Stories constitute the single most powerful weapon in a leader’s arsenal.Dr. Howard Gardner, Professor, Harvard Graduate School of Education*
Building an emotionally captivating story for your company is essential in getting investors’ attention—and ultimately in getting them to open their wallets. Founders who concentrate solely on the mechanical details or functions of their product and ignore the story of what it will do and why it matters do so at their own peril. How you frame your company and anticipate the motivations of your investors is the difference between a successful pitch and a disappointed walk home. Storytelling lets your audience make inferences and come to conclusions without being told how to think or feel about your offering.
important Let’s say that again: if you can’t get an investor emotionally interested in what you’re building, they will not invest in your company. An investor’s emotional response will dictate how the pitch goes. If they aren’t excited in the first few minutes, they’re going to be looking for evidence to justify their lack of excitement. If they are excited, they will be looking for confirmatory evidence. The best investors recognize emotional bias, but many will not. This is an unconscious behavior, and if you underestimate the impact of emotions on decision-making, you’re actively selling yourself short and reducing your chances of getting someone to invest in you. And remember, figuring out how to get people emotionally invested in your problem and solution will serve you not just in securing investment, but in recruiting and hiring employees and in reaching customers. Investors know that.
Indeed, storytelling isn’t just about giving your deck some flair. Especially for early-stage companies, investors are assessing a founder’s ability to tell their company story. They want to see that you can succinctly share your vision and the opportunity the company presents to those involved, both monetarily and with regard to mission. They want to see how well you understand your customers and how you have managed to bring together the right team of people to make the company a success. If you can’t do these things, early investors will assume that you won’t be able to impress or convince investors down the line, and that you’ll have trouble reaching customers to buy what you’re selling and talent to join your team.
Take the words of legendary* marketer and entrepreneur Seth Godin to heart: “Marketing is no longer about the stuff that you make, but about the stories you tell.”* And make no mistake—the is a marketing tool. Emotionally captivating stories can convince employees, advisors, and investors to commit to being a part of building the founders’ vision.
No matter what, you must convince investors that your company can create enough value to return their fund; while portions of your will speak directly to market size and how you plan to capture your portion, your story will tell investors why this idea is going to gain traction and how you are uniquely positioned to meet the needs of your customers and reach them. Your story is a value proposition that goes beyond returns: What other value does your company offer? What kind of opportunity does investment in your company represent to VCs?
The guiding value proposition should be distilled in your thesis statement. Based on your audience research, you can tailor your value proposition to which investors you’re in front of.
If there is any one secret of success it lies in the ability to get the other person’s point of view and see things from their angle as well as your own.Henry Ford, founder, Ford Motor Company*
To create an effective story, you have to consider what motivates the recipient of your story: for founders, this includes customers as well as investors.
When building the deck, most founders are solving only for reception from investors, which can lead them to an inadequate understanding of the end user, the customer. These founders are starting with the wrong thesis: getting buy-in from investors. But in fact, the thing that is going to create the best reception among your investor audience is that you demonstrate a deep understanding of who you are ultimately serving.
Lay the groundwork for this by making sure you’ve interviewed a number of theoretical ground users and put what you learn into your story. Concentrate on understanding your “desperate user”—that is, the person most motivated to change a habit, behavior, or buying pattern based on the amount of pain they experience from the problem you have identified.
When it comes to investors, they are usually motivated by a combination of impact, power, and money. Your due diligence on firms and individual investors will help you determine which of these factors is likely to be dominant. But you also need to understand the kinds of businesses they fund, what criteria they use to judge the likely success of a project, what they care about, and what takeaways they need to sell you to their colleagues and partners.
Your thesis and vision come out of how you frame your company’s mission. It’s accurate to say Tesla is a manufacturer of cars and batteries. But their mission statement is to “accelerate the world’s transition to sustainable energy.” A great story for an investor paints an emotional picture for the recipient that shouts, “This problem is huge. It’s dramatic. Solving it would mean massive value creation—the world would be better off and we’d get rich doing it.”
At the same time, lengthy stage-setting may make some investors frustrated—they will want you to get to the point. Storytelling is not about theatrics, nor is it about overinflating your company’s mission. Are you a pizza-delivery app? Don’t try to tell investors that you’re going to save the world. Your story should be honest and humble while framing your company in the best possible light.
A lot of founders find focusing on numbers (like market size and revenue projections) more comfortable than focusing on emotion. But emotion is what motivates people to change, and no matter what you’re selling, you need customers to change their behavior. You want to frame your narrative thus: “People are really grappling with something very difficult, which is going to motivate them to do something differently, and it has financial repercussions.”
Who is suffering so much that they’ll be willing to take a chance on an unproven startup? This is where it all begins and all comes together: the story of your company’s relationship to that desperate customer, based on the pain point you have identified.
That story may begin with your personal connection to the pain point, which is a great way to communicate how you have arrived at a contrarian insight—that is, what do you know about the market that other people don’t? The personal connection strategy doesn’t work for every startup, but it can be a crucial part of your narrative if it helps investors see how you as the founder can understand and communicate with your customers. Is this a problem you currently face or faced at one time? Introducing the problem as something you have struggled with, or that people in communities close to you have struggled with, will help you demonstrate the ways in which you are uniquely positioned to solve this problem. Investors are also looking for founder-market fit, so a personal connection to the problem at hand can be part of how you explain why and how you understand the market and are poised to make this particular business a success.
Keep in mind that if you do not have an authentic personal connection or do not want to make the company story personal, you still need to explain to investors how you arrived at your contrarian insight. How do you know what you know?
Though introducing the problem as somehow personal to you is an important storytelling element, you also need to use data to explain why it’s a serious or large enough problem that your solution will find an eager, sizable reception.
important Your own experience with the pain point or customer base should supplement your thesis, not be your thesis. You don’t want to represent an insular viewpoint or sound like you’re building something for yourself alone. The personal, emotional connection to what you’re building should come out of your research into a broader population, while your personal connection to that population and/or pain point should be framed as what gives you a unique ability to reach customers.
If you do not have a strong personal connection to the problem, or if it simply isn’t your style or preference to focus on your own story, you might choose to tell a narrative about a “real” person. (You can, of course, do both.) You can give them a name and a location. The story might flow something like this:
“Here’s what happens when X tries to do Y. She suffers, she pays X amount, and the results aren’t good.”
“This is how it makes her feel.”
“Here’s what her experience could look like instead, and how it changes some deep emotional stuff that that experience is connected to.”
If you choose to tell your customer’s story up front when explaining the pain point you’ve identified and the solution you’re offering, you might cover it all in about two slides: “Here’s what happened to her” and “Here’s what could be different.” Alternatively, you can bring the theoretical customer along with you from beginning to end, focusing on their pain point, your connection to their problem, how you are uniquely situated to solve that problem, what the solution would mean to them, how many more people are out there suffering in the same way, and how you will reach them with your solution.
Whatever storytelling style you choose, the purpose of your narrative is to demonstrate that you have a contrarian insight, that you’ve been able to identify a need that is underserved in the market, proven that there is a real pain around it, and shown what it will mean when you solve the problem.
Founders often go wrong here. They say things like, “Your life will be better or easier or more convenient!” But that’s not as effective as, “There is real pain around this and no one is doing enough to solve it.” Today, most investors are looking for painkillers, not vitamins. You don’t want to frame your company story or mission around making people’s lives easier. True narrative strength lies deeper: “Why are people suffering? Here’s how we’ll mitigate that suffering.”
So you’ve told a great story that demonstrates the importance of your company’s mission, how you arrived at a contrarian insight, and why customers find this problem so painful. But what if investors don’t “get it”? They say, “I’ve never had that experience before; I’m not sure there’s a market for it.” This is where whatever revenue you’re generating or plan to generate or that comparative companies generate comes in: “X person is willing to pay $500 a month for a service that doesn’t adequately solve her problem.”
This is also part of your narrative because you’re tying revenue to the emotional pain you discussed: “People will migrate to a better solution and this is what they will pay. And you can see that based on what they’ve been paying for substandard solutions.” If you’re working on a SaaS tool and this emotional stuff isn’t feeling like it’ll be easy to harness, just dig deep—this model can work for everyone. Is it a financial interface for an actuarial firm? Well, maybe the inefficiency of their current system causes strife or confusion or job dissatisfaction, and it’s costing them in retention and morale. Find something that hurts, and then you can pivot to revenue.