Telling Your Compelling Story to Potential Investors
The number one mistake that entrepreneurs make is operating out of the mindset of “Build it and they will come.” There is a natural tendency for entrepreneurs to be so steeped in their own vision that they assume it should be obvious to everyone else – especially investors. It isn’t. Everyone else hasn’t spent days and weeks thinking about it and working on it.
Entrepreneurs have to help investors see that vision through a very compelling story. With potential investors, you often get only one shot. How you tell your story determines whether it is a good shot or a near miss.
Stand Out From the Crowd
The first thing that entrepreneurs need to realize is that sophisticated investors are getting exposed to hundreds of opportunities. Your opportunity has to stand out from all of the rest.
Even that is not enough, however. You are asking an investor to risk their hard earned money (in the case of an angel investor) or invest someone else’s money that has been entrusted to them (in the case of a VC and other institutional investors). After they have heard your story, you ideally want the investor to be more concerned about missing out on this opportunity than they are concerned with the possibility that they could lose all of their money.
Effectively Tell Your Story
The second thing entrepreneurs need to realize is that this is a staged process. Investors are busy people and have no desire to try to understand everything about your opportunity in one sitting. The process that all entrepreneurs needs to master is analogous to the “inverted pyramid” process that good journalists use to write newspaper articles. With this process, the most critical information is provided first and in such a way as to cause the reader to want to continue reading.
A well-written newspaper article provides the reader with a good idea of what the story is all about in the first sentence. This is equivalent to the “elevator speech” that an entrepreneur needs to have prepared. Within roughly a time interval of 30 seconds, a potential investor must be able to get a good sense of what the opportunity is all about and why they might want to hear more.
In a well-written newspaper article, the reader gets a good summary of the entire article within the first paragraph. This is equivalent to an executive summary that you give a potential investor or an initial presentation. Each of these must provide a thorough overview of the opportunity and, once again, cause the investor to want to hear more.
In the next few paragraphs of a newspaper article, there is a more in-depth description of the key aspects of the story. This is equivalent to the full business plan or more in-depth, follow-on presentations.
Finally, the last part of a newspaper article provides much of the specific detail surrounding the story. This is analogous to the due diligence portion of the process of working with potential investors.
At each stage of telling your story, you will need to ask yourself what the investor will want to know at that stage. What questions will need to be answered? What concerns will need to be allayed? At the same time, you will want the story to be so compelling that they want to proceed to the next stage. To do this, you will be providing more insight into the full potential of this opportunity and why the investor will want to be a part of it.
With a well-written newspaper story, you find yourself reading it to the very end. With a well-told entrepreneurial opportunity, investors will want to progress to each next stage and eventually invest.