How to be a well liked investor (to founders)
$150m of capital raised later, and seeing this movie many times in the audience now, it's fascinating how clear the common denominators are when meeting with extraordinarily successful investors.
Why they get all the best deal flow year over year. Why founders all say "you have to meet with THAT person".
Contrary to popular investor belief, it has a lot less to do with what this person invests in versus how they invest: a self fulfilling prophecy so to speak.
So here's a quick overview (for investors) of what founders care about and pick up on:
Bad investors:
Don't get it and tell you what you should be doing: Bad investors don't pay attention to your message and as a result have no idea what you are doing. They follow this up by explaining to you how you should be building this vision they've paid no attention to. They expect you to listen to them even though they've never built a business themselves, have limited VC experience, but have an MBA from Wharton (I mean no offense. I couldn't get into Wharton. Don't kill the messenger).
Waste your time: Bad investors fiend interest in your company even though they likely have no interest in investing. They like to meet for a cup of coffee just to "get to know you" so they can pass when you are actually formally raising. Or, they'll meet with you 15 times, spend time with your entire management team, provide detailed request lists, or even drag you in front of the full partnership for a discussion, only to then drop off the face of the earth for a few days before passing. They do this with every company they meet with and feel entitled to your time and attention. They are late for meetings or always "running behind" and constantly cancel and reschedule at the last minute.
Don't let you get through your deck, interrupt you, have condescending style: Bad investors won't let you present your deck. They think it's some sort of "style" to be provocative and perhaps condescending to see how you react. Reality is that entrepreneurs think this person is just a dick who won't let them finish a sentence nor present the business to them in the most effective manner so you come out with a clear understanding of what they are doing. Bad investors constantly check their cell phones - especially when you are answering a canned question they asked demonstrating they haven't been listening.
Always need comps "so it's like the Uber of nail salons but with a Yelp twist on Amazon": Bad investors cannot possibly understand what you are telling them unless they are able to compare it to some other existing model that is proven that they already understand.
Really truly care about how you determined the conversion rate on tab 3, row 18, column 6, in May of 2024 in the financial projections and want to argue about it: You want to know how I got that #? I'll tell you how I got the #. I frigging made it up so I can back into revenues 3 years from now that I know you are going to discount by 40% but will still support the deal math everyone will require in order to take new outside capital. You know I did this. So let's just focus on the 10m customers that could potentially be using our product in the next five years given this massive industry catalyst we've been talking about, cool?
Are very unlikable generally. Ego. Arrogance. Know it alls. Treat founders badly: Bad investors tend to think very highly of themselves and can be very unlikeable professionally. It's funny because sometimes the worst investor in this respect can be the most delightful person who you want to drink and hang out with in a different environment or situation. I don't know what it is (some say self confidence issues and insecurity, some say it's power corrupting) but something happens to bad investors when they are given capital to deploy or make a ton of money. They think it makes them special and better than others. Bad investors don't realize that no matter what fund they work at or how much capital they have or how much money they've made or what big unicorn they've invested in that, in the end, acting like an a-hole just makes them an a-hole. So when people talk about experiences with them, all entrepreneurs are going to say is "yeah, I met that person. He/she's an a-hole. Meet with them only if there's no one else". On the flip side, it's amazing how some of the most successful VCs who have helped create some of the largest companies also happen to be some of the coolest, balanced, available, curious, and modest people you'd ever meet. Truly.
Are unavailable: C'mon man - no, I don't want to come in for an hour and tell you about my business on May 18th because right now it is March 12th. Certainly appreciate your taking the time, but you're just a dick.
Say they are providing a term sheet and do not: I once had an investor drag a company I'm on the board of (raising a Series A) through multiple meetings, some of which included airplanes, three full partnership meetings and numerous detailed request lists over the course of 8 weeks. Associates calling the functional area leaders daily asking for all sorts of information and distracting from the business in every way. Every week for the last 3, they told the founder "we will be providing a term sheet this week". Finally, after nearly two months they "are providing the TS in the morning, for real this time, let's celebrate and talk about it over dinner with Andrew because he's in NYC". Then they passed without any real feedback and we learned later is was simply because they thought the deal would be "too expensive" or some other ridiculous excuse. Bad investor.
Let very green team members vet deals and have opinions: Contrary to what a lot of people say, I see nothing wrong with getting pushed down from the partner to a principal or an associate. There's nothing better than getting more support internally from people who put you in front of their boss, believe in what you are doing, have a voice, and help shepherd you through a process. Plus, junior peeps always move onto great things whether it's partnership or really interesting roles at other places - it's because they are the best and the brightest and that's how they got the job to begin with. So meet them and make friends. Bad investors, however, let very green associates fresh out of Harvard or banking do more than just "filter" out businesses that don't fit the thesis or some other key criteria. They let them have actual opinions about your business and tell you what those opinions are while empowering them to make decisions regarding whether the fund invests. Sorry Bobby, I don't care about what you think of ReversibleDiapers.com, we started the business when you were in high school.
Gossip, lie, back-channel constantly, and act like political animals: Bad investors gossip about founders, their companies, and companies they meet with like pre-teen girls in their middle school cafeteria. Every time you speak with them they start sentences with "I heard..." and you feel like you need to take a shower after every meeting. They use words like "back-channeling" often. They take forever to close because they neglected to tell you that they haven't closed their fund yet (but this deal will really be a great catalyst to put their LPs over the edge). They tell the founders one thing and other board members another while trying to manage perception and build alliances to impact change - versus being forthright and transparent. They never get voted off the island and they win a million dollars. They are generally full of it and try to bull shit the biggest bullshitters on earth, Entrepreneurs.
Ignore your timing: I love telling a bad investor who ignored my constant reminders about timing because "we want to get back to work" that we are about to sign a term sheet and watching them get all flabbergasted and ask for more time. Man does the deal become much more expensive for them after that because they realize all the traction we mentioned was quite real.
Don’t respect the hustle: Starting a business is the hardest thing anyone can ever do. By far (trust. I’ve been in M&A for a decade. I’ve been a buy side investor. I’ve been the bat shit crazy founder type. I was probably mediocre at all of these roles, but nothing compares to building something from scratch. Nothing.). As a matter of fact, most proven founders become VCs or do successfully, what VCs do professionally, in their spare time. The good VCs, they know this. They get it. They are empathetic and give founders (who are just trying to get it done) a break from the bullshit (investing or not) by treating them well.
Good investors
Normally "get it": It's very unlikely that your business is hard to understand after one 30 minute meeting (except for you, that person developing a geolocation machine learning neuroscience market network platform....no one understands wtf you are doing). No matter what stage it is in, I can promise you that your business is not too complex to understand after a decent pitch deck and 30 to 60 minutes. Good investors pay enough attention to what you are saying as you attempt to spoon feed them your vision so that they "get" what you are doing. They ask good questions you never thought of and after you meet with them you are thinking "damn, that person is really smart. Really got what we are doing quickly and really gave me some great ideas"
Provide feedback quickly: A couple of days (or one Monday meeting max) after you meet with a good investor, they provide you quality feedback regarding why they are passing or what they need to continue digging in. If you met with the partner of the fund, the pass comes from them (even if an associate drafted the email). [Note, for this reason, I normally like to have initial meetings with larger funds on a Thursday afternoon because things tend to slow down on a Friday and most firms have a Monday meeting where the message will still be fresh]. Either way, good investors respect you and what you are trying to accomplish because it's hard - so they don't let you stew.
Ask great questions when they dig in: When a good investor digs into your company, they are focusing on the right things and continue to ask quality questions. The more they dig in, the smarter they become, until you eventually realize they know as much about the business, if not more, than some of your team members. Soon they start to provide great insights showing they can actually be helpful (versus just money).
Provide guidance on their timing and process: If they are interested in digging in, you know exactly what a good investor needs in order to give you a term sheet - because they tell you. They are transparent about their timing, what else they have going on, how their process works, and what the next steps are. If you have a peloton moving and are driving towards a specific date, good investors try to meet your timing and tell you if they cannot. If they cannot, it's not because they are trying to bluff you into slowing things down for them, it's because they are being honest and just have other things going on.
Ignore gossip and avoid constant back channeling: Good investors don't gossip and form conclusions to make real decisions based on what their other investor friends say about people or companies. They dig in, form their own conclusion on the team and business, and take everything they hear from the market with a grain of salt. After they invest, you never hear a good investor start a conversation with "I heard...". Good investors are social and collect information, but they know how to distill it
Want to get it done if they make a decision to invest: Good investors make it as easy as possible to get a deal done once they decide they want to invest. The negotiations are not knuckle bleeding and you don't wind up talking about inconsequential things that aren't company friendly (these are also known in the legal tech community as "that's very New York"). They do enough work in a fast yet non-distracting way so that by the time a term sheet is signed, close is just a matter of confirmatory diligence, background checking, and lawyers pissing all over each other.
Don't lead you on: Good investors always let entrepreneurs know exactly where they stand and work on developing a meaningful partnership, even if it's cultivating you for your next business, right from the very start.
Come to your office: They want to see what you have built, what the culture is like, what you are all about and walk the halls. They want to be a part of things.
Give a shit about your process: When you tell a good investor your timing, they make a decision regarding whether it makes sense for them to dig in given everything else they have going on and how realistic it is that they will be able to do their work and get to the finish line. If they think they will, they do all the work they possibly can in order to meet your timing. If it's clear the stars are just not aligned, they will tell you that the timing just doesn't work for them.
Tell the truth: You never have to try to figure out what a good investor is "really trying to say" or "what are they really thinking" or "what are they not telling you that they are telling others". It's because they are normally telling you the truth because in the end it benefits you, the process, and the company.
Are likable: You want to hang out with good investors.
Their portfolios like them: When you talk to founders of their other companies (that they haven't introduced to you), there isn't a pattern of signaling or negative feedback. You don't hear stories making them seem slippery, untrustworthy, or machiavellian.
You like them more after you meet them - even if they pass: After you meet a good investor, whether it's for one meeting or 20, if they pass you can't wait to tell them about the next thing you are doing.
There's many more common themes we’ve seen over time, but hopefully the above is pretty all encompassing and helpful. Don't get me wrong, by no means am I saying "good investors don't care about valuation and just give out easy peasy term sheets". Sure, that helps generate a founder friendly reputation, but I certainly wouldn't want to be an LP in an investor without discipline to mitigate a risk profile that's clear.
All I'm saying is that there's a common theme between investors who are successful and see all the good deals and those that won't over an extended period of time. Be wary of the latter if you are raising and try to make adjustments if any of these characteristics describe your approach.