A few months ago, my partner at GAN Ventures, Reilly Flynn, had a call with a startup looking to us for investment. Ever since Reilly told me about the conversation, I can’t stop thinking about the story.
When we have an initial call with founders looking to work with us, we typically kick the conversation off by outlining our agenda for the call and it usually looks something like this:
- The first call lasts about 30 minutes.
- We spend the majority of the time having the founder(s) tell us about their company.
- There are a few primary things we want to hear from them, including who they are as people, why they want to run this business, where they want to grow, and how they’ll actually get to that place.
- And the last part of the call is reserved for the startup to ask us any questions.
Something about this call Reilly had a few months ago was different, though. He could tell they wanted to answer their questions quickly. They wanted to get done with talking, which seems a little weird when a company is asking us for money.
But here’s what happened—the part that still sticks with me. When the founder was done “talking” about her company, Reilly asked if she had any questions for him and she responded, “Yes, two.”
And then she asked two incredible questions.
First, she asked, “What do you specifically look for when you’re investing in companies?”
We get this question from somewhere between a third to half of founders we speak with, so that’s not the part that’s surprising. The difference is that they typically ask it before they begin telling us about their company because they’re interested in one thing: They want to adjust or mold their pitch to make sure they’re a fit for us and what we’re looking for.
Instead, this founder asked it after she was done. She loved her business, had a ton of traction, and had a large amount of confidence. So she was asking this question at the right time and for the right reasons, which were:
- Getting a feel for our legitimacy.
She wanted to understand how legitimate we were, as investors. If we didn’t have a clear answer, it would have told her something important, something she would have rightfully been concerned about. Not having an answer would have told her we either don’t want to share our answer or (even worse) that we flat out don’t have one. Having an answer, in contrast, shows her that we’re serious about our investment strategy and that we’ve put a lot of thought behind it.
- Saving herself a ton of time.
This was probably my favorite reason for her question. This founder is busy. She is talking with a lot of investors and she’s trying to figure out as quickly as possible if we’re the right investor, for her. If we weren’t, for any reason, it would allow her to move on and talk to the next investor on her list. She wouldn’t have to wait around for us to get back to her in a week or two about working together.
- Saving us a ton of time.
Once we answer this question, every founder has an opportunity. They can either mold their pitch to fit what we’re looking for or be open and honest about their business, without trying to conform to our interests. If someone instead comes to us and says, “Now that I’ve heard what you’re looking for, I don’t think we’re a fit,” we’re so impressed. It builds up so much trust between the startup and the investor and, with that trust, I’m so much more excited to make introductions to other investors who may be a fit for them.
Then, she asked a follow-up question: “Now that I’ve heard everything you’re looking for, I think we’re a fit for GAN Ventures. But in your opinion, is that really the case?”
This is great because it allows us to detail all the areas we think we truly are a great fit and/or mention areas where we might still be confused. It gives us an opportunity to discuss and debate or to outline how we might be able to move forward or why we think we might not be the best fit for the company in question.
Why It Matters
You can imagine the peace that these two questions provide the founder. Once we’ve answered these questions, she knows exactly who we are as investors, what we care about, and if we’ll be a fit for them.
Maybe more importantly, asking these two questions gives us absolutely incredible confidence in her—because she actually appears confident in herself and in her business. She’s not graveling at our feet. She knows she has something meaningful to offer the world and that not every investor will be the right fit. But she’s trying to figure out, as quickly as possible, who will be the right fit. And that kind of confidence is attractive, because—like I said—even if we’re not the best match, I’m excited to pass her name onto someone who might be. It gives us the confidence to either take the leap and invest, or peace of mind in knowing that, should we send her to one of our contacts, we can be confident in a making a solid connection.
It really is that simple. Confidence breeds confidence. All it takes to show an investor that you have it is asking a couple simple questions, asking them for the right reasons, and a true belief in what you’re bringing to the table.