For small businesses, there's always a ton of ways to catch the attention of investors. From that chance encounter at a business dinner party to a well-timed cold call or email, there's no shortage of ways that entrepreneurs can use to secure that critical first meeting.
Still, getting your foot in the door represents only one half of the equation. It is equally important to sell your business to potential investors and actually get them to commit capital, which can be quite challenging without a comprehensive investor briefing. An investor briefing is an important event that guides your first interaction with a potential investor. Depending on the business, an investor briefing might come either in the form of a clear and compelling write-up that sells the strengths and values of the business or as a visual presentation with key points designed to make a lasting first impression.
However you choose to do it, an investor briefing should play an important role during your first official interaction with an investor, especially if you're wooing a private investor. So, here are a few ways to help you craft an awe-inspiring investor briefing that will get you closer to an investment deal.
1. Perfect the art of the presentation.
Despite how simple it may seem to come up with a persuasive presentation, packaging your investor briefing into an attention-grabbing presentation can be quite a challenge. Unlike banks and other institutional investors that often go for financial statements and business plans when making lending decisions, private investors will be more interested in things like your vision, why your particular product or service is a good fit for their portfolio, and other personal elements that can only be articulated within a presentation.
That's why it is crucial to get your first investor presentation right. For starters, customize your presentation for individual investors, keeping in mind that no two investors are the same. Copying and pasting presentations often result in boring, non-inspiring presentations and are among the leading reasons why investors fail to bite, even with a promising product and business idea.
Other things to look at here include careful use of live demonstrations and visual aids, limiting presentations to a maximum of 30 minutes, and making sure your presentation stays relevant to the content your investor would want to hear. You'll further want to hone your communication abilities so your presentation comes out as organized and clear as possible.
2. Be clear and concise as to expected ROI and terms of engagement.
You should also use your investor briefing to outline the basic structure of a future business relationship between your business and the investor, in case they come on board. In addition to setting the foundation for any future business relationship, this engagement proposal should incentivize the investor and set expectations for both the investor and your business before drafting any final, binding agreement.
You should specifically make it clear to investors how you intend to cater to their interests within your organization. Things like voting rights, patent and business registration rights, how your board (if present) is constituted, liquidation preferences, and other elements of control will be crucial for the investor, especially considering how easy it can be to legally mount hostile takeovers in many states. According to New York state legislation, for instance, a shareholder with at least 20% of outstanding shares can petition for corporate dissolution, effectively closing down the company. For investors, this is a significant consideration, as it critically affects their bottom lines.
In addition to the terms of engagement, it is important to show investors how your business will become profitable and how they'll get their money's worth by investing in you. To this end, include in your investor briefing details of how you plan on using your investors' money, detailing estimates that will go into salaries, marketing, and other top-level expenses. Remember to also include financial projections that illustrate your best and worst-case scenarios, including your anticipated break-even point.
3. Highlight the uniqueness of your business model.
In a business world where most startup industries are heavily saturated, a unique business model offers the best way to stand out from the crowd. Investors don't want to invest in another ordinary or "me too" startup whose only unique offering is lower pricing or some wacky discounts. Your business model must look and feel fresh, and your investor briefing should clearly illustrate this unique element.
There are two ways you could model your business idea into a unique offering, even if your product or service has been in the market for years. The first involves finding a unique channel to get into the market – or a go-to-market strategy, which on its own, could see your business thrive in unchartered territory with pools of potential customers. The second follows a successful go-to-market strategy and involves establishing your business to take advantage of these unique channels, making sure you saturate the market and lockout potential competitors.
So, evidently, being unique doesn't necessarily mean being the first to do something, but being the first to get it right. By showing investors how your go-to-market strategy is both unique and scalable, you'll be delivering an investor briefing that’s built for success.
4. Infuse the human element into statistical data.
It's easy and often quite tempting to get fancy with numbers when trying to sell your business to potential investors. However, too much emphasis on the numbers and not enough on the emotional aspect of your business strategy can make your investor briefing uninspiring and unlikely to capture the attention of seasoned investors.
Metrics, such as conversion rates and customer demographics, will not mean anything to investors if they don't see an emotional element that explains why customers would want to buy into your brand.
Take, for instance, your conversion rate, a key metric used to analyze the number of buying customers. On paper, a conversion rate of 3% to 4% is considered acceptable for most industries. However, without breaking down your customers' actual problems and buying behaviors, you'd be hard placed to convince your investors your conversion funnel is built for success in the future. In fact, one study found that businesses that identified problems with user experience, one of the many problems that customers face, saw an increase in conversion rates of up to 75% after making adjustments, which shows just how much you stand to gain by aligning statistical data with practical applications.
By identifying these problems and showing investors how you're equipped to solve them, you stand a chance of creating a convincing business case that's likely to get funded.
5. Show how individual investors will add value.
When making that first pitch, it is important to constantly remind the investor that they are a value-add to your business, and not just in terms of the money. Private investors, particularly venture capital and private equity investors, usually bring a ton of entrepreneurial experience to the table, with resumes that often mimic those of successful serial entrepreneurs.
Most private investors will usually sit on multiple boards as a way to offer their expertise while keeping track of their investments. From this vantage point, they carry a unique understanding of the inner workings of management and board relations, which you can use to navigate through the complexities of investor-management relations. Investors can also come quite handy with things like future rounds of fundraising and recruiting, thanks to accumulated experience within their lines of work.
So, when preparing your investor briefing, remember to include discussion points that target specific opportunities for value addition that you believe the investor can help with. For instance, if you feel a particular investor will be of value to your recruitment efforts, include discussion points that mention a specific challenge you've had with talent recruitment that, when solved, will have a significant impact on your bottom line. Of course, this requires your core business case is a solid one and you've done exhaustive research into your investor's background.
Once you've strengthened the core of your investor briefing with relevant content, remember to bring it all in with charisma and authority, making sure to follow up with the potential investor after the briefing.
If you don't get an immediate response after the briefing, check in with them after a couple of days, taking care not to badger them with calls and emails every other day.