Want to Hook Investors? Do These 2 Things
When it comes to attracting investors, it takes more than painting a rosy financial picture. Investors need to be romanced.
Investors are people like you and me.
Contrary to what you might think, investors aren’t calculators that only care about the numbers — they’re people like you and me. And like you and me, if they’re going to risk their hard-earned dollars, they want to invest in businesses that excite them and that they believe in.
But how do you get them hooked and excited about your business?
To do that, you have to connect with investors on two levels: the head and the heart (a.k.a. logic and emotion).
When you do, you not only grab their attention, but keep it. They sit up and take notice. They become interested. And ideally, they connect so strongly with the vision for your business that they want to get involved and fund it.
If you want to make that happen for your startup, here’s how to do it.
1. Create an emotional connection through story.
Your business plan and your pitch explain the whats, whys and hows of your business through words and numbers. The words tell the story of how your business will positively affect the lives of your future customers, and the numbers are there to support your story.
To hook investors, you want them to see the potential and possibilities of your concept the way you do, so much so that they want to be a part of bringing it to life. And the best way to do that is through the story you tell.
Think of your story as a fairytale of sorts, but in this case your business is the hero. You want your story to be compelling and exciting to the people you’d like to support your (ad)venture — not only investors, but partners and customers, too.
Develop a story arc.
Fairytales usually have a predictable 4-part story arc, which I like to use since it’s so appealing to investors. Here’s how it works:
- Let’s assume that your story begins with an underserved or woefully ignored customer that needs rescuing. Something’s not going well for them, and they don’t have a good way to get what they want or need.
- Then there’s the backstory — some circumstance or complicating factor that makes it difficult for your potential customer to be happy. That’s the villain in this fairytale, the dragon that needs slaying.
- Sometimes the villain is obvious, like a cable company that charges sky-high prices while providing lousy customer service. Other times the villain can simply be a lack of options (like a gap in the market that no one has filled).
- Finally, there’s the hero of the story — your new business — which will come to the rescue of these customers and give them what they want. (This is where you’ll find the detailed, inspiring happily-ever-after.)
Face the enemies head-on.
Great stories have challenges in them, too. As amazing as your solution may be, there’s a level of risk when a new customer buys whatever it is you’re selling. There’s financial risk, yes, but there’s also the risk of inconvenience (or worse) when they have to change the way they normally do things.
In reality, your biggest enemies are inertia and fear of change. Most people tend to think, “Better the devil you know than the devil you don’t.” You know what I mean?
That’s why your story needs to show not only why they’d choose you over the competition, but why they would change their routine and buy from you in the first place. Simply offering a better solution isn’t necessarily enough.
When you develop a story like that, it makes investors care about your business and become excited at the possibilities. Connecting with your vision on that emotional level makes them want to take that adventure right alongside you.
But a great story isn’t enough — you also need the details to back it up.
2. Create an objective connection through details that support your story.
You know the saying “The devil is in the details?” That’s just as true with investors as it is with pretty much anything else. Seasoned investors have a keen eye for what it takes to successfully launch, run and grow a business.
When they turn that eye to your business plan or pitch, they’re going to look for the details that show not only what you’re going to do, but how you’re going to do it. Candidly, it takes a lot of trust for investors to put their money on the line by investing in your business. And that trust gets built by the logical, objective, real-world details that back up your business concept as well as your plan for execution.
In other words, you need a roadmap.
Your business plan is the roadmap where you flesh out your story with the details that show the hero’s journey of your business.
This is where you:
- Lay out the products and services you’ll offer, and their prices.
- Describe how you plan to reach your target customers (and keep them coming back for more).
- Spell out how you’ll produce your product or provide your service.
- Outline the people you’ll need to hire, including the skills and experience they’ll need to have.
- Show, in dollars and cents, that your business idea can work financially.
Details like these are what proves that your fairytale isn’t a work of fiction — that it’s rooted in all the real-world details that make investors understand how you’ll get from here to there.
This is a ‘no bullshit’ zone.
The fairytale analogy may have mistakenly led you to believe that exaggerating and overselling are okay — but nothing could be further from the truth.
Seasoned investors have a nose for BS. You’re not the first business they’ve looked at, and they have an uncanny instinct for catching things that don’t add up and important details that have been overlooked.
The merest hint of BS and you’ve lost them. So it’s crucial that you have the facts to support your story. And when you have to make educated guesses, which you inevitably will, be sure that they are, in fact, educated. Do your homework and be prepared to explain the reasoning behind any assumptions you make.
When you connect with the head and the heart, magic happens.
You want investors to be hooked by your story and genuinely excited about taking the startup journey with you. When you lay the groundwork to connect with them on an emotional level and an analytical one, you create a story that’s hard to resist.
Ultimately, you want to give investors every reason to say “yes,” and ensure that you don’t give them any reasons to say “no.”
Your startup wants its happily-ever-after, so take the time to fully develop your plan and the story within it. Be sure to connect with your audience on both levels — the head and the heart. Otherwise, they’ll pass on your business and invest their money elsewhere.
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