I see a lot of awesome startup ideas every day, from plant-based salami to rocket fuels. These entrepreneurs know how to build great businesses, but often have no idea how to communicate with investors.
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Some founders give me tons of details — but none of the facts I actually need! Let’s go through what information investors need in order to give you that “yes”:
1) Explain exactly what your business does, succinctly. If if takes paragraphs to explain, you’re doing it wrong.
You should be able to explain what you do in a single sentence. For example: “Uber makes it easy for you to get a ride anywhere, anytime.”
If an investor can’t understand what you do and why, he isn’t going to invest.
2) Show revenue clearly. You would not believe how many people get this wrong.
Report your revenue month by month. Don’t just tell investors your last month’s revenue, or add all your revenue up and report it as a single number.
Investors want to see a trend. Are you growing fast, or just treading water?
Showing revenue broken down properly allows them to see that trend.
Here’s an example of how it should look. Give investors both a table and a graph, so they can see exact numbers and visualize the trend.
Bonus points if you calculate your monthly growth rate using a tool like this. At that point, you’ve done everything but write the check for them!
That’s what you want to do: make it easy for them to say “yes.”
3) Be clear about terms and legal.
If you have a lead investor, the terms and valuation will already be set. Be sure to communicate those to every investor you speak with, so they know what they’re agreeing to.
If you don’t have a lead, be sure investors know that too. Some investors, like me, do not lead rounds.
Others only lead rounds, so the fact that you don’t have a lead is actually a positive for them!
Also, clearly explain how you’re incorporated. Most investors only want to invest in Delaware C Corporations.
If you can give this basic info on what the company does, how it’s performing, and how the investment will work, you will have answered most questions right off the bat. When a founder has her presentation dialed in like that, I assume she is experienced and highly competent.
Remember, if investors don’t have the info they need, the default decision is always no.
Make sure that doesn’t happen to you! Present the key facts clearly so you’ll have the greatest chance of success.
Where do you find founders struggling to communicate with investors? Leave a comment at the bottom and let me know!
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