Investors are a fickle lot. Each has their own ethos, methods, preferred industries and investment criteria.

Having been in the game a for a little while now, I’ve seen biases too.

But investors will ask one question every time you approach them for funding.

And they will ask this question in many different ways.

Do you know how many different words for snow are in the Eskimo language? While the exact number is the source of much debate, somewhere between 40 and 50 is a good guess.

Before I reveal the answer – sorry, the question – let’s explore why genuine investors ask this.

What you won’t learn – until you become an investor yourself – is that almost no investor wants to be first. Almost all will happily follow-on from other investors.

So, drumroll, what is the first question every investor in the world asks?

The first question(s) on every investor’s lips is . .

How much money have you already raised and who from? Or, they might ask it these ways:

  • Who else has invested?
  • How much has been committed to the current round?
  • What does your cap table look like?
  • Where did you get your last money?

Investors want to know how you have validated your great idea in approaches to other investors.

This will be asked using different questions, but the intent is always the same. For example:

  • What’s been your uptake?
  • What are the key takeaways from other investors?
  • How successful have you implemented the feedback you’ve received?
  • How much have you invested personally?

The last question above relates to cash. Sweat equity doesn’t count because it’s mandatory for most new ventures.

It starts with you.

Investors aren’t rabbits

Call it the price of admission to watch and learn the rules of the game. A bit like a family of elephants – lots of elephants.

Essentially, what you are being asked, is:

  • How much skin is in the game?
  • Is any of it yours?
  • How much of it is from the people in your first level connections, such as family and friends?

After all, if you’ve approached 999 investors and failed already, they don’t want to be the rabbit.

This is the key theme. Unless you mix with investors, they are usually disconnected from you by two or three levels. This means you had to reach out to them, either directly or through PR of one form or another.

Conversely, serial entrepreneurs are successful at raising money on second and third ventures. Obviously, they’ve done it before and they’re already connected with investors.

But what about the people who already know, or love, or trust, or like you? Or people you’ve done business with before? What about your first level connections?

Four stages of engagement

Make no mistake, an investor is a buyer. And, when engaging with any type of buyer, you must get through four basic stages of engagement:

  • Attention.
  • Interest.
  • Desire.
  • Action.

And five basic filters for a transaction to happen:

  • Respect.
  • Like.
  • Trust.
  • Believe.
  • Care.

Fall over at any single one of these engagement levels – or any of the filters – and you’re done. Game over.

Your first level connections are probably through almost all the filters. And you have the capacity to take those people through the four levels of engagement.

Which begs the question from almost every investor you are pitching to. Why is there no other money in before you got to me?

Glass glowing light bulb and business sketched ideas

Investors don’t invest in ideas

Strangely, investors won’t pay people to test their ideas.

They typically either:

  • Made the money themselves, or
  • Invested their credibility and reputation in securing other people’s money to invest.

Investors don’t want to lose what they’ve already made. No, they would rather make more by investing in something else that is ready to make them more. Get the picture?

Think about this.

You’ve grown up and have made friends with people, such as current and former classmates. You’ve got family, neighbours and you’ll have mentors, peers, colleagues, bosses.

But none of them has invested? Why? This is now where an investor’s head is at. Don’t focus on the bells and whistles, and pictures of dancing unicorns in your flash pitch deck. They want to know:

  • Why has all your network passed on this opportunity?
  • Have you even bothered to approach them?
  • Have you failed the trust test with them?
  • Are you believable?
  • What is it about you that has caused their entire network to pass on them?
whose fault?

Who’s fault is that?

About half of you might blame your circumstances on the fact that you can’t find a single investor in your network.

As valid as these excuses may seem to you, it doesn’t change this fact:

In the mind of the investor in front of, you’ve fallen over at the very first hurdle.

“If you can’t raise $100 each from 100 people you know to get started, how on earth are you going to get $100 dollars each from the million customers for your venture to succeed?”

Daniel Mumby

But some smart people reading this article are starting to have the veil lifted.

They are starting to see the opportunity in their existing network. If they are masters of their own destiny, they’ll be asking themselves:

“If it is to be, it’s up to me.”

Daniel Mumby

What investors want

Investors want to see what you have in the tank. When everything is on the line, do you have the capacity to solve problems and get the job done – no matter what?

Do you accept responsibility for the problem and the solution, or do you search for excuses?

That’s what they are looking for. That’s who they really invest in.

They don’t invest in technology, business models, value propositions, networks, markets, or audiences.

They want good people. People who can get the job done, whatever it takes.

The equation is simple

Therefore, to attract investors, you must become that sort of person.

So, turn the questions around and ask yourself why:

  • Friends (who say they love me) haven’t invested in me?
  • Family (who probably do love me) hasn’t invested in me?
  • My network of peers, colleagues and mentors (who say they like, respect, trust and believe in me) hasn’t invested in me?

Once you know the answers to these questions and can overcome them, you are on the path to greatness.

You won’t need to explain this to investors or put it in your pitch deck, they’ll see it your cap table and in your eyes.

Did you find value and inspiration in this article? You might also learn from the next article in this series. The Second Question Every Investor In The World Asks