The psychology of a persuasive investor pitch

How do you make your investor pitch or M&A management presentation more persuasive. One powerful technique is to use cognitive biases in investor pitches.

First: answer these three questions:

1. Are you a rational, logical decision-maker? 

2. Are the investors you pitch to rational, logical decision-makers?

3. Do investors decide purely through conscious analysis of information?

Surprisingly, the answer to all three questions is a clear ‘NO’.

Your conscious mind is not in the driving seat

Psychological research shows that our subconscious minds are steering us from under the bonnet. By the time we decide to make a turn, our subconscious mind has already decided which way to go.

Why? 

Because there’s too much going on for us to constantly process everything consciously. So the driver under the bonnet – our subconscious – constantly sifts our surroundings for danger and high priority information. The unconscious passes control over to the conscious mind only when we need to switch on our full attention. But most of the time, the unconscious nudges us left and right without us even knowing it’s there. We accelerate forward, believing we’re fully in control.

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This has real consequences for the high stakes world of investment pitching

Most of us have it backwards. When we want to create persuasive investor pitches, we set out to prove our case for investment. We wear our logical hat and talk about numbers, the team and the competition. But you can’t prove any investment decision in advance. You can’t guarantee the returns or forecast the future. Wearing the logical hat isn’t enough. You need an emotional one, too.

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Persuasive investor pitches make the investor feel confident

Investors should feel confident that they are making a good decision. So, instead of trying to prove an investment decision in advance, they build confidence about that investment decision. And if you build confidence, you make sure the investors’ subconscious doesn’t dismiss you as a danger or a risk to avoid. So – what can you do to build confidence? How can you use the way our brains work to be more effective and deliver more persuasive investor pitches?

I want a persuasive investor pitch

Here are three cognitive biases you need to harness:

1. Cognitive ease
2. Exposure effect
3. Priming

1. Use cognitive ease for persuasive investor pitches

Something is easy to understand when our brains use little energy to process information. This feels effortless, which we equate with being good and true.

When something is tricky to understand, it feels difficult. When your brain feels strained you are more like to be vigilant and suspicious. You feel less comfortable, rely less on intuition, and act less creatively.

For example, V4C are a Polish mid-market fund. We recently helped them to prepare successfully for a round of fundraising. One of their challenges was that international investors didn’t recognise the names of their outstanding Polish portfolio companies. This lack of familiarity could make investors feel uneasy, and overlook the success of the investments.

We could have advised that the fund detail each of the portfolio companies, and explain the different products they offered. Instead, we assigned each company an analogy. For example, we referred to one web company as ‘The Go Daddy of Poland’. This instantly brought to mind the fast-growing, profitable, market-leading company that investors were already familiar with. In just a few words, we’d supplied a mental shortcut that carried a wealth of positive associations. This made it easy for investors to understand.

Every detail matters when making your offer familiar and accessible – from clear design through to appealing trading names. For example, a study by Pascal Pensa found that companies with pronounceable ticker symbols – such as KAR or LUNMOO – outperform ones with unpronounceable symbols like PXG or RDO.

How to use cognitive ease to your advantage in investor pitches: 

1. Use simple language and make sure concepts are easy to understand.
2. Use high contrast visual aids that convey message within a few seconds.
3. And make sure any text is clear and easy to read. And, if you can, pick names and phrases that are easy to pronounce and remember.

I want a compelling investor pitch

2. Exposure effect for persuasive investor pitches

Psychologist Robert Zajonc proved a link between a word, face or symbol being familiar and the positive feeling people have for it. Zajonc said this comes from evolutionary advantage: it makes sense for animals to be wary of novelty, as it may lead to danger. But repeated exposure to something – and the lack of harm that follows it – means that a once-novel stimulus is associated with safety.

This is why advertisers spend $550bn each year to show their brands and products to us, often in ads that we ignore. When we’re in buying mode, that brand or product feels familiar, even if we don’t remember why, and we perceive it to be a safe choice.

How to use the exposure effect in investor pitches: 

Think about repeating your main message throughout your pitch.  Introduce it early on, so that it starts to feel familiar when you restate it in slightly different way later. 

According to another team of researchers, a message feels truer when you prompt your audience to retrieve your message from memory.  So, you could refer to something you said earlier, but restate just enough of it for people to recall the rest for themselves.

Or you could show just a heading or an image from a previous slide to prompt recall of the rest of the slide’s contents. 

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3. Priming for persuasive investor pitches

If I introduced you to a friend by telling you about his interest in starting life on Mars, you might think he was crazy. If I started my introduction by detailing his success at launching PayPal, and his individual net worth of $20+bn, his interest in building rockets starts to sound more credible. This is the power of priming, and it has a measurable impact on our behaviour.

In one now-classic experiment, researchers asked students to combine sets of words into short sentences. Afterwards, students who were given words with an elderly theme (e.g. forgetful, grey, wrinkle) walked significantly more slowly than students who weren’t exposed to those words. When questioned afterwards, none of the students had noticed the theme and all insisted their behaviour hadn’t been affected.

In another task, participants were exposed to a logo for just thirteen milliseconds. Afterwards, they were asked to write down unusual uses for a brick. Those who were shown a logo associated with creativity (such as Apple) generated a higher number of uses for the brick and had more creative ideas than those exposed to a logo without such strong creative associations (such as IBM).

In pitches, fundraisers often spend too long talking about the market opportunity or going through detailed biographies of the team. This is a missed opportunity to prime the investor to see the world through your lens. If you get this right, you prime your investor for confidence.

How to use priming in investor pitches: 

Trigger positive associations for your fund by priming investors with well-chosen words, stories and images.   For example, you could start with an image of a successful adventurer to prime the thought of discovering riches.   Alternatively, you could tell the story of a well-known historical figure to prime investors to think about long-term legacy.

Choose a priming device that is relevant to your industry or main message so that it doesn’t feel forced.

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You are not immune – your blind spot

We find the existence of such powerful cognitive biases hard to believe because they do not match up with our experience. We don’t notice them precisely because they happen subconsciously. This means we are over-confident in our beliefs, and struggle with accepting – or even acknowledging – our own limitations and blind spots. The reality is that these biases affect ALL of us. Thinking that you are immune even has it’s own name: blind spot bias.

This is one of the reasons that objective advice from an expert third party is so valuable. Often, fundraisers are so close to their fund or business that they underplay their strengths and overlook the weaknesses in their investment narrative and pitch.

I want a persuasive investor pitch

How we can help you create a persuasive investor pitch

Benjamin Ball Associates has 15+ years’ experience helping businesses and funds pitch successfully to investors. Our team includes former corporate financiers, fund managers, financial PR experts and designers.

We give practical, easy-to-implement advice that helps you grab investor attention, impress them and get you invited in for that vital face-to-face winning new business pitch. Then, ahead of the pitch meeting, we help you rehearse so that you come across as just the right team to help investors achieve their investment objectives.

We do this every day for private companies, quoted companies and private equity firms. 

Call Louise on +44 (0)20 7018 0922 or email louise@benjaminball.com to discuss how we can help you create more persuasive investor pitches.

I want a persuasive investor pitch