One word. Three letters. But it could be the turning point for your business. What does it take to get an investor to “yes”? In this article we’re going to explore the art of winning investors’ trust, touching their emotions and triggering their fear of missing out, to secure the crucial funding you require for your startup.
Trust in the investment
Your first hurdle as a startup founder is this: Why would someone who doesn’t even know you give you thousands or sometimes millions of pounds? Your pitch deck will do a lot of the ground work here, showcasing your great business with good scalability, commercial traction, and the other vital components.
The other part of your issue is why the investors should empathise with you. Being your authentic self is vital in instilling trust and creating a connection with people who are often on the other side of a screen. Transparency is the cornerstone of trust. This means being upfront about your financials, progress, and even the challenges you might face.
While it’s important you don’t waste your investors’ time with irrelevant information, transparency is about revealing both the good and the bad news. Too often, bad news gets covered up or sugarcoated in hope that things will magically improve; they rarely do, and investors will find out. You need to convince your investors that you are a straight shooter. Otherwise, you are simply setting yourself up for failure.
A big challenge is conveying your brand values and in turn, embedding trust. You need to show consistency in messaging, operations, and branding. Your investors will keep tabs on you. They will notice if the values of your business are reflected truly, both in business operations but also in your own communication and actions.
Lastly, there’s one big reason for the investors wanting to know about the team behind a startup: credibility. Whether your team is credible or not will be a deciding factor for the investors. This can be showcased in the team slide, but you also need to show not tell to establish that you actually are an industry expert or have the commercial ability to drive a successful company. Credible entrepreneurs are seen as less risky, ultimately leading to a higher likelihood of investors handing over their money.
Appeal to the investor’s emotions
Emotions are strong, often driving our decisions which we then find data to justify afterwards. Think about this when speaking with investors. Investors are not only investing in a business. They are also investing in your vision. Make your investment thesis appealing by including an emotional investment that aligns with the investor’s personal or business goals. Evoke feelings and remember to articulate your vision both passionately and clearly. You should combine this with other things.
A compelling story is powerful and should never be underestimated. Remember a story is not just a string of events: start with a compelling problem, explain how your proposition solves it and demonstrate the outcome. Stories are relatable; use yours to show the investor the value and potential impact of your business. Find ways to make your business stand out and be distinctive from the other pitches they will be looking through. Think about how you can make the investors see the real-world problem you are solving, or how the change you want to bring about will help people. These can work as an emotional hook and have investors on your side from their first encounter with you.
Lastly, get into the investor’s shoes. Highlight a problem that you are solving, which the investor also feels strongly about. This will connect the emotional wires and create an empathic connection that will go beyond the financials. Impact investors in particular will love this, as they are looking to solve societal issues through investments. In fact, most VCs these days are looking for every investment they make to have some ‘impact’ element. Appealing to emotions is important and will definitely help you pull on some heartstrings!
Fear of missing out
Investors are running a race against the clock on the latest and best investments. The earlier they get in, the bigger the capital gain. Create Fear Of Missing Out (FOMO), and you will have a strong psychological trigger. This will make the investors act more quickly than they otherwise would. On a note of caution, remember that trust is hard to build and easy to destroy. You should still be genuine, as creating false urgency can break the trust of the investor. Urgency is not the only string you can pull.
Weigh out the potential reward against the perceived risk. Investors know most startups fail. Show them that investing in your business is a relatively safe hand to play. Demonstrate that you have a solid risk mitigation strategy, show some kind of insurance, or a strong exit strategy. You should consider how you can alleviate the concerns of the investors and tip the scales in your favour.
This is often where we see a bit of a catch 22 – investors more often than not want to see ‘traction’, but founders generally need some cash to get to the point of having any traction. Think about how you can show some evidence that there is a need and/or want for your product in the market, and how you might be able to do this off your own back. ‘Bootstrapping’ your business to a certain stage without any financial support tells a story of how resourceful you are and will make investors excited by what you might be able to achieve with financial backing.
Being able to understand what underlies decisions from investors is key to gaining the edge in securing investment. Use different approaches such as building trust, credibility, and consistency to create an emotional connection and add a compelling story to it. Make your startup memorable and use FOMO as a psychological trigger.
Psychological triggers can alleviate the concerns of investors, tip the scales in your favour and also play a role in building stronger relationships with the investors. Investment is more than a financial commitment; it is a partnership. Everything you do should show that you’re a good business to partner with, both financially and emotionally.
Ready to find an investor?
Swoop’s equity team can review your pitch deck, introduce you to a network of VCs, and provide further support to you in your fundraising journey. To get started, register your business with Swoop and upload your pitch deck for our equity finance experts to review.