How to Convince Investors

The most common mistake inexperienced founders make when trying to convince investors is relying too heavily on their pitch. Instead, they should let their startup do the talking. Investors are looking for startups that have the potential to be hugely successful. This doesn't mean they're looking for a guaranteed success, but rather a startup that presents a good bet.

To appear as a good bet, a startup needs three things: formidable founders, a promising market, and some evidence of success so far. The most important of these is formidable founders. Investors often decide within the first few minutes whether the founders seem like winners or losers. If they believe you're a winner, they focus on the reasons to invest; if not, they focus on the reasons not to.

The key to seeming formidable is to be confident and truthful. Confidence comes from knowing your startup is worth investing in. If it isn't, don't try to raise money. But if it is, you'll be telling the truth when you tell investors it's worth investing in, and they'll sense that.

Understanding your market is crucial. You need to be a domain expert to convince investors that your startup is a good bet. If you're not a domain expert, your confidence will seem misplaced, and investors will be quick to spot this.

Raising money should not be a goal in itself. You should only raise money when you can convince investors that your startup is worth investing in. If you try to convince investors before you've convinced yourself, you'll be wasting both your time.

Investors view startups as markets, not just ideas. Your target market has to be big, and it also has to be capturable by you. However, the market doesn't have to be big yet, nor do you necessarily have to be in it yet. There just has to be a plausible sequence of steps that leads to dominating a big market a few years down the line.

Rejection is a part of the process. Even the best ideas can be rejected by investors. However, if you know you're on the right track, then you also know why investors were wrong to reject you.

In conclusion, the recipe for impressing investors when you're not already good at seeming formidable is simple: Make something worth investing in, understand why it's worth investing in, and explain that clearly to investors.

The original article: https://paulgraham.com/convince.html