Your business idea has the potential to change the world. It seems that way to you. You need to convince an investor to give you money.
Potential investors have their own way of deciding whether to invest in your idea, whether it will change the world or not.
I have built and sold several startups and have met many investors. In my experience, investors are grouped into five different personality types.
If you know what type of investor you are dealing with, you can adjust how you tell the story of your business to best demonstrate your venture's value.
Here, in no particular order, are the five types of investors you will meet and what they want to see in your pitch.
1. The person looking for SEIS.
This investor personality type is unique to the UK and could also be called the Gimme my SEIS/EIS type. If you are a founder in the UK, you will know about SEIS and the financial appeal these tax incentives hold to certain investors.
The investor will be interested in the kind of tax breaks they can get if they invest in your company. Make sure you have your Advance Assurance in your pitch if you encounter this investor type.
2. The spreadsheet is analysed.
The investor will scrutinize your figures and unpick your business plan. SEIS investors are more interested in your numbers and revenue than in what you are actually doing. They will be analyzing your potential for growth from the moment you meet The Spreadsheet Scrutiniser.
This investor might give themselves away when they want to show off that they are a spreadsheet expert and/or they sprinkle their emails with terms like LTV or CAC. They will ask you a lot of questions, such as why you haven't included dividends, how you'll allocate your funds, and so on.
Prepare for a grilling when you meet this type of investor. Make sure your numbers stack up when you talk to a numbers person.
If your company is focused on saving the planet and not making a lot of money, you won't have a lot of time to talk with a Spreadsheet scrutiniser. To look for an investor with your priorities in line with your own.
3. The philanthropist is a person.
The investor is the opposite of the guru. For this investor, it isn't about your company making money, it's about doing something positive for the planet.
The investor might be independent wealthy or they might simply want to do good with their money, so you need to tell a story about how you are creating positive change.
The borders of this personality type can be fuzzy, as some Philanthropists value the positive change element of your business more highly than whether or not you are making money.
It will be clear if the investor is mission-driven or growth-driven when you are in the initial stages of finding investors. You can appeal to their priorities with your pitch.
4. The person who is the hobbyist.
This investor might not be familiar with the startup community or they might be a little older than most investors who are well established in their career with some capital to invest. The hobbyist doesn't care about making a huge return on their investment, investing is an enjoyable hobby.
The Hobbyist is not likely to want to invest a lot of money, but they want to be associated with an exciting company as an early investor, without having to invest a fortune or take on a lot of responsibility.
You can change your pitch to emphasize how innovative and exciting your idea is, and make them feel swept along with your enthusiasm. They enjoy feeling a part of a new and innovative venture, and often they aren't bothered about your company hitting unicorn status.
5. The aspiring founder.
A big clue that you are dealing with an aspiring founder is that they have a high-paid job. The type of person who would love to be a founder but is not quite ready to take on the risk is called a hobbyist. They will use your company as a proxy to try out life at a startup.
The aspiring founder can be an investor, opening doors and making introductions. This personality type can cause founders to be mad with feedback or suggestions. They can cross the line and become too much of a burden.
Clear boundaries early on will help maintain a good relationship with this investor. From the beginning, you should be clear about roles and responsibilities, how you will work together, and how the aspiring founder will benefit your business.
How to find a good match.
When you know your investor's personality type, you can better understand which parts of your company story will appeal to them. Before you meet investors, it is helpful to look at your business model and goals to find out which investor personality type will be the best fit for your company.
A mix of different investor personality types can benefit your company in the long term because they each require you to pay attention to a different aspect of running a business.
Finding the right investor is similar to dating, you want to find someone who works well with yours, someone who understands and shares your ambitions, and someone you can see yourself spending a lot of time with. Does the investor you met feel like a good fit for your business? You can build on that chemistry to form a strong relationship.
If you are still looking for investors, you should assess your company's strengths, weaknesses, and goals. Then meet investors. Listen carefully to their feedback, work out which personality type they are, and adjust your pitches to match.
Don't give up if you don't find The One right away, you just haven't met them yet.
