The Key to Speaking to Potential Investors: Empathy
At AmpliFi, we often find ourselves talking to businesses about the right way they should talk to their investors and potential investors. Like a lot of important questions, this one is best answered by first answering a series of other important questions.
Before you can properly speak to an investor and get them interested in your company, you need to answer these three questions:
- What do I want? Understand your own business. Distill what you want out of it. Control your destiny. What is your endgame?
- What do they want? At its most basic, every investor wants a risk-adjusted return on their money. They’re giving you a dollar today for ten dollars in the future.
- What story are you telling about why your business is the right investment, right now? Investors have options. The good ones do, at least. They can be investing in the stock market, in real estate, in your competitors. How does storytelling become your differentiator?
Let’s dive into these questions on a deeper level. Or—you can watch this quick video between AmpliFi co-founder Nick Lipetzky and Director of Capital Markets Steve Swanson:
What do you want out of your business—and your investors?
This is something we hope you’ve already asked yourself, but that’s part of what makes it such an important place to start.
You won’t be successful without knowing why you’re doing this. Are you trying to eventually go public? Get acquired? Leave this to your children? Any of these answers are acceptable, but what’s important is that you have the vision and are ready to share it with someone with whom you’re attempting to establish empathy—and a business relationship.
Consider the house flipping metaphor
There’s a chance you’ve bought and sold a house before—or at the very least, you know someone who has. Perhaps you’ve flipped a house.
Your relationship with your business should resemble the relationship someone has with a house they’re trying to flip. If your business is a house, then you should view it as a house you have to live in while you fix it up and prepare to sell it.
And if you don’t sell it, you’re living in this house in perpetuity. Are you comfortable with that? Ready for it? If not, is this the right house for you?
What do your investors want?
Assume you’ve answered everything above, and you’re comfortable with the answers.
Let’s reiterate the point made above: investors want a risk-adjusted return on their money. But they aren’t going to invest in you unless you understand your story and their situation well enough to answer the following questions:
- What are the investor’s entry point and exit point?
- If they give you a dollar today, when does that become ten dollars? When does 100 grand become a million?
- What’s compelling about your business that sets it apart from the competition? And please don’t pretend you have no competition.
More significantly, keep in mind that almost any valuable investor also has other companies they’re investing in—and they know that many of these companies will go to zero, not X. You should make a compelling argument for why you’re going to 10X.
What stage are you in?
The younger your business is—the earlier the stage—the more personal this becomes. Are you in the seed stage? Series A? Series B? The further along you are, the more sophisticated this conversation needs to be. The earlier you are, the riskier their investment. Make it clear why the risk is mitigated—or why it’s worth it.
Finally, do your research. Know exactly who you are talking to and who else they have invested in. Who else are they considering investing in? Assume they’ve done their research on you and your competition, whether literal or theoretical.
Tell The Story
Like we said above: It’s a three-step process:
- Know thyself.
- Know thy audience.
- Tell the story.
Make it simple. Make it obvious. Make it compelling.
Show the investor what the milestones are. What are you going to do for the next 5-10 years so I can take ten dollars out?
It all comes back to empathy
Everything discussed in this article comes back to the idea of empathizing with your investors—and giving them the chance to empathize with you.
Make your vision clear. Be as transparent as you can. And show them why you’re the guide that will bring them to their 10X pot of gold.