What are investors looking for? How do you create an investment deck? What’s the most appropriate language and terminology?
Raising funding for your business can be tough. It’s difficult for all types of businesses, and there’s very little advice to go on.
Here, I’ll cover three essential topics for effective communication with investors and funders and if you follow these steps, it will certainly increase your chances of successfully raising funds for your business.
Guiding the investor’s journey
Sending information to an investor can be subject to some bad practices. You need to be sure the investor sees the information you intend. E.G., 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.
So, you need to guide their journey. Here is a flow diagram to illustrate the ideal investor journey.
When connecting with a potential investor or funder (via LinkedIn, an investment website, such as the UK Business Angels Association (UKBAA), or in-person), your first step is to send the prospective investor an executive summary.
This summary should fit on a single page and include:
- Your point of difference
- 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; number of employees, projected / 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
It’s likely that when the investor has reviewed your executive summary they will once again ask you to send over your deck. This is a tremendously positive signal and a sign you should attempt to initiate a face-to-face meeting, video conference, or failing both of those options, a call.
If you haven’t sent them your deck at this stage, you 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
Once, and only once you’ve had a successful live interaction with the prospective investor, you can 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 it!
At the stage you meet an investor face-to-face or over video conference (to a lesser degree on the phone), there are a few key skills you can adopt, including:
- 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.
- 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 (see below): 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.
The assumption 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.
Take, for example, an investor who makes regular money from a property investment. They might be interested in investing in a property development business so that they can diversify their portfolio (their hot button in this case) but through a business model they understand and have faith in.
Hot buttons chime with an individual’s 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.
To best locate a funder’s hot button, have them 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?
Attaining answers to both these questions will give you a more realistic view. To ensure the answer is genuine, have someone independent ask the questions.
So, there are some rules when it comes to developing an investor comms strategy and, based on my involvement with over 30 fundraises, I’ve created a system that’s remarkably effective.