What is FOMO in investor psychology?

FOMO, the fear of missing out, is an investor's worry about missing a big opportunity by saying no. Most people in fundraising know this concept. Fewer know its counterpart, which I consider just as important, having also sat in pitch meetings as a venture capital (VC) investor: FOLS, the fear of looking stupid.

VCs are people with emotions and fears. One of their biggest fears is looking stupid because of a bad investment decision. The reason is visibility. I once bought shares of the publicly traded company Xiaomi, and they have since lost 50% of their value. Almost nobody knows about that decision. When a VC invests in a startup, in most cases the whole startup scene knows. VCs want to be proud of their investments, and they do not want their peers to see one of them as a dumb decision. I explain this in the CEO Briefing on the counterpart of FOMO.

Why do rejections by other VCs worry the next investor?

Because every earlier decline makes the next investor ask what they are missing. When investors consider a startup that many others have rejected, the thought process often is: “If other VCs have declined this, maybe there is something that I am missing? Am I the stupid one here?” For me, hearing that dozens of investors have already passed is the worst case: strong FOLS.

For founders, this creates a double task. You convince investors of the potential of your startup. And you make sure they feel confident and smart about the decision to invest in you. The CEO Briefing on the fear of looking stupid covers both.

What makes a founder look naive in a pitch?

Statements that show you have not thought your business through. When investors find something you say naive, they may assume without noticing that backing you could make them look stupid too. Typical examples:

• Go-to-market strategy, your plan for how you reach and win customers: “We’ll grow with PR and virality!”
• Market: “If we only capture 1% of…!”
• Competition: “We don’t have any competitor!”
• Product positioning: “We’re ticking all the product feature boxes and the others don’t!”
• Strategic thinking: “We have so many opportunities!” instead of a clear focus.

The last example is a common trap. Enthusiasm about your possibilities is good. But a product with endless potential in many markets can signal to VCs that you lack a clear, focused plan for your first market. A stronger case shows deep understanding of your primary market, for example by starting with a niche.

How can jargon make investors feel stupid?

Investors may not ask what an acronym means, because they do not want to look uninformed. They then leave the meeting with only part of the picture. I have seen this several times from the investor side. After one pitch, the two other VCs in the room and I looked at each other in confusion. When we discussed the startup, we realised that none of us had understood crucial parts of the presentation.

Use simple, clear language. Do not assume investors know every acronym and technical term that your team uses every day.

How do you create healthy FOMO without faking it?

Run a tight process with a clear deadline and show real signs of strength. In my view, FOMO is the strongest weapon against FOLS. Investors feel it when they sense that:

• many other VCs are interested in you,
• you do not depend on their money,
• you are self-confident,
• they would miss a big opportunity if they declined.

These signals have to be real. I warn against artificial FOMO.

The process creates FOMO as well. I usually recommend that founders schedule their pitch meetings in tight batches within two weeks. This limits the time VCs have to talk to each other about your startup. It also lowers the chance that a shared fear of looking stupid spreads when one VC hears that another one has declined. A tight process with a clear deadline creates healthy FOMO on its own.

Why do investors respond to emotion as well as numbers?

Because investors decide partly with logic and partly with intuition. I describe two parts of the brain. The neocortex handles conscious, logical thinking. The reptilian brain reacts intuitively to triggers and makes unconscious decisions, like an autopilot. Even experienced, senior founders often speak only to the neocortex: too many numbers, too much technical detail, large amounts of data and statistics.

The numbers still matter, because they show why your company is a good investment case. Speaking to the reptilian brain as well can make investors like and trust you in the first few minutes of a meeting. Too much logic and too many complicated concepts can push them away within seconds. I introduced this idea in the CEO Briefing on pitching to the reptilian brain. Neuromarketing, the study of how the brain reacts to marketing, names six triggers for this part of the brain. One of them is contrast.

How do you use contrast to win investors' attention?

Make differences clear and visible in your slides, your story, your positioning and your delivery. The brain is drawn to clear distinctions. Sales uses this all the time, for example with before-and-after photos in the fitness industry. In a pitch, contrast can look like this:

• Slides: strong visual contrast, so no light grey text on a white background.
• Equity story: the equity story is the story of why your company is a good investment. Show how the world looks today without your product and how it will look with it. Describe the big challenges of your target group first, then reveal your solution.
• Competitors: a clear line between you and them. When investors see many competitors and cannot tell what makes you different, a startup can quickly look like a commodity. Name your unique selling points and your moats, the lasting advantages that protect you from competitors. A few extra features are not enough. Statements like “We are globally the only ones who …” work when you have proof.
• Delivery: variety instead of a monotonous talk. Show a video or demo, let investors read a customer testimonial, ask them a question or change your tone of voice. Reading a testimonial moves investors from passive listening to active reading.
• Expertise: proof that you know things others do not. Challenge common assumptions, share surprising insights or bring a contrarian view of your industry, for example: “Everyone is talking about X, but nobody understands that the root cause is Y.”

More examples are in the CEO Briefing on contrast in pitching.