Winning Over Investors
What it Takes to Break Through the Status Quo
In this article we will discuss the realities of the current state of finding investors and present a solution to the status quo:
- Imagine the Possibilities
- Disruptive Insight – The Reality
- The Unsafe Status Quo – But Take Heart
- The New Safe Place – Breaking Out of the Status Quo
- How Do I Get to the New Safe Place?
Imagine a series of conversations with an investor and his or her family, who you discover share your passion for what matters, in what really matters, who takes you seriously, continuously growing in interest after each conversation. The result is a deposit into your business bank account that captures the connection you’ve made with each other and makes an urgent difference to you, your future and that of the world, all the while having fun.
Imagine what that would that be worth to you, to the future of your project, to the future of your family?
Imagine what will it cost you if it doesn’t happen? What will the loss be to the world, to your future?
Disruptive Insight – The Reality
The Problem: The Internet and JOBS act has made obtaining investment capital more difficult than ever, NOT easier.
Before the JOBS act (and especially before the new millennium) finding major investors for new or growing businesses was done through a private introduction. It was challenging, but everyone knew the rules.
We’re living in a world (with the Internet and JOBS Act) that investors who can each invest significant amounts of money (angels, angel groups, venture funds and private equity funds) are bombarded with thousands of investment opportunities weekly. They get them on Angelist, LinkedIn and countless other online sources.
The second problem is the number of investors looking at these opportunities hasn’t really changed, so you are left competing with more companies for their attention. At the same time, the number of investors who are really leading the vetting of entrepreneurs has gone down, since online syndications allow most investors to follow the pack into deals. You need to find the leading investors, not the followers.
There are fewer leading investors than before. These leading investors, needing some way to cull the herd of opportunities, continue to rely upon trusted sources for introductions.
The result: Only 3% of companies seeking serious investment ever actually get it. If you want to avoid being lost in the maze of the 97%, you have to find some way of gaining visibility among the leading investors, heads above the other entrepreneurs.
Think of it as dating. The same thing is happening in the world of dating. Singles’ access to compatible dates used to be limited to friendly introductions and those you could meet in everyday life. Now you can meet thousands in minutes on match.com dozens of other match-making sites. This doesn’t make it easier. It’s harder than ever to stand out to attract the good ones and the best ones don’t even show up to be selected by you.
Worse yet, imagine if the number of dating singles was much larger than before. In the world of business, starting a new company takes less capital and resources than ever, again because of the Internet. So there are many more startups than ever. You have more competition for every investor and no time to waste.
Unfortunately, it gets even more challenging: Both investors and singles are increasingly cynical because sketchy descriptions available online makes even the dogs look good. The rate of change of technology presents an insurmountable obstacle for investors: in many cases there is no way to predict if a new idea will survive and grow big enough to ever pay the investors back. There’s no way to project market growth with any confidence. There’s no way to rationally project revenue let alone expenses, and there’s no way to rationally predict an exit strategy. All financial projections sound like guess work.
The business as usual “pitch” and “exit strategy” falls on deaf ears. No one believes you.
In short, online investing, like online dating, is increasingly a lottery for investors; but most true investors are not gamblers. So how do you, as an entrepreneur seeking capital, find the few leading investors who’ll really connect with you, believe in you.
In sum, the current situation with the Internet and JOBS act is like an equation:
GROWING NUMBER OF ENTREPRENEURS + FEWER LEADING INVESTORS + INVESTOR SKEPTICISM AND FEAR OF LOSS = DIFFICULTY IN OBTAINING REAL ACCESS TO INVESTMENT CAPITAL
The Unsafe Status Quo - But Take Heart
But, you can’t wait forever to get the capital you need. In fact, because of the Internet, you have to get the capital quickly or your idea will be quickly eclipsed by competitors. Here is why:
CREATE SLOWLY + FUND SLOWLY = GROW SLOWLY AND THEN DIE QUICKLY
In short, you can’t afford a lengthy and expensive promotional campaign to reach investors online. Yet, if you don’t get the capital you need quickly, your vision dies along with personal, team and family hopes.
The New Safe Place - Breaking Out of the Status Quo
BELIEVING IN YOU IS NOT THE SAME AS BELIEVING YOU.
The Solution: The safe route to capital is to find those investors who are open to a different kind of connection with you, different than having to believe your spreadsheet financial projections, a connection that does not begin with traditional pitching built around (unverifiable) marketing projections, financial projections and exit strategies. The connection these investors seek is one that you’ll appreciate personally -- a connection that relies heavily upon the desired impact on the world and confidence in your team to make that impact.
This is known today as “impact investment” and investors refer to this style of investing as “impact investing.”
The world of impact investing is populated with tens of thousands of very high-net-worth individuals and family foundations who have defined the type of impact they want to make with their resources. They rarely show up in lists of accredited investors nor do they attend angel investor club meetings. Most of their investments are in either 1) capital preservation funds (hedge funds and mutual funds), 2) their own businesses, and 3) philanthropic donations to causes they support, which are generally not businesses at all. When they do invest in young growing businesses, they want to invest in ventures that are aligned with their missions and causes they support. Though concerned about the financial return as any investor, immediate and market-rate financial returns are less important. They are sometimes called “patient investors” though we prefer the term “impact investors.”
Obtaining capital from impact investors is an entirely different experience, one that we think you’ll find, though still challenging, more enjoyable. These are individuals and families who want to get to know you personally. They are primarily interested in the kinds of impact your ideas can make in the world. They are also interested in you and your team as leaders and change-agents, rather than a primary focus on your technology. They understand that technology and markets change rapidly so that you and your team must be nimble and smart enough to pivot frequently in order to make the difference you seek. In short, it’s you that they want to meet and care about.
Venture Capitalists and professional angels frequently claim that it’s the leadership they invest in, but in fact the analysis they perform is primarily financial, marketing, technical and legal. Dealing with impact investors will be a refreshing change for you.
The new safer way to seek capital is to seek impact investors, those that want to believe IN you rather than just believe you.
How To Get to the New Safe Place?
The best analogy is again in the area of romance. Put yourself and your potential investors into a middle-school dance night of the future, a vast dance hall filled with thousands and thousands of distant dance partners and the view is blinded by low lighting and deafened by booming sounds. Where do you begin? How do you stand out? How do you connect?
You’ve got to take this in stages:
First, since you’re completely lost in the shadowed crowd, find some way to get introductions to the potential partners who might really relate to you personally;
Second, engage in an opening conversation heard above the noise that has some kind of connection magic for your future dancing partner, a conversation that leads to a second more private conversation and from there to a third more intimate, with growing connection each meeting;
Third, seal the magnified interest with the kind of activity together that you’ve been hoping for.
Likewise, with investor partners, you can enjoy a multi-stage process of:
- Select and gain introductions to only those partners where there is potential
- Correctly navigate a series of conversations, during which connection intensifies at each interaction (or eliminates the partner from further consideration)
- Capture the magnified connection in the form of an investment agreement and funding
To complete this process successfully, you’ll need things like:
- Messages (for making magic in conversation, particularly that crucial opening line and your golden “elevator pitch”)
- Tools (ways and means to get the introductions and follow up)
- Skills (ability to navigate turns of conversation that leads to magnified connection)
It’s our expertise at Intelliversity in partnership with the Weinbaum Group, to equip you with these messages, tools and skills that will get you through the maze and into the arms of the funding partner you seek while having fun on the way.
Are you interested in learning more? If you think your idea, startup or business would be a candidate for this type of investor, we offer a complimentary eBook to help explore the possibilities. To Download Click Here.