Why Should the Investor Connect the Dots?

A comment on my post yesterday inspired my post for today.

Sachin alluded that the investor “might just be…. unable to comprehend the idea in the spirit that it actually existed” and that “Some of the times, people who propose the idea are unable to defend it they think that the other person is more credible so he might be right.” These points are fair, but I disagree.

The intelligence/understanding/smartness of the investor being pitched to, can be utilized to enhance a founder’s pitch, but cannot be blamed for the founder failing to effectively communicate his/her idea. Expecting the investor to connect the dots could work sometimes, but it could just as likely go off-course. Therefore, it is a good habit for founders to err on the side of overcommunicating and utilize effective check-backs during the presentation to ensure that the investor is following the line of thought that they wanted to convey i.e. the founder should always maintain control over the room that he/she is presenting to.

One way for the founder to gauge how effective (or ineffective) his/her pitch has been, is to pay close attention to the questions raised by investors during the presentation or Q&A. If similar questions are repeatedly asked during/after their pitch, founders should realize that some part of their presentation is leading to a reaction in the investors’ mind that prompts them to ask these questions. The foundation of preparing a great sales pitch is if the founder/s is/are able to back-track that train of thought, identify the point(s) that triggered those questions and answer them (in the presentation itself) before the questions are verbalized.

In sales presentations, it is also important to remember that the customer (read: investor) is never wrong. The customer has only understood, analysed and decided on the pitch that was presented to him/her. To expect the customer (read: investor) to understand what has not been effectively communicated is self-defeating – neither will it improve your pitch nor will it change the customer’s (read: investor’s) mind.

23/2019

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One thought on “Why Should the Investor Connect the Dots?

  1. For an entrepreneur, who is creative and pursuing innovation, its better to pitch to children and grandmas rather than investors. Most investors ask questions without an understanding of the core concepts, what it is fundamentally about. Yeah, I know its about the money. But most of the times children catch up the spark of creativity quicker and better than the investors.

    Most “standard” questions drawn from business plans designed for standard large companies or from the investor’s MBA curriculum: they need to be adapted preasymptotically to early stage startup, which is not trivial–or abandoned altogether. So many times this entrepreneur has been told “of course we know this” or the beastly “nothing new” about the startup’s business model by a VC or an angel who just produced an analysis using “variance”, “GARCH”, “kurtosis” , “Sharpe ratio”, or “value at risk”, or produced some “statistical significance” that is clearly not significant. Its Complication without insight: the clarity of mind of many professionals using statistics and data science without an understanding of the core concepts, what it is fundamentally about. A new innovative startup learns how to live in the real world, aworld with a structure of uncertainty that is too complicated for us.

    This message is for the investors: The less you understand the world, the easier it is to make a decision.

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