Legendary investor Charlie Munger passed away last year in November. While relatively unknown outside the world of investing, the vice chairman of Berkshire Hathaway and Warren Buffett’s long-time business partner, had long established himself as a brilliant, discerning investment mind. Of Munger, Buffet once said:
“Charlie has the best 30-second mind in the world. He goes from A to Z in one go. He sees the essence of everything even before you finish the sentence.”
Among the many lessons Munger imparted to future generations of investors, the principle of inversion may be his best. Inversion suggests that sometimes the best way to look at a problem is from the opposite direction. “It is not enough to think about difficult problems one way” Munger once said. “You need to think about them forwards and backwards. Inversion often forces you to uncover hidden beliefs about the problem you are trying to solve.”
To that end, Munger also said this:
“All I want to know is where I’m going to die, so I’ll never go there.”
How to ensure your startup never gets funded
Today, in honour of the late, great Charlie Munger, we wanted to apply the principle of inversion to one of the central challenges startups face: funding.
Invoking the principle of inversion (and a little jest): what would be the three best ways to ensure your startup never gets funded?
#1 Never explain what’s in it for them
Investors, especially early-stage investors, invest in companies because they buy into its future and see themselves benefiting from being along for that ride. If you really want to deter potential investment, then, make sure that your vision for your company is as unexciting, confusing or unclear as can be.
One great way to do this is to never answer: “so what?” For example, let’s say that you have game-changing allogenic technology that could revolutionize the way hospitals reduce tumors. In your discussion, you might want to go on at length about the technical features of the technology (especially in rich biological terms) but ensure you never explain how this might address potential customer pains.
Don’t reveal that your approach is more than an idea. Don’t share any of your market validation behind it. Definitely don’t mention how several labs have partnered with you or shown acquisition interest. This could be misconstrued as a way in which the investor could make an attractive return on their investment.
Whatever you do, never paint a compelling picture for where you’re headed, and definitely don’t show how an investor could financially benefit.
#2 Pitch Half-heartedly and don’t believe in your company
Ideally, do your best to seem nervous, meek or bored. When someone unexpectedly expresses interest in your company, be so insecure that you respond with “oh you’re probably too advanced for us.” In pitch presentations, don’t practice more than a couple of times, whip together a presentation, even though you don’t know how to make one, and look more uncomfortable than a 12-year-old boy dancing with a girl for the first time.
This is important because, if the investor happens to like your vision, you can still kill the deal by undermining all their confidence in you as a leader.
#3 Ramble and use technical language no one understands
Finally, one surefire way of ensuring no one ever invests in your company is to speak in a way no one understands.
As a starting point, write like a philosopher paper from the 18th century. Every line should take a day to understand it. Also, use as many acronyms as possible. Why succinctly and concisely explain the point you’re trying to make, when you can provide ten minutes of backstory first?
Winner: flood them with data.
Finally, whatever you do, don’t use a clear storytelling structure or anything that resembles coherent storytelling. Ideally, you want your presentation to be disjointed.
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Follow these steps closely and you will be well on your way to never securing any funding!
