Both and neither

I sat down with a friend earlier this week to chat about the process of raising money and at one point he said to me, "Don't bother pitching people who don't understand the online advertising space. If you have to explain eCPM to someone, they're not going to invest in you."

Yesterday I sat down with another trusted advisor who told me, "Pitch people who aren't familiar with the ad space because those who know it well will be too cynical at this stage."

Both are entrepreneurs who have successfully raised money in the past, and both have a really solid understanding of online advertising. When two trusted sources give you conflicting advice, who should you listen to? Which is the correct approach to fundraising? The answer is both and neither.

I recently joined a small circle of founders led by Jerry Colonna (same guy that ran the workshop I blogged about previously) and in yesterday's meeting he made an excellent (and timely) point: Usually when someone starts a sentence with "You should really..." what they actually mean is "If I were you I would..."

This isn't to say their advice or perspectives are not worth considering, but it's important to recognize the biases of the source. In this fundraising example, both individuals were drawing on their own personal experiences of raising capital, but our business is operating in a different financial climate with different founders and a different product. Also, like most first-time entrepreneurs, these two individuals were more than likely defining their strategy ad hoc as they learned tough lessons and made adjustments accordingly. Hindsight is 20/20.

At this early stage we have little more than a vision, strong work ethic, and unbridled talent, which means that we should be talking to people who fit the following criteria:

A. They actually have money to invest
B. They like us
C. They're willing to listen
D. Any and all of the above*

Sure, we may spend time talking to people who have no intention of investing in our company, but it won't be in vain. In fact, we had one of those meetings yesterday and it served as a great reminder that we've done a pretty good job of identifying the risks in our business model and anticipating pushback.

There's no substitution for tenacity. Don't waste time trying to figure out which conversations will be a waste of time. Make it up as you go along. Write down what you've learned so you don't make the same mistakes twice. Rinse and repeat.

*I'll add one caveat to this methodology, which is that we have verbally committed to one another that we will only pitch our business to people we personally believe to be trustworthy, which means we must trust each other's judgment. Sometimes it's a tough call and in these cases we've agreed to tread lightly and err on the side of caution.