How to Speak to Investors
Whether you’re a startup or an established business, you have to spend time talking to investors. What you say and how you say it impact how investors feel about your company and the direction it’s headed. As one of your company’s most important audiences, investors determine how much capital to direct toward your venture. Most investors base their decision largely on the communication they receive from the company itself. Take a closer look at how to speak to investors to ensure the long-term viability and success of your business.
From press releases to annual reports, there are a number of tools you can use to communicate with investors. Companies use a wide range of tactics to get the right message into the hands of current and future investors.
Crank Out Relevant Press Releases to Targeted Media Outlets
Get to know the trade publications for your industry. As you interact with the editors and reporters, you’ll establish a relationship that will help you garner coverage when you put out a press release. It’s important to only send out press releases that contain relevant information. For example, if you hire a big-name manager for your executive team, you should definitely publicize it in a press release. Launching an exciting new product? That’s also worthy of a press release. Though reporters at trade publications tend to be friendly, they won’t pick up a press release that contains nothing new. Investors may look for media coverage of your company, especially if they’re deciding whether to withdraw support or increase their investment. If your company receives positive coverage, it will instill in investors a sense of pride and confidence in your business. You may want to consider hiring a public relations firm to help you promote press releases for major announcements. Firms can help shop your press release around to media outlets that cover your industry.
Provide Positive Interactions on Social Media: Investors can get a sense for the health of your company based on your social media presence. A company that’s engaged, active, and customer-focused can show off these attributes by being on social media platforms such as Facebook, Twitter, and Instagram. For many business-to-consumer companies, social media is simply mandatory. Consumers want to feel like companies are accessible to some degree on social media. You can use social media to share positive stories about your company, testimonials from satisfied customers, and announcements. All these elements combined create a positive aura around your company that investors will like. Because companies can’t control what individuals post about them on social media, they must have a policy for handling negative comments and complaints. If investors see that your company handles negativity with professionalism and kindness, they won’t become overly concerned about the negative noise that’s inevitable on social media.
Create a Compelling Annual Report: Your annual report should detail the milestones of your company over the last year, its aspirations, and its successes. Annual reports should also discuss the challenges facing the company because investors expect honesty and transparency. Ideally, all information in your annual report should link to your company’s mission. The mission is the single thread that guides your company and all the work it does.
Talking to Investors
When you leverage one of the tools for talking to investors, you have to think about the words you choose, the context you provide, and how you frame information. Here’s a closer look at how to talk to investors so you can build their confidence in your company.
Discuss Your Product or Service in Terms of Market Needs
Some companies make the mistake of focusing on the size of the market. While investors like to see companies playing in large markets, there’s something that’s more important than size: market need. Companies need to clearly articulate the market need they seek to meet. As evidence of market need, businesses should provide qualitative and quantitative evidence. The proof of market need can come from the company’s in-house research department or from industry groups from which the company has acquired data.
Recognize the Competition
Many markets are highly competitive. To ignore your company’s competition when speaking to investors is unwise. The investors are already aware of who your competitors are and the products they offer. What you need to share with the investors is how your product or service is superior to competitive alternatives. Failing to articulate how you plan to beat the competition will make investors nervous or unwilling to continue putting money into your company.
Explain Why an Investor is Important to Your Company
Investors need to know why you need their money at this particular moment. That may mean you have to explain where you are in the development process for a new product. To clarify why you need funds, you may have to discuss plans to expand your business, hire more people, or acquire a competitor. The more investors know about why you need their money, the better equipped they are to make a decision about whether to back your company.
Have a Concise Pitch
If you’re approaching investors who aren’t already putting money into your company, you need a clear, concise pitch. Indeed, you should practice your pitch in front of a mirror, with family members, and with a mentor from the business community. When you make a pitch to investors, be prepared to send them your business plan via email or snail mail. A mere pitch is unlikely to compel someone to invest; investors usually want to see the details of your business plan.
Look at Companies That Excel at Talking to Investors
Some entrepreneurs have a real knack for talking to investors. They can encapsulate their vision in a few sentences and present a sound business plan. For inspiration, consider some of these examples of companies that have done an excellent job of talking to investors.
- Uber: Though it’s come under fire recently, Uber initially succeeded at wooing investors. The transportation network startup initially attracted many impressive investors with its apps that let regular drivers use their own cars to offer rides to paying customers. With a clear market need for alternatives to taxis and other modes of transportation, Uber had a compelling solution that enticed investors who wanted to hitch a ride with the startup. The private tech firm is worth billions of dollars.
- Snapchat: While Facebook is still the dominant social media platform, Snapchat is aspiring to cut into its revenue. The high-tech company brought in investors at the beginning with its app that lets people share content that then disappeared. Investors were impressed with the technology itself. They also liked the app’s ability to gain traction quickly among teens and twentysomethings who find Facebook to be their parents’ social media platform of choice. Now a publicly traded company, Snapchat earned $1 billion for its early investors and the two men who founded it.
- Bruxie Gourmet Waffle Sandwiches: Who knew the world needed more sandwich joints? The founders of Bruxie Gourmet Waffle Sandwiches had a hunch that people wanted a better sandwich than they could get at fast-food chains. Building on the soul-food concept of chicken and waffles, a niche the fast-food industry had yet to exploit, Bruxie had no trouble getting an initial round of investors. When the restaurant hosted private investors for a sit-down meal, Bruxie received a second round of financing. The investors were so impressed with the taste of the food, they brought in more investors.
- GrubHub: GrubHub came about when two software developers needed takeout food. They quickly realized there wasn’t a one-stop place where they could go to place their order. But they soon changed that with the invention of GrubHub, which compiles nearby delivery and pickup restaurants and enables diners to place orders. With a large market and compelling market need, the developers had no trouble finding hungry investors for their startup. When the company went public, it was a hit with investors. It’s valued in the billions.
How you speak and what you say to investors has the power to persuade or repel them. That’s why it’s important to rehearse what you want to say and think carefully about how you frame your pitch. When you begin talking directly to investors, avoid making cold calls. Leverage your network to connect with investors with whom you have mutual acquaintances. This strategy gives you an advantage over an entrepreneur who is talking to investors to whom he or she has no connection.