If you’ve ever had to go through the daunting process of asking for an investment from a venture capitalist, you may have noticed that it actually felt somewhat familiar. While the stakes are higher and the atmosphere can feel somewhat uncompromising, the process itself tends to be reminiscent of interviewing for a graduate school program or a job. In all likelihood, you’ll be asked about your qualifications, your values and intentions, and how you plan to succeed in the steps ahead. But most challenging of all, you’ll probably be asked that tricky little question that you were probably first asked as a kid applying for college: what is your biggest weakness?
When going after venture capital, this question can be tweaked slightly to suit the circumstances. To be clear, you may simply be asked the basic question and expected to answer on a personal level. A VC is perfectly within his or her rights to wonder about your character, how you deal with failure, and whether or not you can view yourself in a realistic light. But as stated by LabDoor founder Neil Thanedar in an Alley Watch article on 12 of the hardest questions a VC might ask you, the question may also be rephrased as something closer to, “What is your hole?”
The implication of this question is that something about your business isn’t perfect, and the VC wants to know what it is and how you plan to address it. Thanedar provides the possible examples of zero revenue, a poor or underdeveloped growth strategy, or even a weak CEO. Whatever the case may be, you would be wise to be aware of the issue in addition to how to address it in a meeting or interview.
The most important aspect of answering a question about your biggest weakness, or even the hole in your business is to understand that a direct and honest answer is expected. No VC is looking for you to spin a weakness into a strength with a response along the lines of “sometimes I’m too passionate about the company,” or “sometimes I work myself too hard.” That type of answer doesn’t qualify as honest self-reflection so much as thinly veiled vanity. Career coach Amanda Abella, quoted in Forbes, addressed this issue completely and concisely when she explained, “they want to know that you aren’t conceited and are aware that you make mistakes. Confidence is great, but there’s a fine line between confidence and conceit.” Abella is referring more directly to job interview situations, but the same principle holds true in speaking to VCs about your company.
The same concept is expanded upon by Alice van Harten of Menlo Coaching, who explains in a blog post that telling a story that minimizes your failures “is unlikely to be effective, because it does not give you a chance to show self-reflection and personal growth.” Van Harten is primarily an MBA application coach, and she is therefore referring directly to how to address questions about weakness in an application format. But, again, the concept is relatable. In addressing a personal issue or company shortcoming when talking to VCs, minimizing the problem serves no purpose; in fact, it can make you seem evasive and unreliable. On the contrary, while your business may not be at a point at which you can demonstrate much in the way of “personal growth,” demonstrating that you’re fully aware of a problem and that you have a plan in place to address it can go a long way.
Ultimately, addressing failures or shortcomings when going after venture capital boils down to some incredibly simple fundamentals: be honest, be open, and be strategic. As tempting as it may be to skirt around shortcomings in order to make you seem like a bulletproof investment opportunity, VCs won’t be fooled by such tactics. If there’s a flaw in your proposal or company structure, they’re going to find it. But if you admit to and acknowledge it and explain how you hope or plan to correct it, you come across as a more reliable person to do business with.
Patti Conner is a freelance writer. She recently completed her MBA program at the Haas School of Business and is eager to help others with the process of obtaining the degree. You can follow her on Twitter under the handle @Patti_Conner14.
Photo Courtesy of Sonia Su [FLICKR]