“Shark Tank” Shouldn’t Be Your Image Of Startup Investors
Many of us don’t pursue our grandest ideas because the pursuit of looking for investors stops us cold.
If we draw any conclusions from the show Shark Tank many of us may think that investors are uptight, terrifying, and sometimes a bit sassy. Standing in front of a group of people for that type of judgment sounds masochistic.
This is the image TV has drawn up for us of what investors look like — intimidating and super formal. Let’s talk about the reality though.
Only 0.5% of startups are funded by venture capitalists and 0.91% are funded by angel investors. Less than 1% of you will ever have the opportunity to pitch to a Shark Tank type, so the reality of going after investors isn’t what we’ve been told it looks like.
The majority of startup investments are instead procured through friends and family investments, crowdfunding, and personal savings and credit — channels that won’t require you to talk about your business under intense scrutiny.
What This Means
This means a couple of things for those of you who are serious about nailing down investment for your business. The rules you should be living by look something like this:
- Startup investment fairies don’t exist.
- You should increase your friend circle.
- Your investment search doesn’t have to be so formal.
Startup Investment Fairies Don’t Exist
I cannot tell you how many entrepreneurs I’ve spoken to who talk about their investment search with the plan to find random investors by just networking.
There are definitely channels through which this can be accomplished like pitch events, accelerator programs, well-connected friends, etc. but if this isn’t your starting point, you connecting to a VC by messaging them on LinkedIn isn’t going to have a high success rate.
If less than 1% of startups are being funded by VCs and angel investors, that means that not many startups are being introduced to this pool to begin with.
In short, startup investment fairies don’t exist — the Cinderella story of your startup getting discovered by a wealthy investor and having all of your funding problems solved isn’t a reality we should all be shooting for.
Instead, the reality that should be on the table is how most startups are funded — through friends and family, crowdfunding, and personal funding sources. Which brings me to my next point.
You Should Increase Your Friend Circle
I’ve had a lot of requests from people I barely know to help introduce them to investors in exchange for money, or just as friendly favor.
As someone who has spent 14 years building her entrepreneurial career and her connections, the probability of me doing this is extremely low. No amount of money you throw at me is worth my reputation.
The only people I would ever entertain this idea for are close friends and people I know backwards and forwards after years of friendship — people I trust.
I’d gather that I’m not the only person who follows this rule and that many with connections to investment preserve their relationships with a lot of respect.
What this means for you is that if you’re on a journey to garner investment for your business, then a smart way to go about that is by increasing your friend circle. People give money to people they like, and to people they trust. This friendship and trust are not created in a few friendly coffee dates, it’s one that matures over time.
Your Investment Search Doesn’t Have To Be So Formal
When your search for investment kicks off, you’ll find some friends and family members who are interested in learning more about supporting your venture.
These will be people who genuinely believe in your vision, or have a personal interest in the industry you’re building your business in. You may decide to create a pitch presentation or a business plan to present to these people, but you’ll be far from pitching in an environment that calls for rapid-fire questioning or naysayers.
Instead, amongst friends and family, you will likely be pitching in an environment where people want to really understand the depth of your vision and dig into why you believe in its success. If they ask difficult questions, it’ll be coming from a place of love rather than suspicion.
Pitching to people already in your corner has a different feel from strangers who don’t know you and have every reason to believe that you won’t succeed. In this environment, you don’t have the additional job of trying to impress a room on your legitimacy and professionalism — you can just focus on your business and the vision you’re trying to sell.
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