Raising capital is like online dating – the startup’s guide to wooing investors
In the nineties and early noughties, if you said you were ‘internet dating’, you’d be met with raised eyebrows and a fair amount of scepticism.
After all, dating is all about chemistry and back then few imagined that this could be replicated online.
Then in 2012 all those raised eyebrows fell. If you weren’t dating online, you were the odd one out. The growth of smartphones, social media and the explosive success of apps like Tinder knocked ‘meeting through friends’ out of the top spot for ways to meet someone special for the first time in sixty years. Suddenly, looking for love online was fun, engaging and the way to find that special someone.
But, what does that have to do with raising capital? Well, everything, and Chantelle Arneaud of Envestors is here to explain how.
Facilitated by the lockdown, the once slow adoption of digital by the industry has been spurred on at a rapid pace. And just like online dating, online investing will be the new normal.
The investment industry is now having its ‘Tinder’ moment.
And it’s is a good thing. Online dating took off because technology made it easier to find that special someone. It meant no more going to a club and shouting in the ear of someone in hopes you’d make a match or going to a BBQ and hoping there will be a friend of a friend there that might catch your eye. Through tech, searching singles could access the dating pool from their phone, vastly increasing the chances of making that special connection.
The same is true for online investing. Invite-only pitching events, closed networks and a reliance on personal connections all mean a limited exposure to investors, who have to work really hard to find out about deals. Now, with technology, they too can have access to the entire pool of investment opportunities from their phone. For entrepreneurs, that means a greater chance that you’ll catch their eye, get that first date and, if all goes well, seal the deal.
Tinder for early-stage investing
Like Tinder, online investment platforms, like Envestors, allow fundraising companies to have a deal profile. Not dissimilar to a dating profile, this is the place where you tell potential investors all about your investment opportunity. Unlike Tinder, the balance here is on words over photos. A good profile will include a deal summary with videos, team profiles and market information – effectively everything an investor will need to decide if you’re the one.
The market-leading platforms also include a chat feature where investors can break the ice by asking you about yourself. No softball questions here, you’re most likely to get asked to justify your sales forecast or explain how you’ve sized the market. If your profile piques their interest, but doesn’t win them over straight away, investors can follow you and receive automatic updates on your progress, so if they don’t swipe right the first time, you just might get a second chance.
Those lucky enough to find a match will be able to track their progress towards their investment target automatically, as platforms allow investors to pledge and invest online. And once you’ve got that commitment, you can keep in touch with in-built investor relations tools.
If Tinder for investment sounds like your best bet, you won’t be alone. There’s plenty of competition out there. So, to give you a chance to shine, here are our top tips for finding that special someone(s).
How to find your perfect match
A stunning profile
A top tip for your dating profile is to describe yourself in a way that provokes a question. But for your investment profile, you ideally want to leave no questions unanswered. Having a robust profile is key. If you want a potential investor to move to the next stage, full disclosure is an imperative.
Use video to capture attention. A succinct video overview of your investment opportunity (not your business and definitely not your life story!) will do wonders for arousing interest. Beyond that, ensure you have all your assets on display. At a minimum, you’ll need:
- A market overview: What problem are you solving and how big is the addressable market?
- Explanation of your product or service
- Revenue model: how do you make money?
- Traction: How many clients do you have, what shape is your pipeline in?
- Introduction to the management team: track record, sector knowledge and previous exits
- Competition: How are you different (and better!) to your competitors
- Financial projections: How much money are you going to make over what time period?
- Investment offer: How much investment are you seeking? What is your valuation? What will the money be used for?
- Exit strategy: What is it and what are some examples of recent exits in your market.
Even all that detail isn’t enough. Like a box of chocolates on a first date, you need all your documents wrapped up and ready to hand over. A good investment platform will allow you to control access to your documents so you can share your most intimate secrets with select suitors whilst keeping your details out of the hands of your competitors.
Keepin’ it fresh
In the same way that a savvy online dater will ensure their photos are current, you need to keep your profile up to date and fresh as investors may be keeping an eye on you from a distance. Add regular (weekly is a good idea) updates on new customer wins, new hires, new partnerships, and sales results. Keep giving investors reasons to come back and take another look. Maybe they weren’t sure the first time, so keep showing them you deserve a second look.
A close encounter
Once you’ve got that first date in the diary, get ready to wow them. First meetings are as crucial as first dates. Chemistry is always at play, so you need to ensure you’re prepared so you can relax and be yourself when you finally meet.
We always recommend researching your ‘date’ before you meet them. Find out what else they’ve invested in or what boards they sit on. Ensure you can show them you’ve taken the time to learn a bit about them.
This will make it easier to break the ice and also to find out why they decided to make previous investments, so that you can tailor your pitch to them.
You also need to dress the part – we’re all getting so comfortable with video calls that it’s becoming the norm to be at least half-clad in your PJs, but some studies show that your clothing choice can affect your performance, so take a bit of time to put on your Sunday best – it might just be the difference between a good pitch and a great pitch.
The final preparation point is to know your numbers. Don’t just rely on your charm, make sure you know your numbers because you’re very likely to be asked about them and, in many cases, to justify them. It’s worth ensuring they roll off the tip of your tongue and are justifiable.
Our last tip is to try on your date’s shoes. Not literally, of course. The point is to consider the investor’s perspective. Your business might be the greatest thing in the world – to you, but they are still deciding. Keep in mind their goal is to get their money back, so they need to believe you are capable of delivering the growth you are promising and that your exit strategy — the bit where they get their money back — is sound. Like savvy singles who have friends at the ready to make an ‘emergency get out of date phone call’ investors walk into a room backwards, they are looking for reasons not to invest but if you listen well to what they ask you and say, and respond clearly and transparently, you just might get that second date.
There are huge benefits to online investing. For startups, it means many more investors will see your profile and the opportunity. You will need to adapt to the new way of raising funds but if you do you’ll be able to find a match with the right chemistry.
Want to know what it's like on the other side of the table? Take a look at Chantelle's follow-up article on how digital is transforming the relationship for investors.