{"id":278571,"date":"2025-06-07T04:37:00","date_gmt":"2025-06-07T04:37:00","guid":{"rendered":"https:\/\/peraltafinancing.com\/angel-investor\/understanding-newtons-first-law-of-startup-investing-pitching-angels\/"},"modified":"2025-06-07T04:37:00","modified_gmt":"2025-06-07T04:37:00","slug":"understanding-newtons-first-law-of-startup-investing-pitching-angels","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=278571","title":{"rendered":"Understanding Newton\u2019s First Law of Startup Investing \u2013 Pitching Angels"},"content":{"rendered":"
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Avoid getting over-excited at demo days and investor gatherings<\/h3>\n
When I first started attending trade shows as a product vendor, I would get excited by all the new business we seemed to be generating at the show.<\/p>\n
New prospects would flood our booth asking about our products. Some were clearly looky-loos, many just there for the free candy. But half needed our product, a quarter understood they needed our product, and one out of ten wanted a quote immediately so they could order it tomorrow.<\/p>\n
We\u2019d usually come home with 200 prospects to follow up with, including 50 hot prospects and 20 marked as ready to purchase. For a startup that sold $100K pieces of IT equipment, I was ecstatic at so much new business in the pipeline.<\/p>\n
How many new orders did we actually get? If we were lucky: one or two. Those 20 hot-hot-hot prospects? It turns out they weren\u2019t so hot. The boss didn\u2019t approve. There was no budget. They had other priorities. Mostly, they just ghosted us after the show.<\/p>\n
Newton\u2019s First Law of Purchasing<\/h3>\n
The first five times that happened, I thought I was just a bad salesperson who couldn\u2019t close deals. (I am, but it turns out that\u2019s irrelevant.) Eventually I learned from other salespeople this is just the nature of tradeshows.<\/p>\n
You meet prospective customers and the product is a perfect fit to solve their problem. You expect them to order immediately. But they don\u2019t. There\u2019s a process. There\u2019s other priorities. There are budget constraints. It\u2019s always easiest to do nothing. That\u2019s Newton\u2019s first law.<\/p>\n
Newton\u2019s first law of purchasing: a customer will continue doing the exact same thing until forced to do something different.<\/strong><\/p>\n
I call the high that comes from talking to customers who need our product all day \u201ctradeshow europhoria.\u201d As I walked around to meet the other booths, it was easy to tell the excited noobs from the jaded veterans.<\/p>\n
Once I realized the key wasn\u2019t making immediate sales but introducing the product so potential users would call us when they were ready, I was able to relax. I changed my strategy. I focused more on education and less on sales. But mostly, I didn\u2019t get excited when someone said they were ready to purchase. Instead of a 90% chance of a sale in our CRM, I marked them as 10%.<\/p>\n
We\u2019d get a few sales out of the show, but they\u2019d come slowly, after a lot more questions, demos, and price negotiations. It was impossible to predict which of those prospects would eventually buy. It often wasn\u2019t the most excited customers, nor the ones with the greatest need. It was mostly about being at the right time and right place with the right product when they needed it. And the same is true for finding investors.<\/p>\n
Newton\u2019s First Law of Investing<\/h3>\n
When I talk to founders fresh from a demo day or investor gathering, I hear exactly the same excitement. I call it \u201cinvestor europhoria.\u201d<\/p>\n
They\u2019d meet 50 VCs at the gathering and at least half were excited about their startup. A quarter asked for a pitch deck to circulate, and some already scheduled a pitch. At least five asked to see the term sheet \u2014 they were ready to invest!<\/p>\n
The founders were sure their entire round had just been filled. Their biggest problem seemed to be deciding how much to oversubscribe. Even their next round seemed full from the big funds that were interested but only wrote large checks.<\/p>\n
The startup was taking off! Their funding worries were finished. The VCs even offered to introduce them to big customers. They were at the inflection point of the hockey stick. They were on their way to becoming the next unicorn.<\/p>\n
I hate to be the party pooper (though I am quite good at it.) Take a deep breath. Get some perspective.<\/p>\n
You\u2019ve made good contacts with potential investors. Great. Now the work begins.<\/p>\n
You\u2019ll need to follow up, you\u2019ll need to pitch, you\u2019ll need to answer the same stupid questions a million times.<\/p>\n
Half of those investors who seemed excited will ghost you. Sorry, that\u2019s just the way it is. No matter how many times you follow up, you\u2019ll never hear from them again. It\u2019s nothing you said, it\u2019s not your body odor (though showering regularly can\u2019t hurt.) It would be nice if they gave you some feedback, but most never do. They get thousands of applications and need to focus their time on the ones they\u2019re moving forward with (their words, not mine).<\/p>\n
The ones who seemed ready to write a check today, well\u2026in the cool light of the morning, when the alcohol has worn off, they\u2019re not as excited.<\/p>\n
Perhaps they realized your startup is not quite a fit for their thesis. Perhaps they\u2019ve invested in a competitor. Perhaps the associate passed it around and the partners pooped on it. Perhaps the fund doesn\u2019t actually have any money to invest. There\u2019s no way to know.<\/p>\n
And those big funds that want to write you a big check? Believe it when they send you a term sheet. When you hit their milestones and check in again to see if they\u2019re serious about investing.<\/p>\n
Newton\u2019s first law of investing: an investor won\u2019t write a check until forced to.<\/strong><\/p>\n
The pitches are great, the company looks certain to succeed. Talking with the founders in the networking session afterwards, it\u2019s easy to get excited, especially after a few drinks. It\u2019s easy to say send me a deck. It\u2019s easy to say this is a great fit for us.<\/p>\n
But when it comes time to actually write a check, it\u2019s easier to say no. It\u2019s easy to say too early. It\u2019s easy to say come back when you have a lead investor, or meet the next milestone, or add a key employee to the team.<\/p>\n
It\u2019s hard to write a check and place a bet that\u2019s more likely than not to fail. It\u2019s hard to write a check until everyone else has, too. There\u2019s no reason to be the first to write the check; better to wait until the round is nearly full.<\/p>\n
The investors that are truly interested will begin a formal process: pitch, review, terms, diligence. They\u2019ll see who else is investing and talk to your customers. The process will take months. Along the path to funding, many will drop by the wayside.<\/p>\n
But once you get past the euphoria and unrealistic expectations, you\u2019ll see what you\u2019ve actually accomplished: you\u2019ve built a great funnel of potential investors.<\/p>\n
Most won\u2019t invest, but that\u2019s okay. Because the few that get it, that believe in you, will write a check and become your greatest supporters. It\u2019ll only be a few, and it will take a while, but you\u2019ll get there.<\/p>\n
It can\u2019t hurt to be just a little jaded (though not too much.) Take the demo day promises with a grain of salt (and a couple of aspirin). The checks won\u2019t materialize overnight. It\u2019s part of a long process. But you\u2019ve made good progress in finding the small handful of investors you need and you only need a few.<\/p>\n
Enjoy the euphoria for a night, then put it away and get to work with follow-up to turn those leads into investors.<\/p>\n
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S\u00fcprD\u00fcpr, the teleportation startup, raised $1B from two VCs in their Series A round, making them the first-ever virgin unicorn. But what will happen if their public demo fails? And why is their Chief Elephant Officer missing? Find out in the award-winning Silicon Valley mystery novel,\u00a0To Kill a Unicorn<\/a><\/em>.<\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"