Naval Ravikant’s advice for raising venture capital: “It is an emotional sale, not a rational sale”

“The process of raising money from an investor, a friend of mine once joked, is the process of young men and women seducing old men and women. You’re essentially trying to get them to look at you, and to see themselves in you… And so it is an emotional sale. It is not a rational sale. And you have to understand that at its core level.”

And as Naval explains, emotional sales do not happen via checklists. For example, it’s rare to fall in love with someone because they check a bunch of boxes (e.g. pretty good looking, pretty nice, pretty smart, etc.).

“Usually there is one thing about the person that is so overwhelming that makes you fall in love with them. And in that same way, when an investor is deciding to make an investment in a startup, they usually look for one exceptional characteristic about the startup that they truly adore.”

Naval believes there are four categories in which you can really excel:

1. Team. “If you can show that you have done something exceptional, other than starting this company, that’s a huge thing.”

2. Product. “A lot of entrepreneurs make the mistake of showing investors a half-finished or not-working product and then try and explain their way around it. The reality is investors are users also, so they’re highly visual. They want to see it. They want to play with it. And they’ll make up their mind very quickly.”

3. Customer traction. “If you have users and if those users are organically joining and growing, that’s very good. If you have to say: give us money and then I’ll go get customers, they don’t like to hear that.”

4. Social proof. “Social proof is basically looking at what other people are doing and doing that. So in the investing context, what this means is if you have one investor committed, very often you can get more investors interested. Or if you have a famous entrepreneur or advisor who’s very knowledgeable, involved with with the company, that can help bring investors.”

Naval concludes:

“So those are the four criteria that I think most investors look at, and you really want to be exceptional at at least one of them.

Full video: paan best “SVC2M, Keynote Session by :Naval Ravikant“ (Oct 2011)

P.S. We’ve put together a YouTube playlist with every Naval Ravikant insight we’ve ever shared. You can watch it here: "Best startup advice from Naval Ravikant"