Written by John Auckland, TribeFirst
There’s not a lot of advice or guidance to go on when it comes to raising funding for your business. How do you create an investment deck? What are investors actually looking for? What’s the most appropriate language and terminology?
Mercifully, there are some rules when it comes to developing an investor comms strategy and, from my involvement with over 30 fundraises, I’ve created a system that’s remarkably effective.
In this article, I’ll cover three essential topics for effective communication with investors and funders.
You need to ensure the investor sees the information you intend. For example, if you send over your Pitch Deck before you’ve had the chance to develop a relationship and tell them about your company, it probably won’t be that impactful.
That’s why you need to guide their journey. I’ve put together this handy flow diagram to illustrate the ideal investor journey.
Whether you connect with a potential investor 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:
- 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
- The full terms of the deal – the amount you’re seeking and the type
- Your point of difference
- Past experience or successes
- Current traction (if you’ve achieved anything)
- Any other key information that’s likely to help them make an investment decision
Your potential investor will review your executive summary and again ask you to send over your deck. This is an immensely positive signal and a sign you should attempt to initiate a face-to-face meeting, video conference or, failing both of those options, a phone call.
If you haven’t sent them your deck yet, you’ll need to send a stripped down version with no text to distract them instead. You’ll then talk them through your business model and its strengths
It is only when you’ve had a successful live interaction with the prospective investor that 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!
Identify hot buttons
Obviously, an investor’s prurpose is to make a return on their investment, but beneath this motivation are an array of biases – or ‘hot buttons’. Assuming that an investor is just aiming to make money is where most entrepreneurs go wrong. 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 instance, they might be interested in investing in a property development business. This way they can diversify their portfolio – their hot button in this case – but through a business model they understand and have faith in.
A hot button chimes with an individual’s worldview, and there are generally two types 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 detect an investor or funder’s hot button, ask them to 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?
To ensure the answer is genuine, have someone independent ask the questions. Getting answers to both questions will give you a more realistic view.
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:
- Active Listening – While your pitch documents will be fairly fixed by this stage, 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.
- Identify Their Hot Buttons – 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.
- ABC (Always Be Closing) – 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.
Investment is never guaranteed but, if you follow these steps, it will certainly increase your chances of successfully raising funds for your business.