Monday, October 30, 2006

Get Out of Your Comfort Zone When Talking To Investors

I was a panelist recently on the finance panel at the Florida Medical Manufacturers' Consortium annual summit along with Tom Dickerson of Tullis-Dickerson & Co., Inc., a $350 million VC fund focused on the med tech space. Tom made a great point in his presentation that, when business owners pitch VCs--which would apply to pitching any investor, whether the investors are VCs, Angel Groups, individual investors, strategic partners or lenders--one fatal mistake they make is by communicating their presentation from their own comfort zone. So for a business owner of a medical device company, they'll spend 90% of their presentation talking about the science; software entrepreneurs talk about their innovative source code; fashion companies talk about the merit of their designs. This is their OWN point of strength, but is not what will motivate investors to take action.

Thing is, people are generally only motivated by their own self-interest. Think of it this way: say you are interviewing contractors to build an addition on your home. A contractor comes into your home with a huge toolbox and starts laying out all his tools on your living room floor. He picks up a drill and begins to tell you about how this is the greatest drill money can buy, and it drills the holes straighter than any other drill. Then he pulls out a power saw and tells you how that saw cuts through any kind of wood, and the blade doesn't need to be replaced for years. Then he pulls out a hammer, and tells you that this hammer is so ergonomically balanced that he can swing that hammer all day without getting tired. And the carpenter goes on for 30 minutes on his diatribe about the features of all the tools in his toolbox. If this happened to you, you would likely throw the guy out on his ear. All you want to know about is will they show up when they say they will, will the project be completed on time, will it be finished within budget, will the addition not fall down and will the carpenter not complicate your life forever.

Well, it's the same when talking to investors. When you spend all your time talking from your comfort zone, you are that contractor laying his tools all over the investor's living room floor.

Whenever you try to convince someone else to do something--whether it's to invest in your company, buy your product or service, work for your company, they want to know "what's in it for them."

For VCs and Angel Groups, they want to know about two things: can an investment in your business generate a HUGE return, and that you know how you are going to do that for them. For individual investors, they also want to know about return on their investment but they also are concerned about how long they will likely have to wait to liquidate. Additionally, individual investors may also invest to satisfy some emotional need. For example, if you are developing a cure for lung cancer, people who have recently experienced an incident of lung cancer in their family may be more motivated to invest from an emotional basis.

If you can communicate what you are trying to do in a way that focuses on OTHER person's comfort zone, you will be in a better position to get what you want.


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