I want to tell you a quick love story. You may be asking, “why would a lawyer be talking about a love story?” The reason I want to share this with you is that investors, people who are going to give money and / or resources, love to understand the financial story of your company, hence, a love story.
When you learn to speak the love language of an investor, you will have access to a world of unlimited resources to assist you and your business with growth. The ability to explain how a dollar will go from the investor, through your business, and result in profitability and / or increase enterprise value creates an enticing story for an investor to consider. However, when you are unable to explain this, the likelihood of successfully fundraising for your business will decrease significantly.
Practically the love story is an excel document with formulas that takes the numbers and calculates them into a financial projection / pro forma that can be reviewed as part of the due diligence of your idea or company.
People love a great story, but what they really love is a great ending. So, how are you going to create a financial story with an amazing ending? How are you going to show an investor the ending they are looking for - a tremendous return on their investment?
When creating your story, it is important to understand the various aspects of your business and whether there are expenses or revenues associated with them. Clearly articulating how much something costs or how much profit something is going to create is an integral part of explaining your business model and your financial story. It will be easier to entice an investor to invest when you can describe how the various debits and credits come together to create a trajectory and profitability for the success of your business.
Remember, being investable is the ability to demonstrate the attributes such that someone else will give you the resources you need to be successful. Your ability to demonstrate that you understand your financials is an important attribute. Your ability to understand how to drive profitability and enterprise value is invaluable. Your ability to articulate clearly how your business runs and how much it costs you or how much it makes you is an integral part of your and your team’s success.
One other key to speaking the love language of investors is to be able to capture your financial story in an easy-to-understand pro forma / projection that explains the numbers behind the business. Your ability to put this together is key and a very important aspect of presenting. If you struggle with how to take the story and put it into excel, you should seek the guidance of an expert as your chances of fundraising increase dramatically when you can provide this document.
Ultimately, anyone can put together a pro forma, and there are great resources on the internet to help you with that. However, those are just numbers on a piece of paper, a bunch of data that can be manipulated and is based on assumptions. When you can peel back the layers of the onion and explain how, where and why you are using numbers, then you are starting to tell a financial story, and then you are speaking the love language of an investor.