If your customer problem is big enough, investors will become a make or break part of your success story as a founder.
It’s crucial to understand their perspective. Lots of founders want to meet lots of investors for obvious reasons: they have lots of money. Lots of investors don’t want to meet lots of founders: they get hit up all the time. The more you understand what’s important to them, the greater the chance you’ll get to meet them, and when you meet them, that they will like you. And your idea. If everything goes really well, in six months or so, they will buy into your company and you will reach heights you never dreamed possible.
Investors won’t always be shareholders, but generally they are, so let’s think of them from a shareholder perspective and take a look at what will motivate them to take part ownership of your startup.
They’ll have the following things on their minds:
- Will I Like You? An investor values their time as well as their money. Often, they’re in it for the ride and they want to really enjoy the difference they’ll make, even the institutional ones. They will be spending hours and hours in boardrooms and on zoom calls with you on tough issues. They will expect honesty and some charm. From you, as well as a growing team they want to be proud of.
- Is There a Return on Capital? Generally, the investor will work hard and smart to get their capital and keep it. If they are looking for a ten-fold return from you, (and generally they are), it’s because they know they’ll lose on other investments they have. They know the risks. You don’t have to promise a big return but if you can show a pathway to get it, it’s a win: win. But be careful. As Charlie Munger once said, “I don’t use projections because I don’t like throwing up on the desk.” Keep it real.
- Why Now? Timing. Melbourne Angel Investors rank this as their number one startup success factor. From two perspectives: 1) is the market ready for you and 2) are you ready for investment. If you can show an MVP has strong market resonance, it’s good timing. If you have a strong order book, good timing. If you needed money yesterday, bad timing. They want time to get to know you, to really understand the opportunity and see that their investment is placed right where it’s needed.
- Why You? That you have come to an investor claiming you can fix a problem generally gets the response “well, why hasn’t anyone fixed the problem before?” It’s time for you to sell yourself, and your team, into the breach: you are the people to do it.
- Why Not? Take the doubt off their minds by addressing the major issues like your vision (short and sharp), ambition (boundless), competency (bulletproof), evidence of concept (dataset), market readiness (customer feedback, order sheet, subscribers) and a clear line joining up ideation, execution and acceleration.
Good luck. You can do this.