One Time Ignorance Really Can Lead to Bliss - When Not Knowing Breeds Trust - Are You Fundable #6
Last week we began a journey towards understanding the elements of trust as they relate to your relationships with investors. We surmised that becoming truly related to an investor was a prerequisite to funding and that trust was perhaps the most important component of that relationship-building. I gave you a mantra to remember this:
You Must Hit the Trust Button Before the Greed Button
I left you with the notion that great ability, achievement or success doesn’t, in and of itself, make you someone that an investor will trust, although without some element of those attributes you probably won’t get funded either.
The point is that your expertise, achievement, ability and past success are all important factors in getting funded, but without trust between you and your investor, they won’t matter.
Trust comes first.
Trust is the foundation that can give rise to a great relationship with an investor, in the same way that a strong trunk and root system can give rise to a towering oak tree. You don’t get branches, leaves and acorns without first developing the roots and the trunk.
Expecting acorns before there is a strong root system, branches, and leaves, is by analogy hitting the greed button before you hit the trust button.
I also introduced you to the concept that revealing your flaws, in the right way, can build trust with an investor. Today, let’s explore how to do that . . .
I love the movie “Meet the Parents,” starring Robert De Niro and Ben Stiller. De Niro plays the somewhat paranoid and obsessive future father-in-law, Jack Byrnes, and Stiller plays the bumbling future son-in-law, Greg Fokker, who is trying so hard (and constantly failing) to earn the respect of De Niro by getting into De Niro’s “Circle of Trust.” Beyond the hilarity, the movie provides a compelling look at how to build a trusted relationship that applies equally to you and your future investors.
The most important takeaway from the movie is that being real, warts and all engenders trust in a way that no amount of posturing, pretending or play-acting can.
I’m not talking about a teary-eyed confession of all your faults and weaknesses in the face of an investor that you’re just getting to know. I’m talking about a candid, straightforward acknowledgment about your own perceived flaws, shortcomings, gaps in your team, challenges in your market, model or competitive environment, etc. etc.
Remember, there is a tried-and-true three-part way to reveal your flaws and warts:
- Reveal the flaw unemotionally, as a matter-of-fact;
- Describe how you compensate for that flaw;
- Hold the context that because of your ability to compensate for your flaws, you may be the best candidate they can imagine.
Here’s why this is so vitally important in your dealings with investors . . .
You will only get one chance to earn trust and you won’t have a lot of time.
In “Meet the Parents” Greg Fokker and Jack Byrnes spend an entire weekend mistrusting the perfect image each is trying to portray to the other. So they spend all their time protecting this image and at the same time looking for holes in the other’s image of perfection. No real relationship is formed between the two, until the final scenes of the film when each acknowledges the flaws the other suspected all along.
They finally got all that stuff out of the way and in the space that opened up there was room to build a relationship.
But here’s the crux of the problem for you with an investor . . .
You’re not likely to get an entire weekend to spend with your prospective investor, so you simply don’t have time to waste posturing as the intrepid heroic entrepreneur that knows it all and can overcome any challenge. Probably, you’ll have an hour or two if you’re fortunate. So how are you going to spend that hour, having them looking for a chink in your perfect set of armor, or getting related to them as a human being by showing them the hidden weaknesses up front?
OK, Rob, you might be thinking, but how do I know when it’s the right time to reveal my warts?
One great way to sense that the time is right to reveal a wart or two is when the investor asks you a certain kind of question about you, your team, your product or service, or your plan and projections. Now, the investor is going to ask all kinds of questions assuming they’re at all interested in you or your opportunity. So how can you figure out whether any particular question they ask is the kind of question I’m talking about?
Fortunately, it’s quite easy to spot: it’s the question for which you don’t have a good answer.
When you hear that question that you know you really don’t have a good answer for, there are several options available to you. You can take the “fake it til you make it” approach – doing your best to act like you know the answer by sounding smart. You can take the “misdirection” approach – using a lot of verbiage to steer away from the question and bring up something related or unrelated that you think you’ve got a great answer for. You can take the “Circle the Wagons” approach – being defensive and preparing for an assault. You can take the “Ballerina” approach and dance all around the question.
Please don’t do any of these things.
In the moment, some form of dodging the question that you don’t have a good answer for may seem like a good strategy. But that’s just your conditioning. It goes back to that time when you were little and you danced your way out of trouble with a good lie, or said you were sick and stayed home from school to avoid having to read your book report in front of the class.
It worked then, but it seldom will serve you in business and especially with investors.
Because it destroys trust.
OK, then what is the right approach to take in the face of the question for which you don’t have a good answer?
Here is a golden nugget in the form of three words that just might help seal an investment into your company someday. Write these down and put them someplace where you’ll see them frequently. I’m serious . . . these three little words just might do the trick:
I Don’t Know.
One important reason that “I don’t know” is the best answer to the question for which you don’t have a good answer is that it is the honest answer.
An equally important reason is that “I don’t know” conveys to the person asking the question that you can be trusted.
A third important reason is that “I don’t know” is a very efficient way to establish a modicum of trust quickly, so your potential investor can stop looking for the chink in the armor and put his or her attention on the opportunity you have.
A fourth important reason is that “I don’t know” can differentiate you from the crowd because most entrepreneurs will use some other approach – one that won’t work anyway and won’t engender trust either.
It turns out that a lot of research backs the notion that showing your imperfections actually generates trust, even though we are all conditioned to hide them. In the next post in this series, we’ll explore that research and its practical application with a series of steps you can take to assess whether you’re trustworthy and whether someone you are dealing with, such as an investor, a co-worker, a business partner, is trustworthy.
Key Takeaways: A great opportunity for trust-building truth-telling occurs when investors ask you the question for which you don’t have a good answer. Reveal your flaws in the right way, and you can build trust because it shows honesty – you have a realistic idea of your strengths and weaknesses and aren’t afraid to disclose them. This is an efficient way to move the conversation past the “can I trust you” stage and it will differentiate you from other entrepreneurs seeking the investors’ capital.
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