"I don't want to make up stories ." said a supercool founder to me about his Stage A investor pitch.
It sounds much more natural in Hebrew ( אני לא רוצה לספר סיפורים״" ) but the argument about how visionary you need to sound for investors is fundamental.
So do you tell The Big Story or keep to the "tachles" ?
In the Israeli tech ecosystem it is data that is king. The facts, some humility and a 'tachles' approach to life mean that people are unwilling to make the story of their company too big.
But there are good business reasons to get the balance right when you're raising money.
Investors are trying to answer a simple question: Do you WANT to create one of the leading companies in the industry? So you have to sound like a true believer.
A lot of this is to due with the basic maths of venture capital or The Power Law ( as in the book by Sebastian Mallaby) . The numbers are that around 5% of startups generate 95% of all exit returns. So in a VC portfolio of 100 companies only a few the rule of thumb is that about 50 of these will not make money, 30 will return a little bit of money and just 5 - 10 will return 10x plus the investment to make the whole thing work.
That's why VCs always looking for home runs or at least a chunky return on investment.
So investors look at you to see if you have what it takes to be the rare winners to go really big. The market size and your numbers are key, but they're also looking for your passion, ambition and ability to communicate.
The Big Story is not just for investors themselves - they know it's for your focus and your team's inspiration as well as more mundane matters as recruiting and retention of the people who are going to make the story happen.
Remember; numbers, projections and an investment thesis follow a good story. Not the other way around.
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