During the pitch process, founders typically focus on conveying a lot of information about their company — its backstory, the ins and outs of the technology, and why their idea would solve a major problem.
Yet data is not the only driver of investor decisions. Here are some other factors to consider.
Investors are influenced by visual cues
When presenting to VCs, it doesn’t matter what you look like, but physical presence and passion have the potential to trump substance in business proposals.
My recent empirical work across 12 studies of 1,855 novice and experienced investors highlighted the importance of passion and the physical presence of entrepreneurs during pitch competitions. By studying different types of footage from live entrepreneurial pitch competitions, I found that only silent videos – not business proposal transcripts, audio recordings, or even videos with sound – best enabled investors to identify the real winners of these competitions. Visual cues such as gestures, facial expressions and body language caught the judges’ attention the most.
“Visual presence seems to be essential when delivering a successful pitch”
This suggests that venture capitalists who decide which entrepreneurs are worth investing in are primarily influenced by visual cues rather than the content of business proposals. Although visual and non-verbal information are often considered “soft skills”, visual presence seems to be essential when delivering a successful pitch.
Research also suggests that VCs can be influenced by factors beyond their full awareness – factors that don’t always align with their expressed desire to identify companies with the greatest potential for success.
Founders can consider devoting at least some attention to making sure their visual delivery reflects the passion that drove them to their business in the first place.
Does hard work really matter?
Investors often emphasize the importance of the founder and not just the business proposition in their funding decisions. It therefore seems intuitive that an effective and passionate communicator can succeed in obtaining funding. Yet there are aspects of the Founder that are not always easy to demonstrate.
“Attempting to align with an idealized image of the striving entrepreneur can actually backfire”
In general, we tend to applaud hard workers. Entrepreneurs recognize the dedication and hard work it takes to get started, and they also gravitate toward underdogs. But other recent research reveals that trying to fit into an idealized image of the striving entrepreneur can actually backfire. When study participants were randomly assigned to read about a naturally gifted entrepreneur or a hard worker – despite having otherwise identical biographical details and a recording of the pitch – they were more willing to invest and believe in ultimate success. of the startup attributed to “Natural”. This suggests that our assumptions about what will persuade our audience may be incorrect.
For all founding challenges face, underscoring this image of the striving entrepreneur, there are likely aspects of starting a business that come more easily to them. Founders may find it helpful during their pitches to balance their storytelling so that others can also see — and reward — their natural talents.
Founders also need to consider how well their business proposition might match their identity, as perceived by their audience. Every entrepreneur likely belongs to and identifies with a range of categories, including gender and ethnicity. When thinking about their audience, founders may want to ask what salient aspects of the business proposition and overall presentation best fit their identity.
Understand your audience
One final consideration is often overlooked in the midst of the frenetic fundraising process: take the time to understand your audience.
Just as businesses use focus groups to tailor approaches and products to customer preferences, entrepreneurs can benefit from testing their presentations and incorporating the feedback they receive.
A range of affordable platforms with online participants, such as Prolific, Qualtrics Panels, and Amazon Mechanical Turk, are available for entrepreneurs looking to experiment with how best to present their messages while honing their arguments. Whether founders are looking to attract investors on crowdfunding sites or at pitch events, different types of platforms and panels should allow for more targeted testing, which can better inform pitch development and delivery.
Ultimately, these strategies — all rooted in hard data — demonstrate how founders can better position themselves to successfully raise venture capital funds. With a better understanding of how people make decisions, founders can connect more authentically with their audience.
Chia-Jung Tsay is an associate professor at UCL School of Management.