In Investment, Opinion

In many ways the investment process is like a sales process.

Something I have struggled with is where competitions, pitch events and showcases fit into the process.  Some of them require a substantial investment of time and effort, and the audiences for many of these events overlap heavily.  It feels good to participate in an event and get some good feedback, but if I measure the results against my “investor sales process” it isn’t really where I find prospects or develop leads, and it is certainly not where deals close.  So is participating in these events a distracting vanity?  Or does it have real value?

There are many ways to view a sales process, but I like PLOPS – Prospects, Leads, Opportunities, Proposals, and ultimately Sales.  I have found that a helpful model for planning and managing activity when seeking investment for some years too.

A Prospect is an investor that has been identified from networking or desk research as potentially interested.  A Lead is an investor that has heard something about what you are doing, and expressed some interest in finding out more.  The relationship becomes an Opportunity when you start talking about specifics in terms of investment time, size and mechanisms.  The equivalent of a Proposal is a terms sheet, and a Sale is closing the investment.

I recently had a bit of an “aha” moment.  While a sales process is transactional, it is supported by marketing.  For example, attendance at trade shows may not have a direct impact on moving people through the sales funnel, but may make it easier to do so by raising awareness.  An advert in a magazine may not directly create a lead, but it builds familiarity so when I knock on a customer’s door that isn’t the first time they have heard of my company.

Similarly Competitions and pitch events aren’t part of the transaction process, but they are part of the process of building brand, team and product awareness that both prefaces and smooths the investment transaction process.  So I have started to think of these activities as “Investor Marketing“.  Once I start thinking about them in this way, I can start applying marketing style metrics (rather than sales metrics) and thus better measuring value.

There are many versions of the marketing funnel, and this one from Adam Cohen’s blog  has the merit of both simplicity and being relevant to investors:

Marketing Funnel

Pitching at EIE is a perfect example of an “Investor Marketing” activity.  It is certainly possible that the outcome of the day will be new prospects or leads, but the biggest impact is likely to be in raising awareness of what you are doing (which appears nowhere in my sales model), and getting potential investors to start considering your proposition more seriously.  At EIE this year I was pitching for Cyan Forensics, and one of the highlights of the day for me was overhearing one investor (who we were already talking to) ask another if they had heard my pitch as it was really interesting – advocacy in action!

Understanding that Marketing as well as Sales has something to teach me about the investment process has really helped me to plan and measure activity more effectively.

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