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Investor Mindset, Seth Godin and Chocolate Covered Bananas

Why do investors invest in startups?

That’s an interesting question that entrepreneurs ignore all too often during fundraising attempts, choosing instead to answer questions like, “Why do I need money?” and “What makes me special?” Interestingly enough, these oft-asked questions are what many startups answer during investment rounds and pitches, not realizing the sad truth of the matter: Nobody cares about about your company.

Yes, it’s blunt. But the truth is that nobody really cares about your company except for you, and if you set out on a mission to make them care, you’ll most likely be disappointed in the results. Investors all wear the same shirt, and on it, emblazoned in bright red letters, it reads, “I don’t care about your idea, I care about what it does for me.” Sound similar? They’re not.

During a podcast, Seth Godin highlighted why investors fund startups and put in capital to young enterprises. “Everyone who will invest in you will want it back,” he told the audience in a dry, almost cynical tone. He went on to explain that, first and foremost, investors just cared that they would see a return on their capital.

Godin went on to explain that while this was the most important thing to answer, there was also another way that you could focus on the audience’s wants and needs. “You can tell them a story that they want to hear.” The goal isn’t to focus on yourself. It’s never, “Why do I deserve your money?” It’s, “What will be returned to you?”

Additionally, Godin made another point that is essential to understanding the fundraising process. He explained that in many businesses, the object being sold or the service being offered isn’t particularly unique. He described a chocolate-covered banana salesman that wasn’t necessarily the best at what he did, but instead was the best storyteller. This, said Seth, was what separated this particular entrepreneur from the rest of the chocolate banana world. He was simply a better story teller. At first, this seems at odds with that whole, “nobody cares about you thing,” but you have to realize that stories are not for the benefit of the teller (good stories anyway.) Good stories are purely for the audience.

“When it’s your business, it’s harder,” Godin lamented towards the end of his presentation. “Because you’re too close to it. Because you don’t want to fail. Because you don’t want to be called a fraud… Because of those reasons, you erect a lot of barriers and softeners between the story we need to hear, and the story you’re going to tell us.”

So what do investors want out of the startups they invest in? First and foremost, they want return on investment. Entrepreneurs that don’t answer this question out of the gate might as well be speaking martian for the entire pitch. But maybe, just maybe, they want something a little bit intangible on top of that.

Maybe they want to be a part of a story they can care about.

 

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