Obvious: A great founder and a good business idea attract investors to inject capital into early stage companies.
Not Obvious: How an investor determines the quality of a founder or a business... especially if that founder is young and inexperienced and if the business she runs has yet to launch.
This conundrum is the reason investing, and therefore fundraising, is an art and not a science. It is also the reason I have an endless number of topics to write about in my newsletter.
As is the case with most newsletter issues, today’s subject was triggered by an email from a founder. The founder said (paraphrased) “An investor asked me ______. How should I respond?”
While this is an incredibly common question, there are surprisingly few articles on how to communicate with investors during fundraising outside of “how to write a cold email.” In early-stage fundraising, communication is particularly consequential in shaping a potential investor’s perception. And in the absence of undeniable metrics or solid years of proven success, perception is the main driver of outcomes.
One of the complications of writing a how-to guide on responding to investors is the fact that all situations have nuance and each founder’s interaction with an investor is slightly different. If I’m asked the question “how should I respond” and have time to discuss live, I can help explain the situation and offer specific responses that will help cultivate the right feeling in the investor.
Unfortunately, I rarely have the time to sit down with founders to walk them through options on how to respond. In the past, I’ve considered creating a written guide to responding to investors but have been deterred by its impracticality (both excruciating to produce and difficult to consume).
Because of that, I’ve mostly relied on a simple guiding principle for founders. When founders are stuck and don’t have me or another advisor to consult, I often share a framework called WWPCD.
What Would Patrick Collison Do?
The idea is simple. If Patrick Collison, an incredibly successful, well-known, proven entrepreneur, who by all accounts is quite pleasant/polite, were to go out and raise money for his next fintech startup, what would he do in this situation?
This framework works because Patrick Collison launching his next fintech startup would be the most obvious bet in the world. When communicating, you want to give every impression of being a great bet like Patrick.
If an investor completely ghosts you during your fundraise and you’re curious what to do, well... WWPCD? Probably nothing. He wouldn’t give 2 sh#ts because he’d be confident that there would be plenty other interested investors. And if he absolutely had to get a response for some reason, he’d probably send a pretty measured, simple email to check in. You should follow a similar pattern of calm confidence.
If an investor asks you for a piece of data you don’t have and you’re nervous about responding... WWPCD? He wouldn’t dodge the investor or make excuses. He’d explain very simply why he doesn’t have it and what he does have instead. You should be just as comfortable not having the answer.
If an investor asks you how the process is going and you want to get your response just right... WWPCD? Well this one is tricky because Patrick Collison would likely have people beating down his door and you might not. That said, you probably still want to get as close to his response as possible. Patrick would likely say he’s not sure but expects things to be wrapped up quickly (because they likely would). Without lying, you’d want to say something very similar.
There are obviously some questions where you couldn't exactly follow WWPCD, but I've found this framework to yield an appropriate answer for founders more often than not. Take it as a guiding star and go out there confidently communicating with investors and show them you are a great bet.