Backward Alphabet
A reflection on founder motivation and the impact of an angel network's approach to managing inbound interest
This week I finalized the “mega” angel network application, which consolidates every question found in a dozen Texas angel group applications into a single Excel file. The workbook includes a staggering total of 402 questions. They’re spread across 17 categories including problem, solution, team, competition, financials, and more.
Some networks had refreshingly simple applications with only a few basic questions and a file drop, while others presented an overwhelming miasma of “required responses”. Some charged an application fee, others did not. Some used a dedicated deal management platform, others trusted a good ol’ fashioned Google form. Regardless of the application’s complexity, one thing was common to every single one: it required work to complete. The applicant was always required to put in the work of filling out some information and hitting submit.
For a busy founder, that’s a lot to ask.
And yet it’s the most critical step in the Sourcing process for most angel networks. The best relationships and most effective marketing efforts are meaningless if they don’t convert into real applications to pitch. What can angel network operators do to motivate a founder to invest the time and energy to apply?
I’ll discuss that in just a moment, but first, a reflection on motivation more broadly.
Motivate Me Please
How do you motivate an employee?
Our B-school organizational leadership class, taught by Dr. Anthony Klotz (ever heard of the great resignation? he’s the guy who first used the term), spent a lecture addressing this classic management question. As an engineer by degree, I particularly appreciated this day, since it came with a simple equation intended to loosely quantify the components of motivation.
The equation is as follows, and is derived from the “Expectancy Theory” which was developed by Victor Vroom of the Yale School of Management in 1964:
M = V * I * E
Where
M = Motivation
V = Valence (how much an individual wants a reward)
I = Instrumentality (the confidence level that a particular reward will be delivered)
E = Expectancy (how attainable is the performance level required to earn a reward)
What’s interesting about this equation is that if any of the 3 levers goes to 0 in the mind of the individual, motivation also goes to 0, no matter how strong the other two factors are.
ABCDEFG
For example, let’s assign each letter a value from 0-10, which would make the maximum possible value 1,000 = 10 * 10 * 10. Now say I offer you $1,000,000 cash right now if you can correctly recite the entire alphabet backward in less than 1 minute.
Valence: How much do you want an extra $1,000,000 cash? Probably a lot - let’s go with 10.
Instrumentality: How much do you trust that I can actually hand you $1,000,000 cash if you complete this task? Probably not much, but maybe you think there’s a small chance, so we’ll use a 1.
Expectancy: Unless you’ve practiced it before, saying the alphabet backward is actually pretty tough. Let’s plug in a 3.
Result:
M = V * I * E
M = 10 * 1 * 3
M = 30
So, essentially, based on these numbers, the theory suggests you would be motivated to complete this difficult task at 3% of your maximum motivation level (30/1,000). Some of you might give it a go just for fun, but many of you, based on these numbers, probably wouldn’t even care to try.
But What if it was Elon Musk
Now, let’s flip the scenario. What if it wasn’t me making that offer, but it was Elon Musk standing there with a briefcase of cash at the ready?
Valence: No change. Still 10.
Instrumentality: HUGE change. Instead of a 1, this is now a 10. No doubt in your mind - it’s possible.
Expectancy: Still a 3.
Result:
M = V * I * E
M = 10 * 10 * 3
M = 300 (or 30% of maximum motivation)
This one swap results in a “motivation multiplication” of 10x.
Why This Matters
Now, the point of all this is not to put specific numerical measurements on an individual’s motivation, but to highlight the way each of the 3 levers relates motivation in general. The manager’s job is to find a way to increase & maintain overall motivation by adjusting the levers on the right side of the equation.
Although the concept is traditionally deployed in management theory, I recently began to wonder: what if it could also be used to help us think about how angel networks motivate founders to apply to their network? That leads me to today’s focus: managing inbound interest.
Supporting Job #3: Manage Inbound Interest
As a quick refresher, Angel Ops, which I introduced in this post, seeks to map an answer to the following question: What does the process at a world-class angel network look like? Angel Ops is focused on the backend process of running deals and groups the workflow into 5 core steps. The goal of the first step, Source, is to bring in sufficient deal flow to operate the network by having founders apply to pitch (either formally or informally).
Source
Job: Bring in sufficient deal flow.
Progressive Outcome (PO): Apply - Founders apply to the network.
Within each core step, there are 3 “supporting” jobs-to-be-done that contribute to the primary job. In last week’s article, I discussed the second one at the Sourcing stage - to market the network. This week, we dive into the third and final - to manage inbound interest.
The objective of this whole step is to convert the interest that has been developed through relationships and marketing efforts into a real application to pitch. The final job of the network operator, then, is to manage that precious interest and to ensure it doesn’t fall to the wayside before a founder loses the motivation to complete the application. To do so, the operator must make a host of decisions about how the network will manage that inbound interest.
Let’s look at a few examples.
Expectancy Theory in Angel Investing
In the context of expectancy theory, here’s what each motivating factor sounds like when applying to pitch, from a founder’s perspective:
Valence: “How much do I want the investment and partnership offered by this network?”
Instrumentality: “What percentage of presenting companies at this network receive funding, and how much does the network typically invest?”
Expectancy: “If I spend the time to complete this application and go through the entire process, how likely is my company to receive funds from the group?”
Network operators can influence each of these motivating factors with a little focused effort. Valence can be influenced by developing case studies, stories, and other collateral to highlight the unique benefits of the network. Instrumentality can be influenced by tracking and publishing network performance metrics. Expectancy can be influenced by defining, publishing, and following clear investment criteria.
As mentioned in the introduction, every network has a unique application process. Some are thorough, some are not. These differences highlight the reality that there are a variety of approaches to managing inbound interest. However, it’s critical that each network operator strategically thinks through the way that they will choose to accomplish this job.
Some helpful categories to consider include:
How complex will our application be?
More complexity correlates with lower application volume, and vice versa.How public will our network’s information, performance, and application process be?
More publicity correlates with higher application volume, and vice versa.Will we charge a fee to apply?
Higher fee correlates with lower application volume, and vice versa.Will we accept informal applications?
If yes, application volume is likely to increase at the expense of consistency, since many will be able to skirt the process. Alternatively, forcing everyone to complete an application may ostracize some founders from applying.How clear & strict will our investment criteria be?
Increased clarity and strictness often correlate to lower application volume, since founders will recognize they do not fit, and vice versa.How much support and guidance will we offer founders?
More guides, support, and personal involvement are often correlated with higher application volume, and vice versa.
This list is by no means exhaustive but can be a great place to start when considering ways to manage interest at any network.
Closing Thoughts
The success of an angel network relies on its ability to convert inbound interest into real applications from founders. Unfortunately, the application process can be complex and demanding, requiring founders to invest significant amounts of their very limited time and energy. Thus, the decisions a network operator makes about how they will manage inbound interest are critical to helping motivate founders to make the investment. By understanding the effects of valence, instrumentality, and expectancy, network operators can strategically influence founder motivation and ensure a steady flow of high-quality applications.
What do you think?
Which factors do you think have the most significant impact on attracting quality applications? Are there any other factors you would add to the list?
Weekly Observations: 3 Lessons Learned
On good teams, being the first to propose a thing is hard. 🌪️
This week, our CTO TJ Daly made a passing comment that stuck with me. He said, “You know, I always feel a little bad for whoever is the first to come up with a new idea or product because they spend a lot of time working on it and then we just rip it apart when they present.” It’s true. I’m not always the one in that seat, but as the sales lead and designated “ideas guy” I tend to find myself often presenting crazy new things. But I believe that the “robust dialogue” consistently present in our team meetings is one of the surest signs of health. PitchFact team meetings are definitely not boring…
Sometimes what customers ask for is not what they need. 🦲
I’ve been developing a proposal this week, and I think it’s going to blow the prospect’s mind. Why? Because I’ve spent a long time listening, learning, and thinking about their needs, their process, and how we are uniquely positioned to help. Without going into detail, the proposal addresses what they asked for, but in a way that simultaneously addresses a host of other known issues. Thanks to some well-placed feedback from our team (see learning #1) we’ll also be quoting the bare minimum of what they asked for, but I realized through this process that sometimes a prospect doesn’t actually know how to ask for what they need, and it’s part of our job to help them out.
Time is precious. ⌛
I’ve recently been reflecting on the value of time. This week I stumbled across this fascinating chart from Our World in Data that shows the progression of who we spend our time with over the years, and it’s blowing my mind.
Here are 3 of my personal takeaways:
#1: Time alone trends upward over our whole lives. Learn to enjoy yourself.
#2: Time with friends and family flatlines by age 30. Treasure it.
#3: Time with partner trends upwards over time. Choose wisely.
About Me
I cultivate flourishing.
I'm also the CEO of PitchFact, where we help angel networks conduct efficient and collaborative diligence. I'm a proud husband, aspiring father, and grateful friend. My love languages include brisket, bourbon, and espresso.
About PitchFact
PitchFact helps angel networks conduct efficient and collaborative diligence.
Learn more at pitchfact.com.