MapBack when we were raising our seed round, I remember hearing all the time that early-stage investors “invest in people, not companies.”
It always sounded like one of those things people say to make themselves sound nicer than they are. After all, these were Venture Capitalists, renowned for their keen business insight, and their ruthless pursuit of huge markets and new business models.
But now, when I meet with young companies, I understand what investors mean when they say that.
See, a seed stage founder making a pitch is like someone telling an investor about their plan to sail from Spain to America.
The plan: Sail from Spain to America (map source)
The founder paints an amazing picture of life in the new world. Talking about how cool New York is going to be, what buildings they’re going to build when they get there, and even some rough outlines of what the subway schedule might be like.
Our projections say New York is gonna be yuuuuuuuuge! (photo source)
The thing is, though, on the other side of a table the map looks a little different.
It’s 1491, and no-one has been to America before. In fact, no one even really knows whether or not America exists. Sure there’s probably something there, but who knows what it is?
How the world looked in Spain in 1491 (map source)
Remember: Christopher Columbus thought he was sailing to India. He told his investors he was going to come back with tea and spices, maybe an elephant. He had no idea that he was going to end up in the Bahamas.
So when an investor is listening to your pitch as a seed or pre-seed founder, they are not putting a lot of stock in your tales of the new world. You’re promising them elephants and they’re thinking to themselves “Will this kid bring my boat back in one piece?”
As a company grows, it is guaranteed to pivot at least once and probably many more times after that. Your best customers will come from an unexpected market. A huge competitor will enter the market with millions of dollars to pour into marketing. Regulation or technological advances will render your product obsolete. This stuff is going to happen.
So while your plans for New York are important in understanding what you’re trying to accomplish, they are nothing without a team who can get across the ocean without sinking.
Reflections on an unhappy ending
What seed-stage investors are looking for is a team that is going to be able to deal with the huge changes that are in store for the company. People flexible and resilient enough to handle the pivots, with enough self-knowledge and awareness to see them coming.
This is why investors like second- and third-time founders. Sure, maybe they lost everything and had to swim back to shore. But they come back with a new map:
Experience is luck you can use more than once. (map source)
They’ve seen some of the pitfalls, and they’re less likely to sink the boat on the first rock out of the harbor.
So when you’re putting together your pitch, ask yourself: Do we seem like people who are going to bring the boat back? Will we be able to make adjustments to the plan without running ourselves into the rocks?
When talking to investors, demonstrate some self-awareness. Let them know what you are sure of, what you are guessing, and what you are just hoping is true. Show that you are aware of the risks and keeping an eye out for new ones you haven’t discovered yet.
Show flexibility. Think through some of the obvious pitfalls, and potential pivots. Look for adjacent markets that could also hold value. Be ready to admit when you were wrong. Take feedback well.
Show an early-stage investor that you have what it takes to bring the boat back, no matter what. If you can do that, you will be far more likely to get what you need to set sail.
The Sketched Arrow 