Emotion — An Essential Element in Investing?

Big Red Car here.  Hey, ya’ll, it’s as cold as a witch’s titty in a brass bra here in the ATX.  The 30’s are doing battle with the 40’s and there is some chatter about it getting to 60F today.  Brrrr!

[Haha, STFU, Big Red Car, the folks in NYC and Boston are dealing with a freakin’ blizzard.  So stop your whining.]

So the Big Red Car is thinking about how emotions impact the investment environment.  We’re thinking about how it impacts an entrepreneur getting to “YES” and making a deal.

Business IS an emotional undertaking

If you are an entrepreneur getting ready to change the world, you do not need a 1966 Impala convertible — even one as sexy as me — to tell you that the startup business is an emotional undertaking.  Right?

Here’s a random pic of me and my buddy, Bevo.  Bevo had a tough year in 2013.  He almost seems catatonic, no?

Bevo and the Big Red Car

Hell, you’re up to your eyeballs in passion and emotion.

Don’t let anyone tell you that “It’s just business”!  Old Sport, you know better than that.  It’s vision and passion and commitment and changing the world — and you can’t do any of that if your emotional fuel tank is showing EMPTY.  No you can’t.

And when you baby leaps out of the cradle and takes its first steps and then crawls, walks, runs — crawl-walk-run IS the startup business, Old Sport — your chest will burst with pride.  Oh, yes, business is an emotional undertaking.

Who are the most emotional players in the fundraising continuum, Big Red Car?

In the continuum of bootstrapping, friends & family, angel investors, organized/syndicated angels, seed funding and venture capital A/B/C/D — the most emotional investors are the angels.

Your friends and family are investing based on love.  You knew that, right?

The venture capitalists are investing OPM (other people’s money) and they are investing in the idea.  Oh, sure they are looking for a spear carrier to carry the idea but they will replace YOU at the drop of a silver dollar, particularly if it is theirs.  You knew that right?

[The other day The Boss was talking to one of his brilliant CEOs who had just raised a nice war chest and the CEO was waxing eloquent as to how “nice” the VC who was leading the deal had conducted himself.

Bit of naivete showing through at the edges, perhaps.

The Boss let him run with his warm and fuzzy feeling for a bit.  Kind of like how one might let a 5-lbs Rainbow Trout run up and down the creek to tire himself before coaxing him into the net.

The Boss directed the CEO to some public utterances as to how this particular VC had wound up a deal that had not worked.  Seventy five percent (75%) of such deals do NOT work in today’s rarefied environment.  Ooops, that’s an alarming statistic, no?  Truth often is, Old Sport.

The VC may have warmed the pinking shears a bit and may have checked to see if the entrepreneur was still in the underwear before he cut them up for rags.  Make no mistake, the “nice” VC liquidated that company including cutting up the CEO’s underwear for rags.

So, yes, he was a considerate and “nice” guy but this is a pretty brutal business when you take OPM.  Indeed.

But I digress, sorry.]

Angels invest in what exactly, Big Red Car?

Angels are the ultimate, organic Jockey, Horse, Course investors.  Many of them were and are entrepreneurs — jockeys.

In the matrix of Jockey, Horse, Course angel investors first deal with the issue of the jockey [the entrepreneur, YOU, Old sport, sayeth the Big Red Car].

The emotional and personal connection with the Jockey alone is what often gets the angel investor to reach for their checkbook.  Once they reach for that checkbook, STFU and stop selling.

Close, close, close.

OK, so what do we do with this information, Big Red Car?

Old Sport, you know you audience.  You understand your audience and you relate to that audience in the manner in which they want to make their decisions.  You adapt their mannerisms just like as if you had been to the Dale Carnegie course.

When you get ready to pitch you think about what role emotion plays, if any, in the decision making process of your audience.

1.  Of course, you’ve got the Vision, Mission, Strategy, Tactics, Objectives, Values and Culture all worked out.  You’ve got a working prototype.  You”ve done a bit of alpha, beta and market testing.

2.  You’ve got your elevator, taxi and boardroom pitches memorized with an appropriate call to action on each.

3.  You’ve got your business model canvas drawn up and you’ve got your streamlined pitch deck of about 7-10 slides (chapter headings really).

4.  You know your ask and why.  You can defend your pre-money value and you have practiced your defense.

All of those things are required to get in the game.  But you knew that right?

If you are dealing with angels, you are placing just a bit more focus on the emotional aspects of who you and your co-founders really are.  Find linkages with your audience.  Do some considerable research as to who THEY are.  [No, Old Sport, you cannot access their NSA files but that is a damn good thought because they have probably accessed yours.]

Understand that these angels are likely to be looking for an emotional connection and work your deal.

A couple items of obvious portent — be well groomed, dress like your audience, arrive on time.  Laugh at their jokes.  Housekeeping stuff really.

But, know that angels are looking for an emotional connection with their jockey.  Help them arouse those emotions.

If you need a splash of advice or counsel, feel free to contact The Boss at 5123-656-1383 or jminch2011@gmail.com.  Tell him a Big Red Car sent you.

But, hey, what the Hell do I really know anyway?  I’m just a Big Red Car.  Be kind to yourself and have a great weekend.   Call an old school chum you haven’t spoken to in a long, long time and rekindle that relationship.

 

 

 

 

 

  • replacing you, scary.

  • jim mchugh

    BRC, just got in from running the big Ariens snowblower…stop whining about the weather 🙂

    • JLM

      .
      Yes, snow blowing is a chore like cutting the grass and power washing that has a sense of real accomplishment upon completion. Well played.

      We will stop whining as it looks like 60F is attainable today. Sorry.

      BRC
      .