The Bright Side of Sharing Bad News With Potential Investors

The Bright Side of Sharing Bad News With Potential Investors
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This story appears in the March 2016 issue of Entrepreneur. Subscribe »

Q: How do I tell all without scaring potential investors? 

A: It’s a critical balancing act, but remember: Investors want to hear everything. Kevin Choquette, founder of San Diego’s Fident Capital, who’s been on both sides of this discussion, offers three critical steps:

1. Don’t whitewash. Most entrepreneurs want to coddle potential investors, Choquette says, but that’s foolish: Everything will come out in due time anyway, so it’s better if it happens early. “Be honest about the magnitude of the challenge,” he says. 

2. Identify the challenges ahead. It might be your ability to recruit the right talent. It might be the general condition of the capital market. Whatever it is, Choquette says, lay it out. That way, prospective partners are prepared for what’s next. 

3. Say how you’ll meet the challenges. Tout your team’s strengths. If you have a solid entrepreneurial track rec­ord, talk it up. Do you have a proven ally in R&D? In distribution? In marketing? “Show them your previous experience in building an A team,” Choquette says.  

Edition: June 2017

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