A cofounder who sold his company for nearly $20 million on how to make investors feel like their input matters so they take a chance on you
- Suneel Gupta is a Harvard faculty member and the cofounder of mobile health company Rise, which was acquired for nearly $20 million dollars two years after its launch.
- The following is an excerpt from his new book, Backable: The Surprising Truth Behind What Makes People Take a Chance On You.
- In it, he says showing VCs who previously said no to Rise that he used their input to modify his pitch encouraged two of them to become early investors.
Years ago, I came across a designer named Michelle who was incredibly in demand within her company. People would fight to have her on their team. I later discovered that while people liked Michelle's creativity, they loved her process even more.
After sharing a set of design options, Michelle always gathered input from the room. Then, in a follow-up meeting, she would go down the checklist of feedback, item by item, and show how she had incorporated their thoughts into the newest design. Or, if she had decided not to use the feedback, she would share her reasons why. People didn't always agree with Michelle, but they always felt heard. Their input mattered, and they felt like insiders in her process.
Recently, June Cohen said something that really made Michelle's story click. Cohen, the former head of media for TED and current CEO of WaitWhat, explained that in order to chart a truly epic career, "You need to make everyone you enlist a hero, not just in your story, but in their own." In the "Wizard of Oz," Dorothy enlists the help of the Tin Man, the Scarecrow, and the Lion - by making them the hero of their own stories. Cohen says, "If the Scarecrow didn't have a chance of getting a brain, if the Tin Man couldn't get a heart - they wouldn't have braved those attacks from flying monkeys!"
"It didn't make any sense," Burk told me. So she decided to study what would happen if a charity spent real time and effort cultivating existing donor relationships. In her experiment, Burk isolated a set of people who had given to a national health charity.
If you were a part of this test group, you received a personal phone call from a member of the board of directors. During this call, you were not asked for more money. This was a critical point - the call wasn't being used to sell you again, but rather to express sincere gratitude. You received a heartfelt thank you for your support, and you learned how your contribution was making a difference. After those phone calls were placed, Burk waited to see which donors stuck around.
What she found was astounding. Two years later, 70% of the people who had received the phone call from a board member were still giving to the organization, compared to just 18% of those who hadn't. To top it off, donors who remained were now giving 42% more than they had at the start.
When Burk shared those results with me, I asked her how one simple phone call could make such a huge difference. She answered my question, in part, by reading a thank-you letter she happened to have sitting on her desk. It was written from one community organizer to another, and the first paragraph began: "We know it's often your role to do the work of making donors and volunteers feel like heroes . . . and they no doubt are."
Helping people understand their impact isn't a business concept, it's a human concept. We all want to feel as though what we said and what we did mattered. If you're a backer, that can be as simple as knowing your input was heard and utilized - whether that's for a mission, a strategy, or a product.
I got my first glimpse of this in politics. In high school, I knocked on doors for a local politician named John Dingell, and I still remember the annoyed looks on people's faces when I'd ring their doorbell on a Sunday afternoon. By the tail end of the campaign, people's irritation grew because their homes had been visited multiple times by campaign workers who had handed them the same piece of literature. "If you give me one more of these pamphlets, I'm voting for the other guy," said one suburban dad.
A decade later, when I was canvassing for another candidate, smartphones had changed everything. Before knocking on a door, I could pull up an app and know the issues that mattered most to that voter because we had taken notes the last time we visited the home. I would say something like "From the last time we chatted, I know you care deeply about K-through-12 education. Can I give you an update on some of the progress we're making on that front?" As a result, there were fewer door slams and more quality conversations. Voters felt like they were being listened to - that what they said mattered.
We don't typically win people over in one conversation, but through a series of interactions that builds trust and confidence. Even if the last conversation went poorly, you can use the next one to show them how they influenced your work. This type of follow-up is so powerful that it can often change a backer's response from no to yes.
Brian Wood is an innovation strategist at the National Geospatial-Intelligence Agency, which is part of the US Department of Defense. He explained to me, in layman's terms, an internal project he created called Conduit, which used artificial intelligence to help the agency make better decisions more efficiently. But when he pitched decision makers at the Pentagon, they rejected the idea, expressing a laundry list of concerns.
Instead of getting defensive, Wood listened carefully to the feedback. He took detailed notes and created a checklist of things he'd need to address before he returned. Then, weeks later, he scheduled a follow-up meeting.
Just as Michelle the designer had done at a high-tech company, Wood walked Pentagon officials through a modified version of his prototype, showing them exactly how their feedback had been incorporated. When Wood finished his demo, he saw a room full of surprised faces. When he asked if everything was okay, one of the officers cleared his throat and said, "Everything's fine. It's just . . . no one ever comes back."
Unlike Wood, I never thought to go back to the investors who said no to Rise. That is, until I met an old friend from law school for coffee. Andy patiently listened to me complain about how everyone was passing on my idea. When I was finished, he leaned back in his chair a bit and looked off into the distance for a moment. Then he asked a one-word question: "Why?"
"Why what?" I asked.
"Why did they pass?" he said.
"Because they didn't like the idea," I said, feeling a slight irritation.
"Yes, but why? Why didn't they like the idea?" he pressed.
At that moment, it occurred to me that I hadn't really asked investors who passed why they had passed. Typically, I had received a short email saying something like "Sorry. It's just not the right fit for us." But I hadn't followed up and probed further into why.
Later that day, I took Andy's advice and reached out to all the investors who had passed on Rise and asked them what it would have taken for them to say yes. A few of them responded with their version of "Nothing. Just not the right fit for us." But others responded with substantive notes, offering feedback such as "We would have liked to have seen more numbers around retention" or "We'd like to see the engineering team built out a little more so we know you can build a strong consumer product."
Without asking the question, I never would have received the feedback. And now that I had a clear direction, I knew how to adjust our road map to focus on customer retention and engage a recruiter to help us find engineering talent. About a month later, I emailed those same investors and asked if they'd be willing to take a quick follow-up meeting. I began each of those meetings by restating the concerns they shared and, as soon as that happened, I could feel the room relax. They knew in that moment that I wasn't going to waste their time regurgitating the exact same pitch.
Then, like Brian Wood inside the Pentagon and Michelle inside her design room, I showed how I had modified our approach using their input and the results we had so far. The new pitch didn't always work, but two venture capitalists who had previously told me no became early investors in Rise.
Excerpted from BACKABLE by Suneel Gupta. Copyright © 2021 by Suneel Gupta. Reprinted with permission of Little, Brown and Company. All rights reserved.
Suneel Gupta is the cofounder of Rise and teaches Innovation on faculty at Harvard University. Using the 7 steps inside this book, Suneel went from being the face of failure for the New York Times to being the "New Face of Innovation" for the New York Stock Exchange. His ideas have been backed by firms like Greylock and Google Ventures, and he has invested in startups including Airbnb, Calm, and SpaceX.