Fundraising for your business can be an arduous process; difficult for all types of businesses. And there’s not a lot of advice to go on. Contributor John Auckland, Founder – TribeFirst.
What are investors actually looking for? How do you create an investment deck? What’s the most appropriate language and terminology? Thankfully, there are some rules when it comes to developing an investor comms strategy.
From my involvement with over 30 fundraises, I’ve created a system that’s remarkably effective and these are three essential topics for effective communication with investors and funders:
How to engage investors in-person; Spotting investor hot buttons; The optimal investor journey and Face-to-face communication.
There are a few key skills you can adopt when meeting with an investor face-to-face or over video conference (and to a lesser degree on the phone). They include: Identify their hot buttons (more on this below) – By the time you meet face-to-face, you’ll have already identified one or two key highlights of your pitch that are likely to trigger their hot buttons. You’ll have some flexibility with how you frame your points of difference, but it’s better to find out early on if your hot buttons don’t match. It’ll save you a lot of wasted meetings and follow-ups.
Active Listening – By listening to the investor you can tailor your presentation towards the areas they are interested in. Always ask them about what they like to invest in before you pitch.
Mirroring – This is a technique where you make someone feel more relaxed by mirroring their body language, which is why face-to-face or video meetings work best.
Recognising Positive Buying Signals – Closed body language such as folded arms means they’re probably not going to invest. But if you present yourself in a calm but engaging manner, they might then start to instinctively mirror you and open up. Other signals also include asking you more about the numbers, next steps and timescales.
Always Be Closing (ABC) – Closing involves encouraging your prospective investor to reflect on how interested they are in your idea. Just ask them how they feel, what they like about your opportunity and whether they have any barriers to investing.
An investor’s primary objective is to make a return on their investment (ROI), but beneath this motivation are an array of biases – or ‘hot buttons’. While investors of course want to believe that backing your business will bring them a decent ROI, their trust in you will be triggered by their hot buttons.
If an investor makes regular money from a property investment, for example, they might be interested in investing in a property development business. This way they can diversify their portfolio – which is their hot button – but through a business model they understand and trust.
An individual’s hot button is a proposition that chimes with their worldview, and there are generally two types that you can influence: emotional and rational. Hitting an emotional hot button might involve presenting an environmentally-minded investor with an innovation that protects rainforests. Pushing another hot button may involve offering an investment opportunity to a teetotaller who recognises the soaring craft beer trend. If your investment doesn’t trigger at least one hot button then you’ll have a much harder job.
In order to identify an investor or funder’s hot button, just have them take a look at your pitch deck and financial model and ask two questions: What stood out to them the most? And, what was their biggest barrier to investment? Getting answers to both questions will give you a more realistic view and ensure the answer is genuine, by having someone independent ask the questions.
When it comes to sending information to an investor, there are some bad practices seen throughout the fundraising industry. If you send over your Pitch Deck before you’ve had the chance to develop a relationship and tell them about your company, for instance, it probably won’t be that impactful.
You need to guide their journey. I’ve put together this handy flow diagram to illustrate the ideal investor journey. When you connect with a potential investor or funder, whether that be via LinkedIn, an investment website, such as the UK Business Angels Association (UKBAA), or in-person, you’ll first send the prospective investor an executive summary.
This summary will fit on one page (two at a push) and will include:
● Your point of difference (which you base on your hot button research)
● Past experience or successes
● Current traction (if you’ve achieved anything)
● The full terms of the deal – the amount you’re seeking and the type (loan, equity, bond, etc.)
● Key information about your business such as the number of employees, projected or actual customer numbers, size of the space etc.
● The directors and management team
● Any other key information that’s likely to help them make an investment decision
When the investor has reviewed your exec summary they will once again ask you to send over your deck. This is a hugely positive signal and it is at this stage you should attempt to initiate a face-to-face meeting, video conference, or failing both of those options, a call, bearing in mind the advice offered earlier.
If you still haven’t sent them your deck, you’ll instead need to send a stripped-down version with no text to distract them. You’ll then talk them through your business model and its strengths
Only once you’ve had a successful live interaction with the prospective investor do you leave them with a version of your presentation. The text included should roughly mirror what you said in your meeting, and should feature a full financial model in a spreadsheet. Don’t send them a lengthy text-heavy business plan, they probably won’t read it even if they ask for one!
Inevitably, no one can guarantee investment, but if you follow these steps, it will certainly increase your chances of successfully raising funds for your business.