In the great scheme of raising money for a startup, trying to get your dream job, or win a lucrative sales contract from a hiring manager, it all comes down to one or two compelling advantages you can offer that the other candidates fail to offer. What might that be? Value, experience, references, work ethic, passion, determination….no. It’s none of those things – EVERY candidate offers these attributes or they wouldn’t have gotten in the door.
All things being equal among the many choices available to investors or hiring managers, there is usually one thing they secretly want more than anything else, which few candidates offer: a manageable risk, fully-guaranteed investment, backed by the good faith and unwavering confidence of the candidate. It’s what they would LOVE to have but rarely get, because so few candidates have the chutzpah to offer it.
Allow me to elaborate with a brief story.
When I was raising money for my third company, I pitched every venture capital firm in Seattle and many of them on Sandhill Road in Silicon Valley. I was getting a lot of “sounds promising, we’ll get back to you.” Closing a round of funding, or getting a job or lucrative sales contract, is all about momentum. If you don’t have it…if you don’t create urgency for a quick decision, the effort will stall. It gives the “buyer” more time to consider alternative opportunities.
My raise was stalling and I couldn’t quite pinpoint why. The technology was awesome. The market was huge and poorly served by competitive solutions. The deal was priced right. I had assembled a good team. All the right elements to get the “job” seemed to be on my side.
I finally figured out it was “me” that was the gating issue.
Investors never come right out and say it, but in the back of their minds they are thinking: “Is this the right jockey for this horse for the next race?” My answers to their questions regarding future growth and leadership requirements were clearly giving them pause. Investors want guarantees that a founder will get out of his own way….that he won’t impede the success of the company, but will graciously step aside if and when it outgrows his capabilities.
My answers to this line of questioning were vague and, in hindsight, probably defensive. That is always a bad sign to hiring managers. BTW, investors are in essence “hiring managers,” because they are hiring a CEO to manage their money in one oftheir companies, and provide a handsome return on investment. If you are a fan of the TV sitcom, Silicon Valley, you might recall the episode where Piped Piper’s founder was removed as CEO because he “created a company that was too valuable for him to run.”
So after six or seven pitch meetings that failed to create momentum, no less a commitment to invest, I devised the No Fail Tactic.
Whenever the discussion turned to future growth, leadership, and building out the team, I slid a piece of paper to them across the table, face down. They would immediately flip it over, read it, and a sly smile would creep across their faces. It was my signed letter of resignation, only requiring their signature to become effective. I would say, “I serve at the pleasure of the shareholders, of which you would be a major shareholder. If at any time you don’t think I am the right person to lead the company, all you need to do is sign that and I will graciously step aside.”
In some discussions, if I really really wanted a particular investment firm because of their pedigree and industry connections, I would up the ante. I would offer them the right to buy all of my shares in the company at the seed valuation. Not only could the investor accept my resignation, but also acquire all of my shares at a steep discount to the present valuation. This was not a hollow ploy, but an unwavering show of good faith and confidence that I was always going to do the right thing for the company and protect their investment. If i couldn’t deliver on that promise, they could recoup at least some of their investment by taking my entire stake.
The tactic worked beautifully, the raise was oversubscribed in short order. In fact, it pained me to do so, but I had to turn away more than $10M that was offered because the first investors that signed term sheets did not want to take any more money. (And by the way, they did subsequently accept my resignation a year later and installed a new CEO, but that’s a story for another time.)
This No Fail Tactic is one that few if any other candidates will offer. It works in raising money, getting a job, or winning a lucrative sales contract. Over the years I have offered my products and services free-of-charge for 90 days. Only if they delivered the features, benefits, and ROI promised, would the client need to pay me – and they were the sole determinant if the promises were met.
I once posted an opening for an intern and asked all the applicants (several hundred) to work free-of-charge for 90 days. If at the end of 90 days I was 100% satisfied with their work and cultural fit, I would hire them full time with benefits, plus a 25% bonus (to compensate for the 90 days free). Not one single applicant took me up on it.
The No Fail Tactic is not for those who are unsure of themselves, or who have a need for control or immediate gratification. It’s for those who have an unwavering belief in themselves and their offering. And in the end, it’s that intangible that everyone wants to invest in, but is rarely offered. Good luck out there!