We all know getting investment as an entrepreneur is downright hard. There are many hoops and hurdles and it usually comes down to who you know.
Investors often reside in closed networks; have personal investment preferences and the ratio of early-stage investors to new ventures is completely out of balance. End result – investors hold the power. That’s about to change.
The pending shift in power
Legislative reform in Australia could result in certain changes to both general solicitation of investor proposals and the sophisticated investor classification.
This means Australian entrepreneurs will be able to attract potential investors publicly as opposed to closed-network channels, and potential investors may no longer have to meet the stringent criterion such as asset and income levels.
Equity crowdfunding will increase the number of opportunities investors have to choose from and the number of investors competing for deals. And therein lies the power shift.
Even with this reform, still, only a handful of entrepreneurs will be able to thoroughly prepare themselves and their start-up to be investable.
It is these investable entrepreneurs who will have the upper hand over investors, because to an entrepreneur in demand by multiple investors holds all the cards.
First things first
Forget everything you know about crowdfunding. Equity crowdfunding platforms target investors and are in the opportunity evaluation business while pledge, reward and lending-based crowdfunding platforms target customers and are in marketing.
Equity crowdfunding requires you to successfully navigate investor dealflow to execution – not make new sales. To avoid this fatal flaw, you need to learn how to talk to investors.
How to talk to investors
Entrepreneurs and investors don’t have the best track record of effective communication. They have completely different perspectives and experiences which frustrate both sides.
Investors are time poor and interested in what they need to know to make an investment decision whereas entrepreneurs feel the need to tell investors everything they are thinking. Entrepreneurs mostly speak from a customer sales perspective rather than the short sharp articulation of value and return investors are seeking.
Yes – I promise you can get an investor’s attention with a single sentence! In fact, I strongly recommend that when an investor asks a question, the response be limited to one word or one sentence only, with a smile. Don’t waste time on what you want to say and focus that valuable time on what an investor wants to know.
What do investors want to know?
Investors are more interested in the people behind a company than they are in the company itself. Now reflect on all those conversations about the features and benefits of what your company sells… see the disconnect? It’s just not relevant.
What is relevant though is what you are personally passionate about and what market opportunity you are pursuing. Which other people and companies in the world are chasing the same opportunity and how are you doing it differently?
Think of this as a one-to-five scale upon meeting. One – you may have been in the same room, but who knows? Two – you were standing in the same circle, perhaps were even introduced. Three – you made a few comments. Four – you introduced new thinking, new perspective, new information. Five – the investor is still thinking about you and what you said days later.
A great way to achieve this is by starting sentences with “Further to what John said…”, “In addition to what Kathy said…”, “I agree”, “I disagree”. Be bold in a way that progresses dialogue rather than rehashing the old or being adversarial.
The first thing an investor does
After you grab an investor’s attention, they will reach for their phone or tablet or sit down at home later and Google you. You will receive 5 to 10 minutes of undivided stalking time. What they find will determine whether they contact you immediately or keep you on their ‘observing’ list in case you cross paths again.
Personal branding defines what happens next. Do you have your own domain name? Do you have a personal website? Do you have a clearly defined focus and purpose? What niche are you leading? How influential are you? Do you have a professional photograph or is your LinkedIn photo cropped from your best mate’s wedding?
You will be researched online by potential clients, partners and the media – investors are just looking for an idea of your capacity to attract high growth opportunities.
Notice how I haven’t said investors will research your company online? All you really need is a landing page that says coming soon.
Hold your horses! Don’t pitch yet…
After you have met an investor and dialogue has started, treat that investor as a mentor. Relationships take time to evolve so expect at least six months of the getting-to-know-you phase. Like a marriage, it’s not wise to invest until the honeymoon period is over.
Add the investor to your personal email list that gives your network progress updates on everything you are doing, not the company newsletter. Ask them out to lunch (their time is more valuable than a coffee!) and choose a lovely place locally to them every few months.
Most importantly, information and energy exchange is just that – an exchange. It must go two ways. Give the investor new insight, new information, new contacts that may help them, share what you have learned from success and failures in macro and micro levels. Just like in matters of the heart, if it’s all about you, the relationship won’t last.
Start the process
If you would like to start your journey towards being investable, get involved with StartupCrowdfunding.com.au. It is being developed as Australia’s equity crowdfunding platform that showcases investable opportunities.
While legislative reform must occur before deals go live, its current launch focus is education and community events surrounding opportunity evaluation and investor relationships to help Australian entrepreneurs be investable.
Lauren Rielly is serial entrepreneur and founder of StartupCrowdfunding.com.au. She is the Administration Officer for the Melbourne Angels, has a Master of Entrepreneurship & Innovation (MEI) and is a Sessional Lecturer in Entrepreneurship. Lauren has lived across Australia, the Philippines and Silicon Valley, exited two companies and spends her time attracting and evaluating opportunities for early stage investors.
