Deepening Investor Trust In You: The Master Funding Equation (Part 2)
Last week we discussed the primary importance of developing initial trust with investors. No trust? No space to hear about your business idea, your team, your offer. No funding. So I re-wrote the Master Funding Equation to put trust at the forefront:
- a Trustworthy CEO +
- a Viral Vision Statement/Elevator Pitch +
- a Powerful Pitch Method +
- the Correct Pitch Content +
- a Winning Business Strategy +
- a Balanced Team +
- Understanding the Mind of the Investor
Recall that I said there are two components of trust: establishing it, which we covered in the last post and maintaining it, which we will discuss here. Establishing trust is all about creating a relationship. Maintaining trust is all about demonstrating trustworthiness as a means of deepening the connection with your investor. That means you have to act as a trustworthy person in some relevant way, be put to the test so to speak. It's all about showing an investor that they can count on you.
Recall that when we discussed the pitch I provided you with a sure-fire way to get your pitch back on track when an investor tries to take you in another direction. You tell a story where you faced an obstacle and overcame it. This was part of the process for controlling investor conversations developed by Oren Klaff and described in detail in "Pitch Anything." The reason you tell a story at such a time is that it re-focuses the investor on you as the hero or heroine they can trust to act with poise when the going gets tough. Because they know from experience that the going always gets tough at some point.
Telling a story is an effective way to get a pitch back on track. If done effectively, it can demonstrate that at some important time in the past you rose above difficulties and created a good end result. That can help establish trust at a certain level, but it's not effective in maintaining trust.
So once trust is established, how do you maintain it through the investment process?
Think of any relationship in your life that has some depth to it. There is some level of trust. It deepens over time. But how?
By a succession of actions, not simply words. Trust is deepened by a succession of actions that deepen another person's ability to count on you. What those actions are, how they count on you is contextual to the relationship. That's because expectations are different in different types of relationships. With an investor, your expectation is that he or she will eventually fund your company. Their expectation is that you will continue to take the kind of actions that they expect of a CEO worthy of their time, their money, their reputation.
The challenge is that early on in the developing relationship your level of interaction can be sparse. You won't likely see them every day. You likely won't speak to them daily. It's the challenge of deepening a long distance relationship. One way to do that is to make promises, then deliver consistently on those promises. I discussed this tactic in a previous blog. I'll review the key points here.
Begin by truly understanding what an investor puts at stake should they invest in your company. It isn't just money. It is also their valuable time. It is their opportunity cost --something else they could have funded if they hadn't funded you. Perhaps most importantly it is their reputation. Their reputation is their life-blood. It represents all they endured on their own path to success. It impacts their personal relationships. It impacts their status among other investors. It's really important to them!
If someone funds your company they're now associated deeply and directly with you. What you do directly impacts them. Your successes increase their pocketbook but more importantly their reputation, their standing in the community of other investors. Your failures, of course, have the opposite effect. That's not to say investors expect you to never fail, to never make a bad decision. They know that is bound to happen occasionally. What they want to know -- really get this -- what they want to know is how you'll respond. Since they don't know you well at the outset of the relationship you need to find ways to demonstrate reliability any way you can. Reliability in small things breeds trust that you'll be reliable in big things.
So, you're going to find ways to make (and keep) small promises. By keeping small promises you not only demonstrate reliability but also that the investor is important to you. They know you're busy. They know you have stresses. They know you are probably pulled in ten directions daily. They know you often work late. They know you're probably up early. But as you make and keep promises they begin to realize that they're as important as all those other things you do daily.
On the flip side, if you don't make firm promises, if you don't consistently deliver on those promises, then when the proverbial shit really hits the fan can they count on you to be at your best?
Make promises. Keep them. They can (and should) be simple at first. If you schedule a call at 2 pm, call them exactly at 2 pm. If you have to go through a gate-keeper to get through to them, be sure and call 5 minutes early. Be on time for meetings. On time means 5 minutes early. As the conversation develops a time often arises when the investor poses a question to you that you do not have an answer for in the moment. This is a golden opportunity to build trust through promises. Tell them it's a great question that you do not have an answer for. Tell them you will find an answer. Tell them when you will provide that answer. Then, do what it takes to get the answer. Draw upon your team. Draw upon your coaches or mentors. Then deliver the answer, the best answer you and your advisors can come up with. Let the investor decide if it's a good answer. Regardless, they'll appreciate that you took the time to provide the answer. You've demonstrated reliability. You've deepened trust.
Another method for deepening trust is to become an excellent listener. Yes, yes I know. You're already a good listener. Here is some news: chances are you're not. I highlighted this phenomenon is a previous post that you really should read. Documented research shows that most of us think we are good listeners, yet we think most other people are not. It turns out that we are all biased in this area. So take the case that your listening skills could be improved!
In my next post, I will review the art of listening within the context of deepening trust with an investor. Together, we'll clean the wax out of our ears so we can really hear what's being said by investors. The big prize in this is that when you truly are a master listener, they'll know it. You'll absolutely stand out from the crowd. You'll make them feel important. You'll deepen their trust in you. So, listen up!
Key Takeaway: Being a "trustworthy CEO" does not mean that YOU think you're trustworthy, nor even your friends, spouse or colleagues. It means that the investors sense they trust you in their gut. This overcomes their natural skepticism, their "crocodile brain." This happens unconsciously when you tell the right stories then make promises and keep them.