Finding an investor is just liking finding your customers, you must find them in the right place at the right time. Approaching investors with a straightforward mind-set will help your business find the perfect match for your company. Entrepreneurs often forget that investors are humans just like you or me and get caught up in creating a pitch that doesn’t resonate at all.
In my experience of speaking to dozens of investors while building different start-ups, I can confidently say that investors simply expect a conversation that can help them understand the fundamentals of your business. Meanwhile as a business, you must identify if the investors that you approach match your company culture and the way you do business. An introduction to Empathy Maps
A great tool that I’ve discovered and one that really aids in understanding people is the ‘Empathy Map’, which is a collaborative tool that businesses can use to better understand potential investors. While this is typically used for customers, it perfectly fits the premise of an investor as well. Let’s look at it. It’s made up of a picture of the investor surrounded by six distinct sections, which are: Think and feel. What’s on their mind? What matters to an investor? What are their aspirations?
Hear. They say that no man is an island, and that’s true of investors. What are friends, networking connections and other investors saying to them that could affect their thinking?
See. Look around. Who is investing in your competitors? What do they see their peers doing? What are current business factors that can influence their investment decision? Say and do. Time to look at their actions and words. What is their attitude towards others? What do they do in public? How has their behaviour changed?
Pain. What does failure look like to this investor? What fears, frustrations or obstacles potentially stand in their way?
Gains. On the flipside, what does success look like? What are they hoping to get out of the relationship?
Drawing up an empathy map, like this example, will give you a significant head start and prep you for investor meetings. Humans are wired in way where our thinking and feeling is based on what we hear and see; investors are no exception. As an entrepreneur, it is important to observe the things happening around you and empathy maps are fantastic in making you more aware about your surroundings. It may require time and effort, but the outcome is worth it.
The 10-point investor checklist
Here’s a list of questions that you should consider asking a potential investor to judge their interest and fit with your business. When was the last time you met a failure/success start-up? What kind of impression they left on you? If you listened carefully, you will read between the lines to understand what that investor appreciates or dislikes.
Have you heard about investors who got into troubles with their portfolio companies? This question will help you understand how that specific investor perceives other investors. What do you love/hate the most about media that talks about entrepreneurship/startups? You want to understand how they see investment space.
What are you worried about the most? Sometimes it is just good to ask the question directly.
When the last time you failed as investor? What were the reasons? Can you see the signs of failure now? Investors are often asked text book questions, so if they answer you with generic answers or something they read in a book while they gain their MBA, I think you should watch out.
Do you have a workflow to manage investment deals? If you read on their website that they will help you build processes in your startup, but they do not have a workflow to manage their very basic process. I would think twice before applying.
Read their website, word by word. This founders, partners, and associate’s profiles on LinkedIn. Those are the people you will be working with. One of the common misleading information that investors use is “Agnostic Investors”, if their whole team comes from a financial background for example, then you pitch a restaurant you will be wasting your time and theirs. Know who they are. During the investor meeting, do not make it one way, it is not they ask, and I answer, make it two ways communication get to know who they are, ask questions like this
What is your investment criteria? How do you evaluate start-ups you invest in? I noticed many entrepreneurs get disappointed after they got rejected by an investor, simply because they did not know what is the criteria of success for that specific investor. What is your decision-making process? Is the whole investment team makes the decision about your start-up or a single person? When do you feel excited about a start-up?