Sharing information in investor pitches

I was recently meeting with an entrepreneur pitching his startup. During the first few minutes of the meeting, the entrepreneur shared the problem that his startup was solving and what differentiated the company from competitors. All was going well.

I then asked the entrepreneur for some traction metrics, and that’s when the tone of the discussion changed. The entrepreneur shared that he wasn’t comfortable sharing traction metrics during our first meeting and that he would do so if we advanced into further discussions.

There are two reasons why an entrepreneur may not want to share a certain piece of information in an investor meeting. The first is if that information carries negative value. In this specific example, the startup may not have much traction.

The second reason is that the entrepreneur doesn’t trust the investor. While understandable, sending this signal kills the discussion. The reason is that an entrepreneur and investor need to trust each other in order to partner. So if one side essentially sends the message that they don’t trust the other side that’s a step backward, not forward, in achieving that goal. And when this message is sent in the first meeting where building trust is of vital importance, it can be a lethal step backward.

In this case it was the entrepreneur’s unwillingness to share traction information that killed the discussion. Sometimes it’s their unwillingness to share something else. I’ve witnessed entrepreneurs who, in later meetings, are unwilling to have you interact with their team, conduct personal reference checks, or call their customers.

In each case, they’re signaling that they either have something to hide or don’t trust the investor. Neither signal is good.

Also published on Medium.

  • While I agree with the idea that not sharing things like traction up front isn’t a great way to start a conversation with investors, it’s also tough to ask someone to trust you during an initial meeting if it’s the first time you’ve met.

    There certainly are investors who have taken a meetings just to gather market intelligence or even worst to gain insights for one of their portfolio companies.

    It’s an interesting discussion how to bring together a startups lack of initial trust and an investors desire to know all the facts right away. A warm intro helps, but only a relationship over time would really make a founder willing to share. Often times (like this one) the founder doesn’t have that chance.

  • The observation in your second paragraph is correct. That’s why sometimes it’s a good decision for the entrepreneur to kill the discussion. You just need to be aware that you’re doing it, and know when to do it and when not to. Researching your investor before the meeting (portfolio, feedback from the person who made the intro, reading their blog, …) is a great way to increase your odds of making the right decision when you decide whether or not to trust them.

  • SK94301

    sorry, i think you’re being somewhat naive.

    i personally know of an example when an investor shared an entrepreneur’s confidential information (pitch deck and notes from the discussion) with a second entrepreneur so the second entrepreneur could pursue the concept.

    as it turned out, the second entrepreneur was friendly with the investor, who eventually funded the entrepreneur’s company.

    while i believe many (most?) investors behave ethically, bringing considerable sums of money into the equation can change things. look at the RadiumOne board’s behavior with regard to its CEO, for example:

  • See my reply to Andy’s comment

  • SK94301

    i saw your reply, but don’t think it addresses my point. entrepreneurs typically operate in very different circles than investors, so it’s often difficult to determine whether an investor should be trusted.

    trust is earned over time…it shouldn’t be expected during an initial meeting.