Any any given moment, there is a tremendous amount of wealth circulating in search of strong, unique opportunities.
However access to this capital is not easy. More than ever, raising funds today is an extremely competitive exercise because of the sheer number of individuals and diverse organizations looking for investment and funding. The list includes entrepreneurs financing startups, established startups looking to scale up and even major donor specialists cultivating philanthropic commitments.
Investors tend to pay more for a company, when they buy its story. The value proposition of good growth story can be summed up as such: A “good story” turns a company into something attractive to potential investors, which stimulates the imagination and desire of potential investors and catapults the value of the company.
So how much is a growth story actually worth in the real world?
One hundred million pounds sterling, according to Equity Storytelling authors Thomas Ramge and Veit Etzold. One them was responsible for crafting an equity story for an Islamic bank in London with astonishing results. In this case, the British seller had added up the facts and figures and had put the value of the firm at around 100 million pounds. And he would have been very happy to get exactly that price. Then, more by accident than design, he asked one of the authors for advice on how “to give the bride a bit of a makeover”. In the script of the equity story the bank’s actual figures, which were fairly reasonable but did not take into account the bigger opportunity.
In the storyteller’s version, the history of the founder, the management and its location in London with its large Arab community were all embedded in the big picture “Islamic Banking” – and consequently in the success story which this banking sector has enjoyed in recent years. That caught the imagination of potential investors. In the end the transaction brought in 200 million pounds for the seller!
In no other context are stories more valuable than with venture capital, private equity, mergers and acquisitions and stock market flotations. For all those who wish to sell a company, it is well worth becoming well acquainted with the techniques of story selling
Why is that? The simple answer is because investors love a good story. They want to hear a great story about what the company is doing now to create a path for outperformance and sustained growth
Man is a born storyteller, a fact that can be proved by brain research. In the brain there is a doorkeeper which filters out unwanted information. It is known as the amygdala. The amygdala has a pretty demanding job since it has to protect us from data overload, from being swamped with information.
And because ever since the Stone Age we have told each other our “best practices” in the form of stories, the amygdala shows no mercy in booting out anything that does not sound like a story. Fact-laden lectures and dull PowerPoint charts are summarily dismissed..
However relatively few of the people looking for capital infusions are effective storytellers. All too often, they get wrapped up in minutia and neglect to communicate critical ideas and concepts, their visions of success or even why their audience should care. This lack of focus – especially as it relates to the needs, wants, and preferences of their audience – can prove devastating.
All in all, funding efforts can often be meaningfully enhanced with the help of a “good story.” Every parent knows that a good story goes straight to a child’s head and if it is exciting to the belly and if it’s happy, straight to the heart. Things were the same with the yarns spun round the camp fire in the Stone Age. Just that the protagonists in the stories, mammoths and sabre-tooth tigers, were rather different.
According to Hannah Shaw Grove, an expert on the high-net-worth markets and executive editor of Private Wealth magazine, “Our research with wealth holders shows that they reward professionals who demonstrate certain qualities such as integrity and competence. The most influential quality, by a factor of three, is the professional’s ability to present ideas, products or recommendations in a way that is meaningful to the wealthy individual. It’s a form of consultative selling and without it you will not get the desired result.”
Adept storytellers understand the goals and challenges of their audience and make certain to address key points in direct and engaging way. While it’s important to include concrete facts, it’s a mistake to drown in trivial details. Also, many good stories have a personal element that helps link the storyteller to “value” in the eyes of those with capital to invest. And, ideally, the stories should be told smoothly and effortlessly while reinforcing core themes.
While high-quality storytelling can take a number of forms, there is a growing trend to incorporate design, graphics and imagery into the process. “Integrating design elements with a story can be a highly effective way to capture an audience’s attention and make the message appreciably stronger,” explains Ludovic Leroy, Executive Director of Strategic Partnerships and Institutional Support at Pratt Institute. “Digital animation, for example, does a much better job communicating key ideas and having them resonate with funders, investors, and donors as compared to the spoken or written word by itself. Of course, the design must also mesh seamlessly and be strongly supportive of the story without being distracting.”
As competition for capital continues to intensify, storytellers will have a pronounced advantage. It’s an advantage that can be mastered.