Early this year in an interview with J.D. Harrison of the Washington Post, Barbara Corcoran of ABC’s “Shark Tank” said, “…there’s one terrible red flag that turns me off so fast it makes me want to leave the room.” It’s “fancy talk.”
As challenging as it is to create a business model, maybe even start production, and craft a pitch designed to interest investors in your company, it’s nothing compared to the lessons learned by rolling up the sleeves and diving into the work of actually running a business.
Whenever someone makes a pitch to the Sharks and gives off the impression they’ve got it all figured out and all they need is some cash, Corcoran says, “…mentally, I’m out of there.”
That’s not to say it’s a good idea to approach an investor (or lender for that matter) lacking in confidence. It does mean that you should realize and be ready to acknowledge the things you don’t know. Most investors know when someone is trying to blow smoke up their skirt and can pick out someone who doesn’t really know what they’re talking about a mile away. Much better to answer “I don’t know” when you don’t know.
Let me share a good example of this mindset with a discussion I had a while back with Lendio CEO and co-founder Brock Blake. Although this is a conversation about working with his board (which includes an investor in Lendio or two), he describes how he used to try to keep his investors and board members isolated from the challenges and problems of running the company. “It was a big mistake,” he admits.
“Now some of the first people I go to with challenges are the members of our board—including our investors,” he says. Some of the specifics of individual businesses might be different, but many companies share some of the same challenges through different stages of business growth. “I’ve been on the receiving end of some really good advice,” he says. “It should be no surprise, they’re every bit as interested in our success as we are.”
I don’t think it matters whether the deal is done and your working through problems after you’ve got your funding or you are looking for capital. Looking for investors that have the skills and experience to help you create a successful business is every bit (if not more) as important as whether or not they are willing to give you the money you’re looking for. Anyone who has been successful at finding capital from an angel or other equity investor will tell you what you’re really doing is finding a partner to help you build a successful business. And nobody wants to work with someone Corcoran would describe as “…too know-it-all, and nothing happens the way you planned when you get out in the real world.”
“Humble and hungry” is one of the Lendio values and how Blake describes the attitude.
Corcoran suggests, “If you were to ask the other sharks, whether they’re aware of it or not, I bet they do the same thing.”
Are you humble and hungry?