If you’ve been following along the episodes of Inside the Mind of An Investor, guess who’s been behind the scenes! Yours, truly. My eagerness to watch (and edit) each episode is almost parallel to my enthusiasm for watching Stranger Things and Moon Knight.
I came to these videos with largely a blank slate of the thinking behind the investor world. Despite a few years of watching Shark Tank under my belt, I am constantly baffled by how investors decide to invest in, or decide to say “I’m Out” (I’m looking at you, Barbara) for companies. As a high school junior(!), I am still largely unsure about what I want to do in my future, and learning more about the nuances of investing has been beneficial in learning about unique career paths. Every 5 episodes, I will be gathering my thoughts and takeaways.
Finding the right investor is a Where’s Wally? game 🧐
We all know that tedious process of copy and pasting a template into our email composition and changing just the name hundreds of times. Even I hopped on the bandwagon last summer and tried to reach out to a bunch of college professors to do research with — to no avail. I’m actually impressed at how people can manage to cold email hundreds of people without getting tired after the fifth person. Alas, my stamina is not very high.
This season, however, I’ve noticed investors discussing more about cold-emailing. There seems to be a paradox (my English teacher would be proud) surrounding this concept. Some investors don’t believe in cold-emailing and some live by it.
Take Sarah Fay, for instance, who generally strays away from it. She believes that cold-emailing enforces the idea that I call, “You Missed 99.99 Percent of the Shots You Took.” According to my extremely developed experience with romance, these cold-emails seem like blind dates or high school relationships — most don’t end up working out, but a small percentage do. Sarah finds that, instead, targeting and pursuing an investor that has matching interests and the right type of support is more effective — and in the long run, likely more beneficial for the founder. Hear one way a founder reached out to Sarah on LinkedIn and got her to invest.
To some extent, Andy Miller has similar thoughts. A founder tagged Andy on Twitter with an animated video personalized to him on why he should invest in the founder. To Andy, the video told a lot about the founder — the creativity, initiative, scrappiness and out-of-the-box-thinking they utilized for the video was a reflection of how they were as an entrepreneur. If someone made a video just for me, I’d probably invest in them, too.
However, Andy started his story off with a disclaimer: “Don’t come through Linkedin, don’t flood my inbox, I get that all the time. If you don’t come in through someone I know, you’re not going to get my attention.” Aside from those rare creative moments, founders will usually come in through warm introductions, or connections through mutuals. My understanding is that this is one of the most common ways that startups get connected with investors. This is a worrying reality because young entrepreneurs like me, who don’t already have a large network or a pipeline to investors (though I was lucky to arrive at yC to start building one early), will have a tougher time finding investors that can help drive forward their startup.
Fortunately, David Chang found that some investors are intentionally open to cold emails. Some find that cold introductions are one of the only objective methods for reaching and pitching to judges.
I so agree with this. Yes, investors often don’t have the time to be sifting through dozens of cold emails, but if you’re committed to opening up the pipeline for underrepresented founders, sticking to the “trusted referrals adds credibility” route is not helping.
With my ideator cap on, I wonder if some type of platform can be created where investors and founders can meet through cold introductions online. Investors open to objective connections share their interests while founders share their startups. If founders find an investor that aligns with their needs and targets, they could reach out and make a targeted connection there. Sort of like an investor-founder dating app (apologies for all the dating references), but not with swiping left and right. Maybe there is already a platform out there for this. If so, please HMU because I would love to take a deeper dive into this.
What investors like to understand from the get-go
Most investors, like Joshua Summers, have criteria for what they want to see in a pitch. One important criterion he shared that stands out the most to me is explaining why the founder is uniquely qualified to solve a problem. It reminds me of Episode 5 of Season 1, where Melissa Withers said, “Why this? Why you? Why now?” (I love that quote — I used it in a business competition once. I’m sure I sounded very cool saying it.) There is a common theme among investors that it is important to communicate that you are solving a problem that is being truly felt. Hear Joshua give an example of his ideal problem description.
Similarly, an investor like Debi Kleiman goes into pitches wanting something specific: unique insights — a nugget or lens that the founder has about industry, market trends, or consumers — that she has never heard before. Something that isn’t obvious. If that makes her go “WOW!” then Debi is all in.
It’s easy to say that you understand your problem, consumer, and solution, but it’s hard to actually know whether you have a compelling statement for this. For instance, how are you supposed to know if the problem is valid when you haven’t even tested it on a user (whom you’re not sure if they need your solution?). Debi said that it was just as important to know who isn’t your customer as to know who is your customer. From being at bootcamps at yC to conversations I’ve had with entrepreneurs, I realize that the most important thing is to test. By testing your solution more, you not only know more about your idea to storytell about it, but those testing results are traction for investors to go off of when you’re pitching.
Looking forward to Season 3, we have the infamous quote that Vicky so loves. “A feature isn’t necessarily a product, a product isn’t necessarily a company, and a company isn’t always a good investment.” — Raza Shaikh, Managing Director of Launchpad Ventures (his interview will kick off Season 3).If you’ve seen or heard that anywhere — on the form for the yC Innovation Challenge, on our Twitter, or through a Zoom meeting, these episodes will finally reveal to you the context.
Want to watch all episodes of Season 2? Check out each one here ⬇️
EP5: Finding an investor is a matching game, not a numbers game, finds Sarah Fay
EP4: The four criteria TBD Angels co-founder Joshua Summers uses when judging a pitch
EP3: “Unique insights” and other metrics that pre-seed and seed investor Debi Kleiman looks for
EP2: While angels make investments to make money, not all chase an exit
EP1: The best way for founders to break into the investor space is…