Most entrepreneurs know that not all funding is equal. The guidance and connections they receive from investors can be just as important as the capital—but what they may not consider is that investors feel that way too.
Investors want to back entrepreneurs who they can mentor. Because many investors believe their time and expertise to be just as valuable than their money, they want to invest in companies where their personal involvement can have an impact. This means looking for entrepreneurs who are “coachable”—that is, receptive to feedback—and who can benefit from the specific guidance they have to offer.
Several academic studies have demonstrated the impact coachability can have on an entrepreneur’s chances of securing funding. A 2010 study led by Cheryl R. Mitteness, an assistant teaching professor of entrepreneurship and innovation at Northeastern University, showed that coachability influences whether angel investors recommend moving forward with a company after a pitch. Recent research at Babson College by Lakshmi Balachandra, an assistant professor of entrepreneurship, also found that the more willing an entrepreneur is to accept feedback and engage with suggestions that are offered during a pitch, the more interested investors are in pursuing the company. Her study concluded that coachability has an impact regardless of how strongly investors rank a business’s economic fundamentals or the competence of the team.
How can you make sure your eagerness to learn comes across in a meeting or pitch? Take an interest in the perspectives of investors and show appreciation for the experience and advice they have to offer. Rather than coming across as defensive when they provide feedback, ask clarifying questions and probe for more insight in an interested way.
But it’s not enough to simply receive feedback—you also need to act on it. Researchers from the University of Central Florida and Elon University conducted a study to define and measure coachability among entrepreneurs. They found that coachability involved a willingness not just to listen, but also to act on the advice of others and integrate their feedback into the business. With this in mind, you should follow up at the end of the pitch or shortly afterwards about the next steps you plan to take based on investors’ feedback.
While the skills and experience that investors are looking for in a founder are obviously important (and a degree from a highly ranked school or past stint at a tech giant is sure to impress), less tangible personal and relational factors also play an important role. For example, studies show that entrepreneurs who are perceived as trustworthy are more likely to receive investment offers.
“We are backing the founders as much as, if not more than, the business itself,” writes venture capitalist Christian Hernandez Gallardo. A recent study on the popular platform AngelList further demonstrated the importance angel investors place on the team behind a startup. When AngelList emails promoting companies to prospective investors include information about the founding team, investors are more likely to want to learn more about the business. In comparison, including information in the email about other investors in the company or growth in sales or users had no effect.
All this suggest entrepreneurs need to sell investors on not just their businesses and themselves—they need to convince them of the personal strength of the entire team and their willingness to learn. The good news is that coachability is almost entirely within an entrepreneur’s control: While you can’t learn to code or add an impressive job to your resume overnight, anyone can try to be more open to advice and mentorship, and encourage those qualities in their employees. As entrepreneurs work to strengthen their businesses and their teams, cultivating and demonstrating a willingness to learn can be an easy win.