Every room of startup roadshow event is usually permeated with the air of hunger, entrepreneurs’ hunger for capital and client. In contrast, such hunger can be often met with investors’ hidden scorn and scruple. Today, some entrepreneurs, if not all, might still firmly believe in the magic power of personal charisma to attract either attention or money. Before mounting on the stage, they probably practice the pitch in an almost Demosthenes pebble style of diligence. On the center of the stage, they spare no effort in acting like the greatest orator you have ever seen, smiling, entertaining, or enthusiastic, hoping their amazing presentation would stir the audience and open the gates to success.
But would such magic truly happen?
Today, under the surface of any elaborate or flowery pitch, sophisticated and savvy investors are examining at them with their discerning and cold eyes.
I)They are looking at a startup idea and more importantly who is telling it.
Ideas can be simple with wildest ambitions.
For instance, Luckin Coffee, creating the first home-grown, digital-centric coffee brand in China so as to rival the dominance of Starbucks in the country. The startup went IPO after just 18 months of operation, which could only happen during our own gilded age of digital and AI obsessions. Much of the ink has been spilt on analyzing Luckin Coffee’s business model and strategy in comparison with Starbucks.
But few might ignore the fact that Luckin’s female founder previously held the position as one of the highest-ranking executives from Zuche, the leading car rental company in China. She keeps defending Luckin’s branding ideology that it is fine to burn money and bleeding to the point of near-death as the startup would eventually resurrect as soon as it gains market share. Many investors buy her story because that is exactly the trajectory path of Zuche, China version of Hertz behind which she was one of the masterminds to manipulate the very similar tactics of severe hemorrhage at first and now starting to make a profit.
No ordinary people can voice out such pitch; if so they would only be buried in ridicule. However visionary words from Luckin’s female founder seem just appropriate and convincing. She once claimed she should have no problem of raising more than RMB10 billion just based on her own personal network.
Perhaps one more example.
Legend said 20 years ago, Alibaba’s founder Jack Ma had received countless rejections from prestigious VCs, as doubts having lingered on a Chinese teacher without any technical background to fulfill his e-commerce dream until Jack Ma met his co-founder and kingmaker Joseph Tsai whose glittering law and financial career experience helped to close the very first investment deal from Wall Street, including Goldman Sachs. Thus much larger funding from SoftBank soon followed.
If the founder cannot tell the story in a reassuring way, you should at least have one shiny figure as your wingman to do the job. That might explain the most quoted phrase from lots of VCs is “they investigate the startup team and invest in people“.
II) Investors are looking at hardcore technology and they wonder can you sell it…
How many technologies out there are indeed unique, cutting-edge, disruptive, difficult to be copied or surpassed?
Or it might sound too good to be true, like Theranos saga.
Otherwise, the mainstream of the technologies we encounter daily is essentially a rather crowded arena, in particular in the much-hyped AI space.
Some investors now are very much cared about the clientele list, and your ability to associate your name with Fortune 500 company.
For instance, when AI chatbots are dancing around, this Chinese startup is the service provider for Uniqlo.
Hologram and mixed reality, too expensive to sell? How about a use case with BNP Paribas Real Estate?
After Shiseido acquired Giran, L’Oréal acquired Modiface, another rising star in virtual makeup should be a Russian startup which is currently working on a pilot project with LVMH.
Next example. This local startup is established by some top minds from the Chinese Academy of Science, focusing on NLP and unstructured data analysis. The startup signed a string of clients from government, military, and Alibaba’s Ele.me, country’s online food delivery platform. Interestingly the startup is still actively searching for more sales opportunities and willing to sell cheaply, as they know the competition in this racing track is very intense and any AI algorithm needs more concrete business cases to horn its skills in order to improve accuracy. On top of all these, the last thing the investor would like to see is the startup just sits there idly without adding more clients into its pipeline.
Above examples constantly remind investors that signing golden-plate name corporate clients often has less to do with founders’ personal charm but more about startup’s capability of behind-scene maneuvering of its influence in a specific ecosystem. The startup can reach out to decision makers and move things around. This is the key to differentiate the startup with other rivals.
Some might still argue the Theranos scam, emphasizing Elizabeth Holmes’ boundless charm, for instance, the trick of never blinking her eyes during the talking so as to mesmerize the investors. But at the outset, she also had to tap into her well-to-do family’s connections to onboard a few very reputable angel investors. She concocted a Standford drop-out genius story which Silicon Valley would love to hear, with a talent of con artist which no common people would be gifted of.
Though we do not intend to eliminate all possibility of personal charm, the impact might be weaker than we estimate. In China, things would be even more complicated as investors tend to be extremely network-based, cool-headed and pragmatic in short term sense.
We could be getting super excited about the buoyancy of the startup passion and innovation; often neglect the ruthless nature of the business world nonetheless.
By: Cecilia Wu