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'Pitches Are Like Blind Dates': The 11 Things Top Investors Want Startup CEOs to Know

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Be funny, do your homework, know your competitors, and pitch it all in less than 30 seconds -- that's the message leading American investors delivered to entrepreneurs at the WSJ Tech Café.

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An investor pitch meeting is similar to a blind date, argues Jay Samit, an investor, president of ooVoo, and a renowned digital innovator who pioneered CD-ROM technology and LaserDisc distribution. In most cases you quickly realize if you're going to spend the rest of your days with the person sitting next to you, he added.

At the WSJ Tech Café event in New York this week, Samit and his colleagues discussed what entrepreneurs should realize before scheduling a "blind date" with an investor in order to make it successful.

Samit shared the stage with angel investor Brian Cohen, chairman of NY Angels, and venture capitalist Steve Case, chairman and CEO of Revolution LLC and co-founder of AOL (NYSE:AOL).



The troika -- seen in this photo with moderator Vanessa O'Connell, entrepreneurship editor at the Wall Street Journal -- gave a bunch of useful advice to the entrepreneurs in an very tightly-packed room. Here are some highlights:

1. Be well-prepared with your pitch. No, that doesn't mean putting together an endless PowerPoint presentation. Add some personality and charisma to your pitch; open up, set up a personal connection, even "be funny," as Cohen suggests. Know your project, and even more importantly, your customer. What's the customer acquisition cost? Why are your customers using your product? Be prepared to have your prospective investor call your customers, but not before they interrogate you about who your clients are and why they like your product.

2. Aim to spark the investor's interest in the first 10 to 15 seconds. The panel unanimously consented that in most cases it takes a half-minute or less for the investor to say "No," at least mentally.

3. Don't be afraid of the word "No." That's the next best word you want to hear, emphasizes Cohen. "Get to 'No' as fast as you can," he recommends. To save time, both sides should be direct and up front about their intentions and conclusions.

4. Take time to research your investors. Get to know their sphere of interests, focuses, and personalities. You have to be on the same wavelength -- when you get funding, it's highly likely that you'll be spending more time with your investors than with your family or a significant other. Ask investors about their investing strategies, their passions, why they are investing, and if they believe in you. Be responsive to criticism. Be ready to listen and hear. And it's vital to be "coachable," as Cohen puts it.

5. Don't over- or underestimate the importance of the great idea. Case says he tends to invest more in ideas than in people, but admits that the biggest challenge is the execution. Given that creating a startup nowadays is not technically difficult, you'd better have something up and working when you pitch to an investor. (Keep in mind Edison's famous quote: "Vision without execution is hallucination.")

That said, an AAA+ idea that is not yet executed might be given a pass.

6. It's critical to find the right investor, your perfect match. If someone turns you down, it could mean just about anything -- maybe he or she is just not comfortable with your market segment, for example. The investing company Digital Sky Technologies, for example, prefers late-stage high-growth global Internet companies and thus invested in Facebook (NASDAQ:FB), Groupon (NASDAQ:GRPN), and Zynga (NASDAQ:ZNGA) once each company was well-established and almost ready for an IPO. Some investors are following the trends and invest enthusiastically in big data companies, or Near Field Communication (NFC) startups, or anything else they feel is trending at the moment. Others have a broader outlook. There are dozens of focused investors out there, and even the person who turns you down would likely recommend other – and better – doors to knock on.

7. Friends and family should be investing. Money is as important to the business as the belief in what you're doing, and so it follows that those who believe in your project ought to be willing to invest. Investors see it as a good sign when friends or relatives back your project before the first outside investor comes into play.

8. The importance of teamwork cannot be underestimated. As Case says, "If you want to go fast, go alone, but if you want to go far, you'll need a company." Cohen says that he pays special attention to the team component in the startups he's evaluating. "They basically should be able to finish each other sentences," he says.

9. Due diligence: Do it yourself and don't be intimidated when your prospective investor is doing it. Cohen is certain that exercising good due diligence is beneficial to the young company.

10. ALWAYS (yes, capitals intentional) mind the competition. Do thorough research and be up front with the investor about your findings. If you say "We have no competitors," you will immediately raise a couple of red flags to the investor. You need to know the context of the market you're entering and be ready to point out why you are better than the competition.

11. Yes, you've heard it a million times, but failure is important. Don't freak out if you fail. Samit says that he prefers to invest in companies that have already failed, and Cohen loves "successful failures." The ability to quickly fail in a business that is going down is essential. It's easy to say and hard to do, but embrace the failure and learn from it, turn it into a positive experience. Cohen believes that the real failure occurs "when you stop trying."

To conclude, here's the truism Samit reiterated:

From his experience, founders who appear most focused on earning a lot of money rarely succeed. Instead, the goal should be, "I'm going to change the world. " Approach investors with a deep passion coming from your soul.

Good luck!
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