In Search of True Believers

I’m fond of saying that raising capital for a startup (or any risky early-stage venture for that matter) is not about convincing the skeptics, but rather finding the true believers.  

When someone says they’re skeptical about the market size, or concerned about the distribution/sales plan, or unconvinced the technology/product will ship on time the entrepreneur’s natural impulse is to try to persuade.  With anecdotes, market data, and sheer force of will… I shall convince Mr. Investor of the flaws in his or her thinking.  

This does occasionally happen.  Lightning also does occasionally strike twice in the same spot and people occasionally win the lottery.  In general though, it’s a massive waste of time trying to convince an already skeptical investor.  People who invest in risky early-stage ventures need to have a pretty high degree of enthusiasm about an opportunity to ultimately invest.  So unless the starting point of the investor’s confidence is quite high, an investment is unlikely to ever be consumated.  

Assuming an entrepreneur is pitching the right prospective investors (e.g. ones who invest in that stage, sector, and type of company), fundraising is ultimately about finding the folks who are already true believers at some level.  Some of the people you think could be true believers will turn out to be skeptics, and similarly some of the folks you thought were low probability will surprise you wth their enthusiasm.

But ultimately successful fundraising outcomes are produced by navigating to those true believers, rather than convincing skeptics.  Remember that and allocate time accordingly.

Lee Hower

I’m an investor, entrepreneur, and helper of technology startups. I’m currently a General Partner of NextView Ventures, which focuses on seed stage internet-enabled businesses. I co-founded NextView in 2010 with my partners Rob Go and David Beisel. I started in the VC business as a Principal at Point Judith Capital, an early-stage firm. I joined PJC in 2005 and served as a Principal at the firm through early 2010. During this time I co-led investments in FanIQ, Sittercity, and Multiply and sourced investments in Music Nation and NABsys. Prior to becoming a VC, I was a startup guy myself. I was part of the founding team of LinkedIn, and served as Director of Corporate Development from the company’s inception through our early growth phases. Before that I was an early employee at PayPal, and worked in product management and corporate development roles through the company’s IPO in 2002 and subsequent sale to eBay later that year. I went to college at UPenn and received degrees from both the School of Engineering and Wharton School of Business.

    • amir irwan

      It’s almost the same in finding the first few customers too following the Product Lifecycle graph where trying to convince laggards/late majority in the early stage is a waste of time. Focus should be in finding the early adopters/innovators. They are the true believers.