The soft skills, tactics, and awarenesses you need when speaking to investors
The soft skills, tactics, and awarenesses you need when speaking to investors
Words David Hickson
November 1st 2021 / 8 min read
Fundraising, many founders will tell you, is essentially sales. You are selling ‘something’—a vision, a product, or a fully-formed business—which you’re trying to persuade investors to buy into. For early stage founders, that ‘something’ is you: before you have any semblance of a business and products are in their infancy, you have to be confident in selling yourself.
But sales are subtle, and so are investors. Investors, like all humans, are driven by heuristics—a mental shortcut or bias that allows you to make decisions quickly and efficiently—and will therefore be driven by different cues, motives, or judgements. Daniel Kahneman describes two systems of thinking: System One, or ‘fast’ thinking, by which you make decisions based on instinct or emotion; and System Two, or ‘slow’ thinking, by which you make more deliberative, logic-driven decisions to post-rationalise your initial instinct.
The investment process is exemplary of this. Forced to choose between often hundreds of proposals, all with a multitude of factors and influences, investors must make fast, instinctive choices. How then, as a founder, can you stand out when talking to investors?
We’ve broken down some of the soft skills, tactics, and awarenesses you need when raising capital. No ‘cookie cutter’ advice can be easily applied in all scenarios, particularly given the wide range of investors you’re likely to talk to: these aren’t ‘hacks’ that will guarantee you investment, but rather a range of methods that over time should enhance the way you engage with investors.
In any storytelling, authenticity is everything: the audience has to believe in what you are saying. When you’re speaking to investors, it’s crucial that you come across as authentic.
Founders may prioritise delivery over authenticity. You might hire a speech writer to pen you the perfect pitch, or even an acting coach to help you deliver Oscar-worthy speeches. But investors will be able to sniff our artificiality—they will have seen this dozens of times before, and will know when a founder is pretending to be something that they’re not.
Ultimately, you don’t need to be a great public speaker in order to resonate with investors. Instead, you should focus on being the best version of yourself, and putting your best foot forward. Embrace the eccentricities and quirks about your personality and build that into your conversation and pitch. Investors are far more likely to invest in someone they trust as opposed to someone with sharply polished presentation skills.
Passion and confidence
Passion is a good way of demonstrating to investors that you are the type of person who is going to be able to bring people on a journey with you—in terms of building teams, getting investors on board, and growing your customer base.
This is strongly linked to authenticity, so speak from the heart when talking to investors. Demonstrating your own deep understanding or expertise of the industry you’re targeting will show both that you are passionate, and that you are the type of person they trust to build a successful business in that area.
This is tied to your confidence in the product or business. Use conversations with investors to really bang the table about your idea, and don’t be afraid to be visionary. When you’re talking about the product, say ‘this will happen’, ‘this is where the market is going’, and use your data to back this up.
One thing we do with founders in our Pitch Ninja sessions is get them to write a press release for five years time for when you’ve sold your business for $10 billion. We ask ‘what is that business?’, ‘why is it worth that vast amount of money?’: if you can understand this, then the story and passion will follow.
"What may feel like small talk is actually about showing your ability to relate to them outside of the business conversation."
Build personal connections with investors
Given the nature of the conversation, it may be too easy to view interactions with investors as transactional. It’s tempting, as ultimately you want to gauge as quickly as possible if an investor is interested, but it's important not to be heavy handed.
This starts during the informal interactions with investors, before the formal business begins. What may feel like small talk is actually about showing your ability to relate to them outside of the business conversation, and your commitment to building meaningful connections with the investors. This is especially important during conversations over Zoom (which are increasingly common) where it’s easy to disengage with the people you’re speaking with.
Don’t view the conversation as one-sided either. Show your curiosity, ask questions about the nature of their fund or investments. For one, this shows your interest in engaging with them specifically as an investor. It will also answer questions you might have about the nature of their investment, and whether they’re the right ‘buyer’ of your product.
Know when to deploy lean-in moments
Investors will use System One thinking to make decisions very quickly about which founder they want to invest in. When you’re pitching, you won’t have long to capture their attention.
Deploying ‘lean-in’ moments early on in your pitch will help you grab their attention. Depending on the stage your company is at, this may come in various forms. Maybe this is about telling your own story and how you came to the idea for your business; perhaps this is stressing the profile and pedigree of your team; this could also be your vision, or at a later stage, a demo of the actual product.
It’s these big moments that leave an impression. The Pareto principle (that 80% of consequences come from 20% of causes) dictates that investors' decisions will be based on these big moments. So dedicate time to getting these right, rather than endlessly perfecting smaller details.
"Set up meetings with investors, who you don’t think you’ll raise capital from, purely as a way of practising and getting accurate feedback."
Practice in the wild, and take on feedback
Stand-up comedians always do ‘work-in-progress’ gigs before a big tour, as a way of testing new material on an audience. This is the most accurate way to see how jokes land, and how audiences will engage with your set.
Similarly, founders should practice their pitches in the wild, and try to create the experience as authentically as possible. Ask friends or colleagues who you trust to give you honest, unfiltered feedback, or even set up meetings with investors who you don’t think you’ll raise capital from purely as a way of practising and getting accurate feedback.
When you’re looking for feedback, you have to be highly perceptive of what people think of your story and your business: this is an essential part of the process. You’ll need to be able to read into investors’ tone to understand if they have queries or objections to your product. Just as with stand-up comedians, the audience isn't going to tell you explicitly whether your jokes are good or not. This can often be very subtle, so you need to have an acute awareness of this.
Know how to adjust your tone
Almost every investor you’ll speak to will be different: not just in what type of investor they are (angel, seed, VC, institutional investor), but also in what drives and motivates their investments.
One awareness you’ll need to have is around these nuances of what investors are looking for, and being able to adjust your tone accordingly. Angels, for instance, may be looking for investment opportunities to create or elevate a product that they want to see in the world: they’ll be looking for passion and emotion to motivate their investment. VCs, however, may be more interested in understanding the returns on their investment, and therefore will be more driven by data. Before any conversation, know who you are speaking to and think through exactly what they’re going to be looking for.
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About Darren Mulvihill
Darren is Head of Venture Fundraising at Founders Factory, and previously part of the commercial team at Crowdcube, Darren Mulvihill has experience in helping founders use equity crowdfunding to raise investment.
About David Hickson
David is Chief Strategic Development Officer at Founders Factory (as well as being part of their founding team), helping hundreds of startups to fundraise. He's also founded Tribe Sports and was on the founding team at mydeco.
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