FOMO: The fear of missing out by investors

While no investor wants to do an investment that looks stupid in hindsight, nobody wants to miss a great opportunity either. Startup founders want to create a situation where investors get FOMO. This is the key driver of speed in a financing round.

Real-life example of FOMO

An entrepreneur wants a VC to participate in her financing round, but despite getting positive feedback she does not seem to move forward in the decision process. The investor seems to have endless questions. 

However, once other investors have decided to participate in the round FOMO kicks in – and the VC decides to participate without any further questions.

Further reading: How to create FOMO

Phase 7 and Phase 8 of the the fundraising process describes what an entrepreneur should do to create FOMO. And once the dynamic kicks in how to handle it and close the round.