If you understand what type of investor you are pitching to, you are more likely to find the right partner. I have had the opportunity to watch numerous business television shows where entrepreneurs pitch to investor. During this period,there is one observation that has stuck with me from the shows. Based on the questions asked, one can classify an investor in one of three types: The Good, The Bad and The Ugly. Here are the pointers on how to classify the investors during your pitch.
The Ugly Investor
The ugly investor mainly cares about the financing of the deal. If at every opportunity she/he gets, they ask you about your current valuation, your previous valuation, and what will the valuation be when you raise your next round, you are pitching to an ugly investor.
If one of the first three questions is, “who else is investing?” you are pitching to an ugly investor. If her version of “helping” your startup is telling you about which other investors she would like to ‘run this by’, you are pitching to an ugly investor. In addition, If your spend any time in your first meeting discussing the deal structure and debating the merits of convertible notes over -priced rounds, you are pitching to an ugly investor.
The Bad Investor
The Bad investor is a bit more curious, but not curious enough. If she/he only cares about how big the market is, and if your startup has a million shillings total available market, you are pitching to a bad investor.
Marketing sizing is an important and necessary part of deal evaluation, but bad investors only focus on the market size. It’s easy and lazy.
The Good Investor
Pitching to a Good investor goes very differently. If she/he asks your about your customers, is curious about behaviors and habits of your customers, you are pitching to a good investor. Moreover,If she/he wants know who your real competitors are and why, you are pitching to a good investor. The good investor wants to know the likely-hood of your potential customers to hire your product.
Finally,next time you are in a pitch meeting, pay attention to the questions the investor is asking you. Knowing if you are pitching a good, a bad, or an ugly investor will go a long way in helping you find the right investor for your precious startup.