“We’re very interested.” Most CEO’s would love to hear that phrase when trying to raise money from a venture capitalist. It’s promising, right?
I don’t think so. Here’s why.
Put yourself on the investor side of the table for a moment. If a CEO pitches an idea to you to raise money, how would you respond if you were truly very interested?
It’s likely that you’d act on your interest by asking detailed questions. Your excitement about the potential would make assessing this opportunity a high priority for you and your team.
So, when a potential investor says “we’re very interested” near the end of a meeting, it’s not a good sign. It’s often a polite brush-off and not what you want to hear. Watch, as I explain why in this video.
Raise Money From the Right Investors
Too often, entrepreneurs take a shotgun approach to raising money. That means they end up in meetings with investors interested in hearing their pitch, but who know little about the industry. You can tell if the investor has genuine interest by the questions they ask, so it’s up to you to tune into the investor signals near the end of the meeting.
I describe how to find the right investors in the SmartMoney Playbook. It’s free, and you can grab it here.
VC’s rarely say “no” outright because there is little advantage for them to do so. Even if they’re not excited about the deal today it’s better to keep the opportunity in the pipeline. One way to do this is to tell the entrepreneur, “We’re very interested.”
If the investor is really interested, they’re going to ask questions, such as:
- Who has invested so far in your business?
- Who owns how much of the company?
- Tell us about the specific backgrounds of the management team. What have they accomplished before?
Questions such as these represent the buying signals you’re looking for.
If they’re not asking these questions, you should qualify their level of interest.
Start asking them questions to gather as much intelligence as you can. Ask things like:
- What other companies have you looked at in this space?
- What developments would make this deal more attractive to your firm?
Remember, since they took a meeting with you, it indicates interest in your sector. It’s likely they’ll invest with someone in your space at some point. If they’re holding their cards close to the vest at the end of the meeting, however, chances aren’t good they’ll invest with you.
But just because you may not get money doesn’t mean you have to walk away empty handed.
Investment meetings are a two-way street. So take advantage of the opportunity to get as much intelligence as you can. Ask questions to learn about your competitors and how the investor sees the industry.
It’s frustrating to walk away from an investor meeting without moving to the next stage. That’s why it’s so critical to screen investors before you take the meeting. When you try to raise money, diligently seek SmartMoney investors before you even book a meeting.
Creating a target list of SmartMoney investors upfront will accelerate your fundraising and ensure you partner with the right investors.
Do you think it’s good to hear ‘we’re very interested?’