Behind every successful fundraise is a strong narrative.
That is the honest answer to a question that investors repeatedly ask when they get bewildered by sky-high valuation and moonshot venture ideas. However, the founder’s ability to weave a strong narrative about their venture elevates its valuation from being based on its fundamental value to being based on the future potential.
I’ve always promoted fundraising as a sales activity versus a financial activity because the result that you get by segregating both the actions, is the one that gets sold, i.e., since there are shares on sale, the venture is itself the product on sale. Therefore, when the founder convinces an individual to impart with cash today, with the promise of a higher sum of money/return in the future, they have made a sale of shares to an investor.
Why does this venture have the best opportunity to turn that potential into a reality? – that is the narrative. That is the story that must be told.
Over the years, I have put together a list of dos and don’ts for founders to create and deliver a strong narrative. Here is a shortlist:
- Please don’t sell them, make them buy: people do not like to get sold to, they like to purchase. The same applies to investors too. We want to buy into things instead of getting browbeat by a sales professional. An easy way to get someone to buy into your narrative is to use question-based selling, i.e., using questions to guide your investor to a win-win conclusion.
- Don’t give them a deal; give them an irresistible offer they cannot refuse: when founders offer promises of 100x or OYO-type of returns, it just reeks of used-car salesmanship. Instead, focus on building a bigger narrative that pales compared to the business's current value. Do not offer it as a deal; let the investor consider it as one they pouched – not the one they were offered!
- Create a fictional yet relatable target customer persona that they can identify with: I had a founder that did a delectable job on this while pitching. He created the profile of a research analyst creating a report for a mining company. He even gave this person a relatable name (anyone heard of a particular Melon Musk?)
He explained the job role of Mr. Melon and the trouble he faces in his daily job. The pain point faced by Mr. Melon was easily relatable. Therefore, when this fictional character was presented with the said solution, it felt like a personal relief, as though I was Mr. Melon experiencing the product.
A relatable story that puts the investors in your target customer’s shoes - is 50% of the battle won!
- Speak highly about your competition: to speak highly about those you compete with showcases your industry knowledge. Suppose you can identify the strengths and opportunities for those businesses (as opposed to the weaknesses & threats) and speak in genuine high regard. In that case, it tells the investor that you aren’t insecure about the gap between you and your competitor.
- Be prepared for objections: this takes a bit of practice, but after your first 12-15 pitches, you will notice a commonality in the line of investor questioning. The more comfortable you get with answering the objections the better chance of you maintaining control of the narrative
- Encourage discussions, avoid debates: conserve your energy. If your responses to the objections, turn the discussions into debates, find avenues to resolve the conflict, and move the narrative forward. I’ve lost copious amounts of non-refundable time on tangential arguments that I thought I had won while fundraising for Artha Venture Fund. I had not.
- Look for quick noes instead of long yeses: you do not need everyone to believe in your narrative. A fundraise is not a popularity contest. With several hundred (if not thousands) investors waiting for an investment narrative, you should focus your efforts on those that will decide quickly and avoid chasing those that will agree reluctantly!
- Back each assumption or opinion with data: you make several assumptions in your narrative. It is natural for you to have a confirmation bias in your beliefs and for the investor to doubt your opinions. Therefore, have your assumptions backed with datasets from where you derived your opinion.
Anyone can doubt your opinion, but they should not have second thoughts because you have based your views on datasets that do not exist!