When Seeking Funding, Beware of 'Happy Ears'
David Cohen, co-founder of Techstars, has a ton of amazing advice for founders. One of my favorite bits from him is about "happy ears."
What's that, you ask?
It is what most founders have when they are talking to investors. Instead of hearing what the investor is actually saying, founders hear what they want to hear. Instead of "no," they hear "maybe," instead of "mabye?" they hear "yes!"
When an angel investor says he or she is interested, it doesn't mean he or she is in. Interest does not equal commitment.
So how do you get from interest to commitment? First, you need to explicitly ask for investment and clarify the conditions. That is, you ask the investor what conditions need to be in place for a commitment.
Then, you need to confirm that you heard the investor correctly. David Cohen teaches founders to do so called reflective listening. This is a simple communication technique where the founder says/writes back to the investor what they understood was agreed on.
Reflective listening avoids misunderstandings.
Being on the same page with the investors and having clarity is better than running around with happy ears and ending up disappointed.
Alex Iskold is the managing director of Techstars in New York City. Previously Iskold was founder/CEO of GetGlue (acquired by i.tv), founder/CEO of Information Laboratory (acquired by IBM) and chief architect at DataSynapse (acquired by TIBCO). An engineer by training, Iskold has deep passion and appreciation for startups, digital products and elegant code. He likes running, yoga, complex systems, Murakami books and red wine -- not necessarily in that order and not necessarily all together. He actively blogs about startups and venture capital at http://alexiskold.net.