The key take-away here is that a confused investor always says NO!
My name is Cory, I am the President of Creative Return and the host of The Insider’s Guide To Finance. The following are my insights and learnings from the interviews and dealings I have with talented entrepreneurs, operators and financiers. I hope you find them valuable in your endeavours.
What CEOs and IR Pros often fail to realize is that investors are customers too. If you fail to communicate your investment value proposition to them in terms they understand and can repeat, then you will fail to win their investment. If you fail to re-enforce their investment in you, they’ll get buyers remorse and hit the sell button versus becoming advocates of your story.
For clarity, your investment value proposition is different from “invest in our PP because we are undervalued, you’ll get a full warrant and free-trading stock”. Your investment value proposition comes in the form of your investor narrative that enables investors to understand and self-articulate how you will be a success.
To illustrate this point, here is my first hand experience with a highly regarded investment advisor.
We talked about a public company which will remain nameless. After seeing their pitch and reviewing their deck I asked what do you think of the deal?
He said, “Yeah, no. I don't know how they make money.”
That was it - he was out.
As a broker adept in public venture capital, he had seen his share of deals and has a book of business any fundraising issuer would salivate over.
I am still in shock for two reasons. First, I know the company and understand their business model. Second, they have the ingredients to be very successful:
A pedigree management team with outstanding industry related experience,
A high ARR (Annual Recurring Revenue) subscription model, and
Major household name clients.
What else would the market want?
The next question is why did this broker pass on this deal?
He did so because the company failed to make their value proposition and how they generate revenue clear. It may be clear to their big name customers, but it wasn’t clear to their investing audience. The net result was more No’s than Yes’s and, a prolonged and dilutive financing.
The key take-away here is that a confused mind alway says NO!
When looking to raise money or raise awareness and interest with your investor marketing efforts, far too often CEOs pitch the deal as if they were speaking with their industry peers.
Following the CEO’s lead is the IR representation who, with any ethical boundaries, reiterates that pitch to maintain continuity with their CEO.
The net result is that time and money invested in attracting and retaining investors is highly inefficient. Imagine if after a cross country roadshow, your result is that 80% of your audience wasn’t able to articulate what you do. This is a complete waste of money and a failure to communicate.
So, let’s get to the solution.
Brokers and investors start with a reason to say NO. Given their limited time and attention, you need to package your story to them so they have something to bite on to. From my experience, here are three tips to ensure they’ll open the door to a YES:
1 - Emotion trumps logic so begin your pitch in a way that triggers investing emotions first - scarcity, FOMO, exclusivity, etc.
2 - Remember that first meetings are not about getting investment, but earning their interest. When you earn their interest, you earn the opportunity to retell your story to them again so they can affirm their initial ‘feelings’ about the deal.
3 - Give both investors and brokers three simple and memorable talking points about why you are a deal worth investing in.
Considering the way investors and brokers see and ‘feel’ your deal is critical. Aligning an investor experience to a customer experience helps convert interest into investment. And finally, it is crucial to know that brokers, as resellers of your deal, wouldn't dare pitch your deal to their book if they don’t understand what you do because there is no commission in looking stupid in front of their clients.
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