There is a common belief among start-ups and even well meaning advisors that fact and figures alone are enough to secure funds from investors.
Nothing could be further from the truth. Numbers and supporting evidence are very important but they are not the be-all-and-end-all when it come securing seed or expansion funds for your business.
Facts and figures show proof-of-concept and give us some type of certainty. That could be one of the reasons for believing that they are enough to persuade investors to tip some cash into your business. But like most things in life, there is a little more to it than that.
Finding the Animal within
An important element to take into consideration is the art creating a powerful storyline and the impact that has on the human psyche. Take the following quote from the book Animal Instincts, by George A. Akerlof and Robert J. Shiller:
The human mind is built to think in terms of narratives, of sequences of events with an internal logic and dynamic that appears as a unified whole. In turn, much of human motivation comes from living through a story of our lives, a story that we tell ourselves and that creates a framework for motivation. Life could be just one damn thing after another if it weren’t for such stories. The same is true for confidence in a nation, a company, or an institution. Great leaders are first and foremost creators of stories.Effective storytelling, far from being some trick of persuasion, is hard-wired into the human mind. It is inescapable and ubiquitous across all of society and culture.
Another quote from the famed American author of children’s books, Ursula K. Le Guin, sums it up nicely:
The story—from Rumpelstiltskin to War and Peace—is one of the basic tools invented by the human mind for the purpose of understanding. There have been great societies that did not use the wheel, but there have been no societies that did not tell stories.Of course great business stories are never going to be works of pure fiction. You may entertain investors with a clever narrative but they will not invest in your business based on a story alone. Getting the initial story elements right though is critical.
An investor who is captivated by your story will often go out and find the research and the numbers that supports their itch to invest in you and your idea. This happens a lot in sales of big ticket items as well, not just start-up investment.
In the world of psychology this tendency to go fishing for supporting evidence actually has a name: selective exposure. After making a decision we tend to seek out information that supports our decision. But the decision is sometimes already made, in the heat of the moment, triggered by an investor’s intuition or animal instincts, which is moved by your creation of an ancient, compelling storyline.
In the Real World
More evidence of the power of stories is found directly at the home of tech and innovation. Nancy Duarte, the founder of the largest design firm in Silicon Valley, is a massive believer in the power of stories. She even wrote a book about it calledResonate. Her client base includes half of the world’s top 50 companies and its most innovative thinkers.
Duarte constantly makes reference in her book to the contrast between ‘the way thing are’—problem— and ‘the way things could be’—solution—and how bouncing between these dynamics can help affect change in an audience.
Duarte’s specialty is slide deck presentations, for example, Al Gore’s presentation on climate change that was used in his Academy Award winning documentary, An Inconvenient Truth. Duarte makes reference to the power of stories in the opening page of her book:
It all starts with becoming a better storyteller. Possessing the power to influence the beliefs of others and create acceptance of new ideas is timeless. The value of storytelling transcends language and culture. As we move rapidly toward a future of improved connections between people, cross-pollinated creativity, and digital effects, stories still represent the most compelling platform we have for managing our imaginations—and our infinite data. More than any other form of communication, the art of telling stories is an integral part of the human experience. Those who master it are often afforded great influence and enduring legacy. You can have piles of facts and still fail to make an impact on your audience. It’s not the information itself that’s important but the emotional impact of that information. This doesn’t mean that you should abandon facts entirely. Use plenty of facts, but accompany them with emotional appeal.
Take it from another master communicator, Seth Godin, founder of Squidoo and a prolific author and speaker to boot. Godin wrote an article on his blog in 2010 titled “Too much Data leads to not enough belief”. Following is a small extract from his blog article:
"The problem is this: No spreadsheet, no bibliography and no list of resources is sufficient proof to someone who chooses not to believe. The skeptic will always find a reason, even if it’s one the rest of us don’t think is a good one. Relying too much on proof distracts you from the real mission—which is emotional connection."
Telling a powerful story, substantiating your story, and making your story memorable will provide you with the ammunition that you need to raise capital from investors. Facts, numbers alone, do not persuade. Stories get results. Just remember that your story can’t be a work of pure fiction.