research proves that I am not alone in my approach toward life.
Every investor I know wants to make money on their investment.
That’s logical, and it logically follows that a great team with a great idea whose intellectual property is protected for a product that uniquely solves a problem for a large group of customers is a slam dunk. In fact, many articles and books will list out these and many other things as essential components when presenting to Angel and Venture Capital groups:
- Great Pitch Deck
- Well diversified team with past successes
- All trademarks, patents, and copyrights secured
- Significant demand
- A base or early adopters
- High growth projections…
…the checklist of super-important items to successfully close your funding rounds is enormous. But there is one key “unimportant” element to your success that often gets overlooked – the first impression.
Through the years, I have received many pitches from individuals who somehow made it onto my personal calendar. I have also attended quite a few Business Accelerator events where graduates are making their case to potential investors. Start-up events are also a growing trend giving me the opportunity to check out super-early-stage businesses.
In each and every case, I begin by evaluating the same thing.
I’m not sure this first priority evaluation is intentional, but it is definitely first. If you don’t get past this checkpoint, I will never see or hear all of the reasons your business is great. I feel quite confident that I am not alone in this. I would go so far as to say that the vast majority of investors have this exact same evaluation starting point…
What is my first impression of the person standing before me?
It’s really that simple. Now actually gaining an investment requires all of the truly important criteria to be passed during due diligence, but you will never, I repeat never, get to that point if I don’t like you from the start.
Perhaps my colleagues are more mature than I am, but this is true for the vast majority of us. Successful investors have so many decisions to make on a daily basis that we have to filter our way through life in a blink. This blink decision or “gut instinct” is difficult to overcome. For this reason, you should put some real thought into very important, unimportant things like:
- Who should be the point man?
- How should I dress?
- What’s the best way to introduce my company? Does that change based on the audience?
- How does my content flow? Does it tell a compelling story?
Unless you get these “unimportant” things right, you will never get the opportunity to talk about the “important” things you have worked so hard on.