Besides FOMO, founders must manage FOLS, investors’ Fear Of Looking Stupid, for example when backing a startup others have rejected. Three ways to avoid it: don’t say things that make you look stupid, such as claiming infinite potential; don’t use jargon that makes investors feel stupid; and run pitch meetings in tight two-week batches.
Almost anyone in the fundraising world has heard about the concept of building FOMO, the Fear Of Missing Out, but there’s another counter-concept that is equally important to consider when raising capital and pitching to investors – the Fear Of Looking Stupid (FOLS).
No human wants to look or feel stupid when making decisions, but let’s talk about how founders can apply this to fundraising, pitching, and investor interactions.
The easiest example for fear of looking stupid appears when investors are considering backing a startup that has been rejected by multiple other investors. 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?".
Remember this: Very often it's not only about convincing VCs of your startup's potential, it's also about ensuring they feel confident and smart about their decision to invest in you.
How to avoid FOLS?
1. Don’t say things that make YOU look stupid
Here’s a simple example: avoid the 'Infinite Potential' Trap. While enthusiasm about your startup's possibilities is good, overemphasizing all the potential opportunities can quickly backfire. Showing that your product has infinite potential in multiple different markets might signal to VCs that you lack a clear, focused go-to-market strategy. Focus on a coherent business plan that demonstrates a deep understanding of your primary market and proves that you know how to go to market, e.g. by starting with a niche instead of addressing all the infinite potentials.
2. Don’t say things that make THEM feel stupid
The way you communicate your business plan and vision is critical. Avoid triggering FOLS, by using simple and understandable language. Don’t assume that investors are aware of every acronym and all the technical jargon that you know.
Investors may not ask you to clarify “What did you mean by XYZ?” because they don’t want to appear ignorant, and what can happen is that when you leave the pitch room, they will be left with a partial understanding of your solution because they simply didn’t understand acronyms and jargons.
This has happened to me on multiple occasions. When the founder left the pitch meeting, I and the other two VCs in the room were looking at each other in confusion. And once we started to discuss the startup we quickly realized that none of us truly understood crucial parts of the presentation.
3. Efficient fundraising process
What I usually recommend to founders in my FundraisingCOUP program, is to organize fundraising meetings in tight batches. Scheduling all pitch meetings within batches of two weeks. This limits the time VCs have to communicate with each other about your startup, reducing the chance of a collective FOLS mindset setting in when one VC hears from another one that they declined.
FOMO is a great way to counteract FOLS, and having a tight and efficient process with a clear deadline will create a healthy sense of FOMO naturally.
Conclusion
FOLS can be a subtle yet powerful force in the startup investment world. Remember, it's not just about convincing VCs of your startup's value; it's also about ensuring they feel confident and smart in their decision to invest in you.
Frequently asked questions
What is FOLS in fundraising?
The Fear Of Looking Stupid. A typical case is an investor considering a startup that multiple other investors have rejected and wondering whether they are missing something.
Why can claiming “infinite potential” hurt a pitch?
Overemphasizing opportunities in many different markets can signal that you lack a clear, focused go-to-market strategy. A coherent plan for your primary market, for example starting with a niche, works better.
Why should founders avoid jargon and acronyms in a pitch?
Investors may not ask what an acronym means because they don’t want to appear ignorant. They then leave with only a partial understanding of your solution.
How does a tight fundraising process reduce FOLS?
Scheduling pitch meetings in batches of two weeks limits the time VCs have to talk to each other about your startup, and a tight process with a clear deadline creates healthy FOMO, which counteracts FOLS.
