Tag Archives: Acting fast

Inaction

We live in a time period where technology has greatly increased our productivity. This means that, on an individual basis, we can get things done much faster than before.

Thanks to the content available on the internet, we can learn faster than before.

Thanks to the extensive storage and processing capabilities of software and hardware, we can apply our learnings to quickly produce outputs from inputs.

And thanks to online communication tools like email and messaging apps, we can instantaneously relay the outputs we produce, and the decisions based on these outputs, to the people we interact with.

In other words, technology makes it easy to act fast.

However, acting fast isn’t always in our interest.

Although there is a limitless amount of content that we can learn from, our brains remain single track processors that need to recharge regularly. We therefore need to choose what to learn, and allow enough time for the learning to actually take place.

Although we have, for most practical purposes, virtually infinite storage and processing capabilities, that doesn’t mean that we should store and process everything. ¬†We need to ask the right questions based on our learnings in order to store and process data that’s likely to produce meaningful answers. We also need to cross-check the assumptions behind our answers before using these answers to drive our decisions.

And although we can instantaneously communicate the outputs we produce, and the decisions we take based on these outputs, to others, we need to take into account the fact that the recipients of these outputs and decisions are humans. Humans process information differently depending on when they receive it, both on an absolute basis (for example, the time of day or on weekdays versus weekends) and on a relative basis (for example, relative to when they expect to receive it, which is in turn influenced by the importance of the output or decision and when you last communicated). As a result, the first moment when an output or decision is available for communication isn’t necessarily the right moment for its communication.

In other words, while technology makes it easy to act fast, as a result of our humanity, there are important benefits to inaction.

Getting investors to act fast

When fundraising, the best way for an entrepreneur to get investors to act fast to complete an investment (and to get a healthy valuation) is to create demand for the company from competing investors.

However, this isn’t always possible. Especially in markets where capital is scarce, even very promising companies might not have many investors at the table.

When this is the case, some entrepreneurs resort to fabricating demand that doesn’t exist. They claim that investors who aren’t interested actually are, or they exaggerate the interest level of investors who have expressed initial interest. This often backfires because investors talk to each other.

Another approach is to set an arbitrary deadline. This doesn’t work because it doesn’t tell the investor what they have to gain from investing early and the investor knows that they’re the only party at the table. If the deadline were to pass it would simply be extended. In other words the deadline isn’t credible.

Rather than fabricate demand that doesn’t exist or set an arbitrary deadline, a better approach to get investors to cross the finish line is to show them the growth opportunities that the company will miss out on or have to delay due to the lack of funding. This also means that the investor who’s evaluating an investment in the company will miss out on them.

This includes highlighting the great team members that the company isn’t able to hire, demonstrating the foregone revenue or cost savings potential from not making a particular capex investment, and quantifying the opportunity cost of not conducting a specific marketing campaign, all due to delayed funding.

The reason why this works is two-fold. First off, unlike fabricated demand that doesn’t actually exist, it’s truthful. And second, unlike an arbitrary and uncredible deadline, it shows the investor what they have to gain from investing early.