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title: '[How to convince investors](http://paulgraham.com/convince.html)'

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 # [How to convince investors](http://paulgraham.com/convince.html)
 
 1. Formidable Founders
 2. Promising Market
 3. Evidence of success so far

# Formidable
The most important ingredient is formidable founders. Most investors decide in the first few minutes whether you seem like a winner or a loser.

Most investors are genuinely unclear in their own minds why they like or dislike startups. If you seem like a winner, they'll like your idea more. But don't be too smug about this weakness of theirs, because you have it too; almost everyone does.

They're fuel for the fire that starts with liking the founders. Once investors like you, you'll see them reaching for ideas: they'll be saying "yes, and you could also do x." (Whereas when they don't like you, they'll be saying "but what about y?")

A formidable person is one who seems like they'll get what they want, regardless of whatever obstacles are in the way. Formidable is close to confident, except that someone could be confident and mistaken. Formidable is roughly justifiably confident.

What should you do if you're not formidable?
What they should not do is try to imitate the swagger of more experienced founders. Investors are not always that good at judging technology, but they're good at judging confidence. If you try to act like something you're not, you'll just end up in an uncanny valley. You'll depart from sincere, but never arrive at convincing.

# Truth
The way to seem most formidable as an inexperienced founder is to stick to the truth. How formidable you seem isn't a constant. It varies depending on what you're saying.

## What's the secret?
Convince yourself that your startup is worth investing in, and then when you explain this to investors they'll believe you. And by convince yourself, I don't mean play mind games with yourself to boost your confidence. I mean truly evaluate whether your startup is worth investing in. If it isn't, don't try to raise money. [5] But if it is, you'll be telling the truth when you tell investors it's worth investing in, and they'll sense that. You don't have to be a smooth presenter if you understand something well and tell the truth about it.

## How to evaluate whether your startup is worth investing in?

Be a domain expert. If you're not a domain expert, you can be as convinced as you like about your idea, and it will seem to investors no more than an instance of the Dunning-Kruger effect. Which in fact it will usually be. And investors can tell fairly quickly whether you're a domain expert by how well you answer their questions. Know everything about your market.

# Market

A startup is worth investing in, rather than whether it's going to succeed. No one knows whether a startup is going to succeed. And it's a good thing for investors that this is so, because if you could know in advance whether a startup would succeed, the stock price would already be the future price, and there would be no room for investors to make money. Startup investors know that every investment is a bet, and against pretty long odds.

**So to prove you're worth investing in, you don't have to prove you're going to succeed, just that you're a sufficiently good bet.**

## What makes a startup a sufficiently good bet?
In addition to formidable founders, you need a plausible path to owning a big piece of a big market. Founders think of startups as ideas, but investors think of them as markets. If there are x number of customers who'd pay an average of $y per year for what you're making, then the total addressable market, or TAM, of your company is $xy. Investors don't expect you to collect all that money, but it's an upper bound on how big you can get.

Your target market has to be big, and it also has to be capturable by you. But the market doesn't have to be big yet, nor do you necessarily have to be in it yet. It's often better to start in a small market that will either turn into a big one or from which you can move into a big one. There just has to be some plausible sequence of hops that leads to dominating a big market a few years down the line.

## Getting really big
Every company that gets really big is "lucky" in the sense that their growth is due mostly to some external wave they're riding, so to make a convincing case for becoming huge, you have to identify some specific trend you'll benefit from. Usually you can find this by asking "why now?" If this is such a great idea, why hasn't someone else already done it? Ideally the answer is that it only recently became a good idea, because something changed, and no one else has noticed yet.

# Rejection
Even with a strong case like Microsoft's, convincing investors isn't guaranteed. Rejections are common and can create an awkward situation when investors ask about others investing. Navigating fundraising without commitments of other investors can be challenging.

Some skilled individuals may give investors the impression that others are about to invest, despite no commitments. While this tactic can be seen as misleading, it counters investors' focus on who else is investing. However, it's not recommended for most founders, as it's a common lie and requires exceptional deception skills to pull off.

Tackling investor rejections head-on and explaining why they're mistaken is the best approach for most founders. By candidly discussing what scared investors and confidently addressing their concerns, you can present your startup more effectively and create a positive impression. This openness can help prevent any "gotchas" and allows investors to feel connected to their discoveries.

The best investors are harder to bluff and understand that most conventional investors may miss big outliers. Raising money isn't like college applications; sometimes, only the best investors will see a startup's potential. Dropbox, for example, was initially rejected by all Boston investors but later raised a series A round from Sequoia, demonstrating that top investors can recognize disruptive ideas others may overlook.

# Different
Founders often think convincing investors requires salesmanship due to the uncertainty of a startup's success. However, **the focus should be on showing that the company is a good bet**. Convincing yourself first and then investors using concise, matter-of-fact language demonstrates competence and understanding, making it more effective than marketing-speak or unclear explanations.

So here's the recipe for impressing investors when you're not already good at seeming formidable:
1. Make something worth investing in.
2. Understand why it's worth investing in.
3. Explain that clearly to investors.

# KEY POINTS
1. The most important ingredient for convincing investors is formidable founders, meaning those who seem like they'll get what they want, regardless of obstacles. Founders should not try to imitate the swagger of more experienced founders but should stick to the truth.
2. Convince yourself that your startup is worth investing in by truly evaluating its potential. If you believe in your startup, investors are more likely to believe in you. Become a domain expert in your market to answer investor questions effectively.
3. Investors think of startups as markets rather than ideas. To be a good bet for investors, your target market needs to be big and capturable by you. Identify trends that will benefit your startup and explain why now is the right time for your idea.
4. It's common for startups to be rejected by investors, but don't let that deter you. Instead, tackle the problem head-on and explain why investors have turned you down and why they're mistaken. This strategy works best with the best investors.
5. When convincing investors, use matter-of-fact language and avoid vague, grandiose marketing-speak. Be concise and focus on explaining why your startup is a good bet rather than trying to convince them that it will be huge.