The Psychology Behind Startup Investing

The decision to invest is mostly based on feelings. As a communications and media advisor, I work with many entrepreneurs on how to craft their story and their pitch. I aim to improve their communications, confidence and overall delivery. 

However, part of my advising is shedding light on the emotional aspect of fundraising - meaning much of the decision investors make comes down to how you make them feel. So I help entrepreneurs say the right things so they’re hitting the areas the investors care about. 

Let me begin with the fundamentals - the practical must-haves in every presentation pitch. 

You need to talk about your product and you need to talk about the business. Keep in mind, they are mutually exclusive. Your product is not your business and vice versa. Your product is the tangible, the software system, the running of something, etc. However, your business is how money is made. What are your costs, your sales, your overhead, your projection? This is all very important, and the reason for sharing all this is because the investors want to know - will they get their money back if they invest in you. You need to make them feel like they will.

Now, I want to get to the psychology behind it. 

If an investor grants you the opportunity to share your business idea with them, they are hoping you are it. Meaning, they are optimistic, they want you to be the one that hits it out of the park. They want you to be the unicorn. So when you step into your meeting, the ball is in your court. Good stuff, you’re starting out positive. 

They want you to be the unicorn.

Next, you need to build that connection and rapport. One of my clients who has raised over $100 million in his Series C funding and a Y Combinator graduate, said before any investor meeting, he shamelessly watches copious youtube videos to hear that investor talk. He wants to know what words the investor uses, is it ‘product,’ ‘cycle,’ ‘growth,’ etc. Whatever words the investor consistently uses, my client will use too. The reason is so he can speak their language and communicate like them in order to build a connection. 

Whether we admit it or not, we all have a bit of FOMO (fear of missing out). This is especially true for things we are interested in and even more so if it’s something that appears to be a good idea. In the book, Contagious by Jonah Berger, he said it’s human nature to look around and see what other people are doing. If one investor sees an investor putting time and money in another company, they are naturally going to be interested too. So, if you’ve secured a term sheet with another investor, don’t be afraid to say you’ve already secured interest from someone else. No one wants to be left behind. That’s fear.

No one wants to be left behind.

Finally, as an Entrepreneur and Founder, you are selling a vision. I mean really. You’re asking for money so the money can help build your vision. Vision isn’t reality, yet. So the key here is having a plan that shows with their support, you are able to change the world. That’s the feeling of inspiration. You can do this by saying, “this is where we are now (X), but we are able to get to this (Z) if we have the funds that will build the steps (A), (B), (C).” 

Communicating it this way shows your foresight and it also shows the vision you have. It also doesn’t have you coming out guns blazing because it shows you’re practical with what you need to do to get there. Packaging it this way creates that inspiration and undeniable feeling of not missing out.

Pitching to investors is an art

Ultimately, it’s important to be authentic to who you are. Planning and thoughtful communications when pitching to investors is an art. As one wise person once said, you can have an amazing business idea, but without the funds, the idea isn’t going to get very far.

Follow Jessica Chen, CEO & Founder, Soulcast Media HERE.

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Soulcast Media is a premier communications and media agency. We work with entrepreneurs and professionals on elevating their communications skills, and we work with organizations on building communications and media strategies.