5 Things Investors Look For
and how branding can help
It all starts with an idea. But how your idea reaches and inspires your audience is what changes the world. Investors want to back something they believe in and that people will love. By developing a robust brand you will show your startup’s reason for being, the value it's providing to its customer and why your idea is like no other. Your brand is what connects your startup to your audience. It is what they resonate with and will ultimately be the reason why they choose you.
90% of startups fail and the no.1 reason is a lack of market need. But, If the lean methodology is about identifying customer challenges and providing value to them, how does this disparity exist? The answer may lie in Decoding Tech Brands, a study undertaken by Hotwire and University of Sydney where they uncovered that 75% of scaleups use functional messaging in their branding contrasted against 82% of global high performing non-tech brands who use emotional messaging.
WHY IS THIS DISTINCTION IMPORTANT?
In his book How Customers Think: Essential Insights into the Mind of the Market, Gerald Zaltman, Professor Emeritus at Harvard Business School states that 95% of purchasing decisions are made in the subconscious mind. These decisions are emotionally driven and are made as a matter of survival - what do we feel will keep us safe. We find safety in trust developed through familiarity over time. So, by developing your brand from as early as MVP with a focus on the positive emotional value it delivers to your audience, you lay this foundation. At every touchpoint and with consistent brand messaging, it is reinforced embedding your brand as their subconscious go-to.
WHAT DOES THIS MEAN FOR INVESTORS?
Investors want to know how well you understand the landscape you are playing in and how you strategically plan to return on their investment. They look for several indicators that will guide them in their decision to either invest or pass on your startup. With branding you will address many of these considerations and your startup will be better positioned to meet their criteria. Let’s have a look at 5 key things that they look for in your startup and how branding can help you excel in each.
1. solution to problem
Investors are looking for startups that the world will love and the ones that we love are those who understand us deeply and connect with us emotionally. They want to see that you are thoroughly familiar with the market, the underlying problem and how your solution serves your customer.
Whether your startup’s solution is based on doing something quicker, more efficiently or differently, customer adoption will only occur if it is expressed in a way that’s of value to them. At the core, the customer is in search of transformation. A shift from a negative emotion attached to a problem to a positive one served through a solution. The gap in the market needs to be identified through their lens so the brand can connect by communicating empathy with the problem before presenting the solution and the positive outcome it provides.
Take for example a startup developing workflow management software. A feature is the streamlining of processes and the benefit is saving time. How this startup can connect with their audience is with a brand that offers emotional value. To them, the software is alleviating stress which leads to a feeling of control. This is the problem that is being addressed. If only the feature is communicated, the customer may not see the need for it. In their eyes, having to learn a new way of doing things may compound their stress which brings us back to the number 1 reason why startups fail.
2. TRACTION
Investors want to see how your idea is received by the market as the success of your startup is built entirely on this. Achieving early traction is an indicator that you have identified a problem and your solution fits which increases their confidence when considering growth into a larger market.
As outlined in Solution to Problem, connecting with your audience through a brand is how you empower them to take control and choose your solution and not a competitor’s. With clear and consistent brand messaging that resonates, you create hooks and when it’s time for them to make a decision, their subconscious selects you. By branding your MVP, you give your startup the best chance of attaining early traction.
The earlier your startup is able to be in this position, the greater the traction you will generate as you pave the way for future scaling opportunities.
3. market size
Your Total Addressable Market (TAM) paints the big picture to investors, your Serviceable Available Market (SAM) provides a glimpse into scaling opportunities and your Serviceable Obtainable Market (SOM) is the niche you have identified as your very own.
Investors will be looking for your strategy to capture your SOM, how you plan on scaling into your SAM and your potential with your TAM. As attractive as large figures are to investors, accuracy and sound evidence show your knowledge of the space you are in and are better indicators of your future success.
By developing a brand strategy, you gain a deeper understanding of your customer - their demographics and psychographics - providing clearer scope of the size of your SOM and making way for a communication framework that speaks directly to them by discovering channels they can be reached. You will gain a more definitive appreciation of your differentiator allowing you to better identify who your competitors are and the value they offer, painting a truer picture of the size of all three market subsets paving a sturdier strategy for growth.
“connecting with your audience through a brand is how you empower them to take control and choose your solution and not a competitor’s”
4. differentiation
Your startup’s differentiator underpins your brand and shapes its personality and expression. How well you define your differentiator signals to investors how clearly you understand the market you play in and how you will position yourself in it.
Below is a brand positioning template to help you clearly articulate who you are, what you do, who for and why. It gives context to every part, helps establish your differentiator and packages it all up in a simple, digestible way.
The simpler you are able to explain what your startup is all about, the easier it’s understood. This seems obvious but its significance goes a little deeper. We encounter up to 10,000 branded messages a day with 95% of them being blocked out. Of those that made it through, they were understood with as little effort as possible and struck an emotional chord to be tagged as something to fear or find safety in.
This is where your visual identity can help your brand shine. As we respond to shapes and colours emotionally, your visual identity is the simplest way to communicate what your brand is about in a snapshot and distinguish it from the sea of other offerings. It is often the first instance an investor or customer comes to know of your brand, so it is of utmost importance that it exemplifies everything it stands for. By virtue of crafting a well thought out visual identity that is unique to your brand, how you are different will be inherent in its design.
A study by DocSend and Professor Tom Eisenmann from Harvard Business Review suggests investors spend on average three minutes and 44 seconds looking at a pitch deck. According to venture capitalist Reid Hoffman, an average partner at a VC firm might see 5,000 pitches in a year. By coupling clear and simple brand messaging with your visual identity, you can say so much with very little. It will make the most of the limited time an investor will give to reviewing your pitch deck, clearly and simply explain your solution to the problem, gain early traction by resonating with your audience and solidify your position in the market as you capture your niche.
5. brand story
Why did you take the plunge into a startup? What do you hope to achieve? What makes you you? Investors aren’t just investing in your startup, they are backing you. They want to know what drives you, where this passion comes from and if you have what it takes to commit to your promise. The promise isn’t in hitting your targets but rather the delivery of what your brand stands for including its values, uniqueness, beliefs and behaviours. A promise to be what it communicates that it is. Hitting your targets will come as a result of this.
A cohesive brand will help you better understand your startup’s reason for being, what is the substance behind the promise and develop a communication framework to connect with investors and more importantly, your audience.
People resonate with stories and your brand helps tell your “why?” In the words of Simon Sinek “People don’t buy what you do; they buy why you do it and what you do simply proves what you believe. In fact, people will do the things that prove what they believe.”
Your brand story speaks directly to the subconscious by eliciting an emotional response that calls for action. When people relate to your “why?” and become familiar with your “what?” they rationalise their feelings and become compelled to take control and move into action.
For a customer, it will be to amend the problem with your solution and for an investor, it is to back the founder who has shown depth and a well-rounded understanding of the landscape they are in and what they set out to achieve. All stemming from the delivery of the brand promise.
To find out more about how you can transform your startup into a brand, click the button below.