Fundraising Hack: Determining an Investor’s “Taste”
A founder is always “pitching.” He or she is pitching to potential recruits, potential partners, the press, and of course, potential investors. Always Be Pitching. In the case of pitching investors, there’s a lifetime’s worth of advice on that process, and I may have found a twist on another one, perhaps that has been discussed but not in this way. And, that twist is about an investor’s “tastes,” or their preferences. You’ve probably heard this advice in a different form — it goes something like this, to paraphrase: “As you’re making your list of potential investors to talk to, pay attention to what investments they’ve made previously, either as a firm or individually, and see if you can tie that back to your own company’s vision.”
This advice is directionally right, but now I’ll describe it in a different way: Try to determine your potential investor’s “investment taste.” This is basically like dividing people between those with “sweet tooth” vs “salty toothy.” Well, it’s more complicated than that, of course. But, after helping a good deal of founders through various seed and Series A funding rounds, one thing I’ve noticed is that it doesn’t matter if investors pass. There are always more around the corner, and the reasons for passing oftentimes may have less to do with the opportunity and more to do with their own “taste” or preferences for investment. Some investors are drawn to deeply technical minds. Some are drawn to a line-of-sight to revenue. Some are militant about distribution advantages, while others gravitate toward businesses that have a chance to gain and exert network effects.
The insight here isn’t to simply look over a potential investor’s portfolio and connect the dots to the first order, but to take a big step back and notice the patterns within those investments and their background and, within reason, to artfully explain why your company, even if it’s in a different space, may be of interest to the investor given his/her taste profile. People have tastes, and those tastes are usually a sum of their experiences. Sometimes those are obvious, but most of the time we have to hunt for them. We learn these through constant observation, and it takes time. We know the tastes of people we work with closely or those in our small circle of families and friends, but that happens over frequent interactions and fueled by proximity. By contrast, you may meet an investor for 55 minutes, so trying to determine their taste may not only help make those meetings efficient, but more importantly, may help guide founders as they initially make their target lists to begin with.