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Through stories, we understand complex topics. How do you design an effective fundraising story for your startup? In essence, you should never try to reach out to investors without a strong story.
The value of storytelling for startups
In a startup, the vision always outweighs what has actually been achieved. A startup is a bet on the future. Storytelling is essential to build this bridge and makes the difference in building a company. Um makes the difference to convince all people who share this vision: team members, co-founders, customers and even investors. It makes the difference how willing your customers are to pay for your product and also how willing potential investors are to pay for your equity.
“In a startup, the vision always outweighs what has actually been achieved. A startup is a bet on the future. Storytelling is essential to build this bridge and makes the difference in building a company. “
Reflect on that. A story changes perception. Why does a bakery on a subway floor charge 1 euro and Starbucks 4x as much? The story is why consumers buy expensive plastic water with a hundredfold margin, even though it is drinkable free of charge as tap water.
Still, Pepsi-Cola recently launched two new bottled water brands in a $16 billion industry. It's worth it because of the story, she engineered the value.
Every effective sales process, every pitch is based on a strong story. you creates value. Developing and telling stories is an essential skill for every founder.
What a good story should do for your startup
There are a few key factors on how to build an effective fundraising story when you start fundraising efforts.
The primary goal is to tell a story that resonates with the ideal audience. In the first step, you need to know your counterpart very well. Who are your ideal investors? Are you looking for funding from business angels, VCs or strategic investors?
The second step is to know what their goals are. A VC wants to see a 10x increase in their investment. This is not random, because the VC also has its own investors, to whom it must answer. A strategic investor has other value drivers, such as a new service offering for existing customers.
“Know what goals your investors are pursuing. A VC wants to see a 10x increase in their investment. This is not random, because the VC also has its own investors, to whom it must answer.”
The next step is to communicate the most important value drivers about your startup - adapted to the target group. In terms of content, you need to analyze how investors think. Business angels think differently than professional investors. In this form, you need to reduce complexity. If your solution is applicable to small companies and large medium-sized companies, then select a target group and define yourself. A story creates value: It shows what value your startup creates for your customers.
And in the final step, the story awakens emotions. Emotions increase the inner connection trigger action.
The 6 parts of an effective story
1. Create context
Where are you from and why are you here today? What are the experiences and background of you and your team? Attract your audience through a scenario that they can understand.
2. Outline the problem
What is your why? How did you encounter the problem of your current customers? Why are you giving yourself up to the problem? Show that you love the problem and not your solution. Is the problem so big that it is worthwhile to found a startup?
3. Defend your solution
Why is your solution better than the existing ones? Why is it 10x better? Do you have any proof, such as customer testimonials, to prove that?
4. Show how you deal with challenges
Anyone who has worked with startups, either as founders or investors, knows that corporate success is not easy. There are many hurdles, changes, and adjustments that you have dealt with so far and will deal with. Show how you overcome problems and how to get involved. For investors, this is an important indicator of how you, as an entrepreneur, will overcome obstacles in the future.
5. Demonstrate how you help people and companies
What effects do the solutions and your startup have on people and companies? How does it change and improve your daily routine? Quantify the benefits and make them emotionally appealing. DeepTech solutions must, of course, take a different line than products for end users.
6. How can they become part of the story?
Finally, draw the link back to your audience and show how they can participate in your success and mission as an investor. Always be closing.
Write and practice your story
Write down your story, outline it.
You need multiple versions in different lengths for different scenarios:
- a very short version as an elevator pitch.
- one for the about page on the website
- a longer version for live pitching and talking to investors
- and one that you can build into your pitch deck
Tell them to your co-founders. Take the feedback and iterate. Simplify it so that it resonates. Practice the story, because that's how it becomes spontaneous and credible. How does the story sound in front of the mirror, as when it was recorded? What does it sound like to friends and family? Practice makes the story authentic.
Many technical founders find this extremely difficult. If you fall into this category, consider hiring an author. He will see a story when you can't recognize it yourself and adapt it for both customers and investors. This investment is worthwhile.
Synopsis
It is critical to know how to effectively attract investors. A good financing story makes the difference. It creates value in which investors can participate. Practice, iterate, and make the story perfect. Don't be afraid to seek help from experts. Your success depends on how you communicate effectively.
