Y Combinator founders experience: teach you how to persuade investors

Beijing time on August 10, silicon valley startups incubator Y Combinator founders Paul Graham (Graham) recently wrote, if the startup founder wanted to convince investors to invest in it, then you need three things: a powerful company founder, development potential is huge market, and so far has presented evidence will succeed.

here is the full text of this article:

when people for lifting and hurt himself, usually because they are trying to use back the power to lift; In fact, the correct method should be the legs. While trying to trusted by investors, lack of experience, founder of also can make the same mistake, they will try to use the flowery words to persuade investors. If they make themselves founded startups to do it, so most of the time can have better effect — that is, if they understand why first founded his own company worth the investment, you can simply to investors make a good description.

for investors, they want to look for are those who will become very successful startup; However, is not sound so simple to do this matter. As in many other fields, in the success of distribution in the startup is also abide by the “power law” (Stevens, an American psychologist, found a law); But in the startup, the curve will sharply lifting jaw-dropping. In this area, the success of start-ups will achieve great success, so that the other startups in the shade. As every year, only a handful of entrepreneurial companies (15) according to the conventional wisdom of success investors attitudes towards “success” like this kind of success is binary. Investors, in other words, if you can feel your startup company has among the 15 “huge success” the company the opportunity, so no matter how small the opportunity, most investors are interested; On the other hand, there is no investors will be pro.

(it should be pointed out that, in most likely some angel investors will be interested in “moderately successful startup, but they also like” great success “.)

so, you need to do to let a person feel your company will be a huge success? In general, you need three things: a powerful company founder, development potential is huge market, and so far has presented evidence will succeed.

Powerful

in these three things, the most important thing is the founder of the powerful. Most investors will look at the first time for your company will be a winner or a loser’s problem to judge; And when once they formed their own point of view, so it is difficult to change. Every startup is worth and not worth investing the reason, and if investors think your company will be a winner, you will put the focus on the reasons for worthwhile investment; And if they don’t think your company will be a winner, then you will focus on the reasons for not worth the investment. For example, a startup may face an affluent market, it is worth the investment of reason; But at the same time, the sales cycle is relatively slow, this is the reason is not worth the investment. If investors were impressed for the founder of the company, is because the company faces the rich market and said they are willing to invest; Instead, they will be delayed because of the company’s sales cycles and said it is not willing to invest.

investors should do so, not necessarily want to mislead you. Most investors don’t really know why you like or dislike a startup. If you look like to be a winner, so they will be more like you think. But, don’t because investors this weakness, too complacent, because you also have this problem; In fact, almost everyone is so.

of course, the idea of startup itself will be place in the process, they are lit investors that the fuel to the fire in the heart, can let investors are starting to like the founder. Once investors began to like you, then you will find that they will consider your idea: they would say: “the idea is very good, but how can you what to do.” Conversely, when they don’t like you, will tell you: “but what what what?”

The basis of

however, trusted by investors is to make yourself look very strong; Because this is not the most will use a word, in conversation so I need to explain. A powerful person refers to, it seems that the people can get what they want, no matter what the path of his forward obstacles. The meaning of “power” similar “confidence”, except only one thing, that is people may be full of “confidence” but doing something wrong. But generally speaking, the meaning of “strong” and “confidence” is not far.

there are some people who are very good at allow themselves to be strong, and some of them because they are really strong, and just let this powerful display; Others because they can disguise themselves more or less. However, most of the company founder (including those who will make a very successful company founder) in trying to raise money for the first time are not good at allow themselves to be very strong. So, what should they do?

for these founders, they shouldn’t have to do is to try to imitate the experience, the founder of the latter usually struts to blow his own horn. Investors are not always good at judging whether a technology can succeed, but are very good at judging a founder is confident. If you try to imitate others deliberately lost self, so in the end you will only sink and cannot extricate oneself. As a result, you will be away from the good faith, not credible.

true

as a cub “rookie” founder, can let him become the most powerful way is to stick to the truth. You look how strong is not a “constant”, but rather depends on what you said. Most people say “one plus one equals two” would seem to be very confident, because they know it’s true; But for those who have no confidence most, if they told a venture capitalist “one plus one equals two”, while the latter’s response is expressed in question, so these people will feel puzzled, and even some of inferiority. Those who are good at to look strong person with a kind of magical abilities, that is they can noodles don’t change color to say such a sentence: “we will have the ability to earn $1 billion a year.” But in fact you also can do the same thing, the premise is that as long as you can convince yourself first.

it is secret. You need to convince yourself that you founded startups is worth the investment; Then, when you explain the matter to the investors, they will believe you. I call the “persuade yourself”, is not to say that you want to play mind games with yourself to enhance self-confidence; I mean, you want to really to your founded the question of whether startup worth the investment. If that is not worth the investment, then don’t try to raise funds; But if that is worth the investment, so when you dialogue with investors, you should tell the truth, tell them that your company is worth the investment, and they will feel you said is true. If you understand very thoroughly, about something and then tell the truth in this matter, so you don’t need to become an eloquent speakers fluently.

and to assess whether your startup worth the investment, so you must be a domain expert. If you are not a domain expert, but want to pretend to be a very confident, so in the eyes of investors point of view is just a “stark effect” (Dunning – Kruger effect, is a kind of cognitive deviation phenomenon, refers to the inability of people in his ill-considered decisions on the basis of the wrong conclusions, but failed to correct understanding of its inadequacy and identify wrongdoing) instance – in fact, this view also just reflects the fact that under normal circumstances. Investors will ask questions, through your answer how well to quickly determine if you are not a domain expert. So, you have to know everything about your market.

why founder will keep trying to convince investors that something even they don’t believe myself? Part of the reason is that all of us have been trained to do like that.

when my friend Robert Morris (Robert Morris) and Trevor Blackwell (Trevor Blackwell) study in graduate school, department of their mentor to a student ask a question, this question until today will be our reference. When the bad students play at the end of the slide, the department supervisor suddenly raises a question:

“in the conclusion, which one is you really believe that?”

in the school organized a “artifacts”, that is all of us are trained to do one thing: even if also reluctant to say when have nothing to say. If you need to write a paper ten pages, you must write ten page, even if you only have the idea of a sheet of paper to write, even no idea at all. Many startups is also hold the same idea to raise money. When founders think it is time to raise, will brave enough to try for the best conditions for their entrepreneurial company. Most founders have never stopped to think about in advance and ask yourself what you can really convincing, because they are trained to have to express the demand as a must do.

good time to raise money, not just when you need to raise, not when you get to a certain person as prescribed deadline to raise funds, but when you are able to convince investors. Prior to that, don’t try to raise funds. Unless you can disguise myself very well, if you can’t convince yourself, then you don’t ever try to persuade the investors. Compared with the degree you can disguise, investors better capable of identifying you say lies, even if you just inadvertently had lied. If you are convince yourself before to try to convince investors, then you are wasting time on both sides.

compared with before trying to convince investors the stop to convince yourself, then you can get things don’t just save time. Doing so will force you to organize your thoughts and convince yourself of your startup is worth the investment, you also have to think of the reason why you company worth the investment. If you can do this, to finally get things are not only can enhance self-confidence, but also has a “provisional roadmap to success.

Market

please note that I have been very carefully in the debate about whether a startup worth the investment, rather than whether a company can succeed. No one knows if a startup will be successful. For investors, this is actually a good thing, because if you can know in advance whether a startup can succeed, then the company’s share price has become the future price, and investors will not make money. Startup investors know that every investment is a bet, and the opportunity to win the gamble extremely remote.

so if you want to prove that your company is worth the investment, so don’t need to prove you can succeed, only need to prove your company is a good bet for investors. So, what makes a startup into a good enough bet? Besides the founders of the powerful, you will also need to have a look very reasonable road, this road can lead you in a large market share. His own startup founder as an idea, but the startup as market investors. For your company is engaged in the business, a total of X client, if the market and the customer pay per year on average to Y, then total addressable market is $Y. Investors don’t hope you can earn all the money, but it is always hope that you can earn a maximum.

your target market must be great, and you can be captured. But in the beginning, the market doesn’t have to be very big, you also don’t have to enter the market right now. In fact, in a smaller market often start is better; In the end, or is this market will become very large, either you can from the market into a huge market. You just have to provide investors with a reasonable reason, prove your company have the ability in the development of a few years leading a huge market.

for the so-called “reasonable”, there is a big different measure, the difference lies in the “age” of start-up companies. In the “Demo Day”, a company set up only three months only need to do a promising “experiment”, for investors to look at their own investment can get nothing in return; For A company for two years, if you want to raise money in A series A round, then it must be able to prove “experiment” to succeed.

however, each can really huge success of the company are “lucky”, because these companies mainly from the growth in which they control the external wave. So, if you want to convince investors that your company can grow up, then it must be able to identify certain trend of allows you to benefit from it. Normally, you can ask a question to find the trend, that is “why is founded the company right now?” If your idea is good, why no one else has done? Ideally, the answer is you thought until recently turned out to be a good idea, the reason is that some things have changed, and no one else besides you noticed this change.

, for example, if only by the Basic programming language, then Microsoft will not become so large as it is today. However, starting from the Basic programming language, Microsoft in a microcomputer are strong enough when perfectly expanded software product portfolio, then a microcomputer set off a wave of real scale, the scale is in 1975 the most optimistic observers also expect them to.

however, although Microsoft really well at the time, so can let a person feel to invest in the company will be a good bet, but at the time probably not the case. Microcomputer has been a huge success, but Microsoft is not only performance is good, the execution and lucky enough. However, before Microsoft has not been so successful, no one can clearly know what could be so development. nullnullnullnullnullnullnullnullnullnullnullnull