Startup Advice: How Entrepeneurs Gain Credibility

While talking with young founders in Europe and the US over the last couple months, I have been asked the same question repeatedly -- how can an entrepreneur just starting out gain the necessary credibility to attract capital? It is an important question because, at its heart, a startup investment is an investment in the entrepreneur. And the earlier stage the investment, the more so this is true.

We all know the allure of the elusive "serial entrepreneur" -- the rare breed who has done it before (successfully) and will not fall victim to the same business pitfalls (he'll have to discover new ones). I have backed serial entrepreneurs before and will continue to back them. They have valuable startup knowledge to bring to bear on the company building process that we in the venture business clearly covet. But I have also backed first time entrepreneurs, sometimes just out of school. I did not back their extensive startup knowledge. I did not back their record of success. In many cases, I did not even back their domain expertise. In fact, some of the very best entrepreneurs with whom I have worked lacked any of the standard indicia of success that a venture investor might look for in a successful founder.

So how does an entrepreneur with little or no track record gain credibility? In my experience, they gain credibility in two ways -- they borrow it and they demonstrate it. Borrowed credibility runs on the same principle as guilt by association. If entrepreneurs surround themselves with people who have credibility, they gain credibility themselves. In the business world, reputations are paramount. As a result, when well-respected individuals vouch for an up-and-comer, it is meaningful. There are lots of ways someone can vouch for you as an entrepreneur. They can provide services to your company (awesome lawyers, accountants, recruiters, etc. are in great demand -- if they work with your company it means they were willing to bet on your success). They can lend their name to the company as an official advisor (ideally you will be able to clearly explain how they are working with your company other than merely lending you their name). They can invest in the company (if industry experts or startup/product/marketing gurus invest in your company, it is a huge vote of confidence in what you are doing). They can go on your board (business leaders have no more valuable resource than their time, so if they go on your board it is a huge recommendation of you and your company).

When it comes to borrowed credibility, there is perhaps no more important act than the initial introduction you are given to an investor. If you have no track record and you cold call an investor, you have huge reputational obstacles to overcome. This is particularly true because many investors will assume that you were either unable to find someone to make the introduction or too naive to realize the importance of an introduction. Either way, your likely success as an entrepreneur will be sharply discounted. On the other hand, if you are introduced to an investor by someone he or she trusts and respects, you are well on your way to a trusted relationship yourself.

The other way first time entrepreneurs gain credibility is to earn it. I don't mean this in some sort of hazing way. There isn't a clear path to earning credibility. You don't produce a particular amount of diligence. You don't deliver a particular number of industry reports. You don't call or email to followup a particular number of times. What you need to do is be really smart and well informed about the business you are pursuing.

The best way to earn credibility with investors is to have good answers to the questions you are asked. At August we want to invest in people who know more about their business than we do. We want to be excited about what you're doing and get more excited as you thoughtfully answer questions about your business. That doesn't mean that you need to have all the answers. You don't. You just need to be thoughtful when you don't and explain 1) how you intend to get the answer, 2) what you predict the answer to be, based upon what you do know, and 3) how you expect to gain the answer over time. Domain experts are best positioned to answer questions about a domain specific business. But being a domain expert does not require direct experience in a particular business. It may be sufficient to borrow the knowledge of those who have worked in the industry. In fact, oftentimes the most interesting ideas come from people who are not mired in traditional ways of thinking about an industry but know everything there is to know about how things are done today.

Credibility also comes from doing what you say you are going to do. Sometimes that means following up on a question from a meeting (If you say you'll get back to an investor with an answer and you do so promptly, you'll gain credibility; if you don't, you are done). Sometimes that means hitting numbers you say you will, or closing on a customer you expect you will. I once gave a term sheet to an entrepreneur because he delivered on a number of assertions he'd made about his business at a meeting three months earlier. There's nothing better than an entrepreneur who delivers the goods.

If one of these techniques for garnering credibility is good, all of them together are great. Get introduced to an investor by someone he or she trusts. Build an advisory board and board of directors of industry experts and admired professionals. Do your homework -- know everything there is to know about the market you are pursuing. Welcome questions about your business -- answer them well when you know the answer and admit when you don't. And always do what you say you are going to do -- whether that is delivering promised followup materials or hitting your numbers. In combination, these techniques can give any entrepreneur, no matter how young and/or inexperienced, the credibility necessary to attract great investors.

Comments

[find a dog]

Great job on the site, it looks outstanding. I am going to save it and will make sure to check often

[nike shoes cheap]

which helps increase the amount of time that your muscles are engaged as you walk.

[Discount New Balance]

Great post. I am also a young entrepreneur and looking to meet some important clients tomorrow for the first time. Sleep is going to be little, to none.. But this read was great and encouraging.

[compare health insurance]

Hey I pair your style I instrument concur for your take gratify remain transmitting!

[movers halifax]

Hii. Great article you've written, is this your first website blog or have you been doing this a while? I'd be interested in reading some more of your things. Links please?

[Ken Griffey Jr Shoes]

my idea like you, just not good at expression

[Ken Griffey Jr Shoes]

my idea like you, just not good at expression

[hair regrowth]

Hi, thanks so very much for these suggestions!...

[Nike Free Run Mens]

Thank !I really love to read this post .

[supra shoes]

This guy goes to a psychiatrist and says, 'Doc, my brother's crazy,

[nike frees]

This guy goes to a psychiatrist and says, 'Doc, my brother's crazy,

[Kobe Bryant Shoes]

Queen, you'd no small courage." Cold wind looking at the back of Muslim silence, Hou Qingning not argue

[nike air max]

The article is great, I got the idea!

[Cheap Jordans]

In this article, I was like, really very good, thank you for sharing.

[Cheap Jordans]

In this article, I was like, really very good, thank you for sharing.

[Vibrams 5 Fingers]

That was my thought,too.

[Vibrams 5 Fingers]

That was my thought,too.

[Mens New Balance]

Great job on the site, it looks outstanding. I am going to save it and will make sure to check often

[hats for sale]

The article is worth reading, I like it very much. I will keep your new articles.
http://www.nfljerseysmalls.com

[Soccer Shoes]

you'd no small courage." Cold wind looking at the back of Muslim silence

[Nike Lebron 8 South Beach]

thanks so very much for these suggestions

[GHD Iron]

Good stuff as per usual, thanks. I do hope this kind of thing gets more exposure.

[prefabrik fiyatları]

I have worked lacked any of the standard indicia of success that a venture investor might look for in a successful founder

[New Balance Shoes]

From that assumption, I put the hatch at roughly two feet wide. Depending on how the interior is laid out, it looks like it would be sufficiently large to carry seven people on a short duration trip.

[Low Carbon Steels]

I sincerely got a kick from your article. I really do not truly have much to say in response, I only wanted to comment to reply great work.

[Visvim]

Wealth is the test of a man's character.

[Visvim]

A man is only as good as what he loves.
1

[1045 steel]

i like your website very much

[tiffanys-jewelry]

Queen, you'd no small courage." Cold wind looking at the back of Muslim silence, Hou Qingning not argue, after all, and so down that the result is what she wants. Emperor Laoer light listening to

[tiffanys-jewelry]

Being happy doesn't mean that everything is perfect. It means that you've decided to look beyond the imperfections.

[rolexwatches2011]

Being happy doesn't mean that everything is perfect. It means that you've decided to look beyond the imperfections.

[sun-glasses-hut]

That's the worst part. Liking someone so much and knowing he'll never feel the same way.

[kabin]

I have worked lacked any of the standard indicia of success that a venture investor might look for in a

[Cheap Onitsuka Tiger]

Only an injunction)0f the lessening Can avoid that problem． Defendant： 1)Our name accurately reflected the first BaFfle of the owner of the store．andwe used the word“secret”as a kind of inside ioke because we wanted to keep the new business a secret from a former boss at a competing store．

[Cheap Onitsuka Tiger]

Only an injunction)0f the lessening Can avoid that problem． Defendant： 1)Our name accurately reflected the first BaFfle of the owner of the store．andwe used the word“secret”as a kind of inside ioke because we wanted to keep the new business a secret from a former boss at a competing store．

[Polo Outlet]

The nomination of the winner depends on the capability and spirit of the personality to finish the race.I like the post very much as it contain informative in knowledge.I like pics of Chelsea shares of the beauty of running in Madison, Wisconsin.I want to congratulate the winner for the nomination race.I want to know suggestion from others.

[Cheap Onitsuka Tiger]

The nomination of the winner depends on the capability and spirit of the personality to finish the race.I like the post very much as it contain informative in knowledge.I like pics of Chelsea shares of the beauty of running in Madison, Wisconsin.I want to congratulate the winner for the nomination race.I want to know suggestion from others.

[Jelly Star]

I'll add this to my favorite readings, it helps me to understand more about entrepreneurs gain credibility. I learn so many thing here. Thanks for sharing it.

[oakley frogskins]

For anyone attempting to build and/or maintain a business in this age of pervasive social media

[oakley frogskins]

For anyone attempting to build and/or maintain a business in this age of pervasive social media

[Dimas]

Wow, that was huge For many entrepreneurs with small and big businesses.

[prefabrik evler]

I wrote something for everyone in this blog, very loved friends know my birthday today, I congratulate myself, and everyone's birthday in advance

[1045 steel]

nice post

[Asics Onitsuka]

He that makes a good war makes a good peace.

[Asics Onitsuka]

He that makes a good war makes a good peace.
s

[Lebron 7]

So how does an entrepreneur with little or no track record gain credibility? In my experience, they gain credibility in two ways -- they borrow it and they demonstrate it. Borrowed credibility runs on the same principle as guilt by association. If entrepreneurs surround themselves with people who have

[New Balance 1574]

after all, and so down that the result is what she wants. Emperor Laoer light listening to

[Buy New Balance]

(if industry experts or startup/product/marketing gurus invest in your company, it is a huge vote of confidence in what you are doing). They can go on your board (business leaders have no more valuable resource than their time, so if they go on your board it is a huge recommendation of you and your company).

[yagoona]

Hey some really interesting ideas here. Thanks

[AirMax 95]

enjoy real advantages in policymaking should remind us of the need to behave responsibly in democratic activity and to make sure that our representative institutions are actually capable of governing, and are not paralysed by political brinksmanship.

[Ken Griffey Jr Shoes]

Thanks for informative and helpful post, obviously in your blog everything is good.If you post informative comments on blogs there is always the chance that actual humans will click through.

[justin bieber shoes]

It required a lot of of rinsing and spring water :) The orange notes of Peychaud’s were ultimately my favorite of the group. I think I'll have to make my own bitters next. Free Brothers makes a nice "specifically orange" bitters. Great Blog!

Cheers,

[justin bieber shoes]

It required a lot of of rinsing and spring water :) The orange notes of Peychaud’s were ultimately my favorite of the group. I think I'll have to make my own bitters next. Free Brothers makes a nice "specifically orange" bitters. Great Blog!

Cheers,

[justin bieber shoes]

It required a lot of of rinsing and spring water :) The orange notes of Peychaud’s were ultimately my favorite of the group. I think I'll have to make my own bitters next. Free Brothers makes a nice "specifically orange" bitters. Great Blog!

[Air Jordan]

i agree with your views from here.

[Christian Louboutin Pumps]

i agree with your views from here.

[ed hardy bikini]

Hou Qingning not argue, after all, and so down that the result is what she wants. Emperor Laoer light listening to

[Asics Shoes UK]

Well begun is half done
s

[Asics Shoes UK]

Health is better than wealth.
1

[Nike Air Max]

No pains, no gains.

[Nike Air Max]

Actions speak louder than words.

[Buy New Balance]

a startup investment is an investment in the entrepreneur. And the earlier stage the investment, the more so this is true.

[mbt online]

That was my thought,too.

[Mortgage refinance]

Whoa, awesome read. I just now found your site and am already a fan.

[dog carseat]

Was doing research for an article I hav e to write for a class this site helped quite a lot thanks!

[Penny Hardaway Shoes]

When it comes to borrowed credibility, there is perhaps no more important act than the initial introduction you are given to an investor.

[Cheap Jordans]

Just because someone doesn't love you the way you want them to, doesn't mean they don't love you with all they have.
2

[Cheap Jordans]

True love's the gift which God has given to man alone beneath the heaven.

[Air Max]

A true friend is the one who holds your hand and touches your heart.
1

[Air Max]

Look into my eyes - you will see what you mean to me.
2

[Jim Amick]

I like your content and will read some more but I'm having trouble visually with this blog. Any chance you can change the background and/or font?

[MBT Trainers]

Thank you for sharing. Very happy to see your article, I very much to like and agree with your point of view. Have a good time.

[lebron 8 gray]

Cold wind looking at the back of Muslim silence, Hou Qingning not argue, after all, and so down that the result

[Robert Fonner]

Thanks for sharing. Sometimes it takes being in the right place at the right time. A little luck has never hurt in addition to all the parameters you listed.

[Basketball Shoes]

So how does an entrepreneur with little or no track record gain credibility? In my experience, they gain credibility in two ways -- they borrow it and they demonstrate it. Borrowed credibility runs on the same principle as guilt by association.

[Beats Casque]

Cold wind looking at the back of Muslim silence, Hou Qingning not argue, after all, and so down that the result is what she wants. Emperor Laoer light listening to

[Ed Hardy Swimwear]

And gladly would learn , and gladly teach .

[Ed Hardy Swimwear]

And gladly would learn , and gladly teach .
1

[Christian Louboutin]

The roots of education are bitter , but the fruit is sweet .
s

[Christian Louboutin]

The roots of education are bitter , but the fruit is sweet .
a

[Christian Louboutin]

A great poem is a fountain forever overflowing with the waters of wisdom and delight .
A great poem is a fountain forever overflowing with the waters of wisdom and delight .

[simuler assurance auto]

As an entrepreneur in car insurance, I have to say credibilty is the most important thing I have to be to be succesfful.

[Ed Hardy]

Truth and tears clear the way to a deep and lasting friendship.
3

[Ed Hardy]

I can trust my friends. These people force me to examine, encourage me to grow.

[Swimwear Bikinis]

Too late we learn a man must hold his friend unjudged, accepted, trusted to the end.
2

[Swimwear Bikinis]

Too late we learn a man must hold his friend unjudged, accepted, trusted to the end.
1

[production music]

I must say, I thought this was a pretty interesting read when it comes to this topic. Liked the material. . . . .

[Asics Shoes]

Such a good writing, or by I saw for the first time. I'm quite happy, you are a good writer

[Air Max Shoes]

You can share some of your article, I'm like you write something, really very good! I will continue to focus on.

[Buy Sandals]

No man is an island, entire of itself.
3

[Vibram 5 Fingers]

Reading is not merely sympathizing and understand; it is also criticizing and judging.
3

[nfl jerseys]

http://www.jerseysnfljerseys.com/bmz_cache/6/627f70a5c109bbe7c4724945f6689248.image.180x120.JPG
http://www.jerseysnfljerseys.com/bmz_cache/7/7270bf9bc7b06a8c422bc6599d9acb14.image.180x120.JPG
http://www.jerseysnfljerseys.com/bmz_cache/e/e897e0ef45eea6d3adeccc107a643583.image.180x120.JPG
http://www.jerseysnfljerseys.com/bmz_cache/b/bfdb54b943ea021f324527084005570c.image.160x120.jpg
http://www.jerseysnfljerseys.com/bmz_cache/6/6edd923e6a105baead606e1daf8b823b.image.180x120.JPG

[web development services india]

I found your site via yahoo thanks for the post. I will bookmark it for future reference. Thanks

[Buy Sandals]

A bad shearer never had a good sickle.

[Vibram 5 Fingers]

A cat may look at a king.

[skin tag removal home]

Nice post. The entrepreneurs are really doing a great job.
Thanks for the post. It was very interesting.

[Beats Casque]

nd so down that the result is what she wants. Emperor Laoer light listening to

[New Balance Shoes]

still weighing my options though. I have some capitol and i just want to make the right decision

[Cheap Beats By Dre]

the result is what she wants. Emperor Laoer light listening to

[Air Jordan 2011]

Thank your for sharing your wonderful article. I very agree with your views from here.