The other day I was speaking at an event with Hiro Maeda of Beenext, and an audience member asked us when we thought it would be a good time to start talking to potential investors. This person wanted to know whether it was okay to start talking to an investor before he needed to raise.
This is a tricky question because it depends on the investor. Here are two ways to think about it.
One way is that first impressions matter, and they matter a lot. If you go to an investor when you are uncertain about your idea, or when your pitch is not very polished, the investor could subconsciously anchor their impression of you overall to their impression of your first meeting. So, no matter how much you develop your idea and grow as an entrepreneur, they will always remember the less impressive version of you. Therefore, when you do need to raise money, it may be an uphill battle to convince them. These investors are not looking for diamonds in the rough. They want to see the diamonds sparkle right away.
The other way to think about it is that investors invest in “lines, not dots.” Some investors are okay with seeing your unpolished self, as it is just one data point. They want to see your progress over time, and invest after they’ve gathered enough data points about you over the course of multiple meetings. In some cases, the trend lines are exponential, or at the very least linear. That’s a positive signal to invest. Hiro recently did an investment with us in a founder that Yohei and I started talking to almost a year ago. Back then the founder didn’t even have an idea of what he wanted to do, but over time we saw his progress and got excited about his potential.
We’ve offered term sheets within 24 hours of meeting, and we’ve invested in founders that we’ve gotten to know over the course of months. So, it is hard to say where we should be categorized. I cannot be human and definitively say that first impressions have never influenced our decisions, but in general I believe we invest in lines.