4 ways tech innovators can improve investor engagement

Innovators face an interesting problem. Most focus on developing a world-changing technology, not how to explain it. But to be successful they must sell the value of their technology to investors, customers, regulators and the general public.

Over the last year, we surveyed more than 100 venture-backed companies taking part in prominent tech, climate and health events in Switzerland, the United States, China and the UK. These companies ranged in maturity from start-ups through to growth phase unicorns on the road to going public.

The problems tackled by these innovators range from a specific climate issue through to curing cancer and companies developing software as a service. These are brilliant people, with incredible inventions. But they consistently tell us that they are struggling to communicate effectively, especially with investors.

Here are four challenges that innovators face when engaging with investors, and some ideas for how to fix them.

A top priority for innovators should be how to communicate better with investors. You can’t get your invention out into the world if you can’t raise money to develop it – and that means building relationships with investors.

Partly this is because investors can seem unfathomable. This is understandable, as investors are in demand which can make them hard to reach unless you are invited to the right events or have a warm introduction. What’s more, most innovators start their business connected to fellow experts, like computer programmers or biochemists, and so they have little experience of fundraising and few relationships to call upon.

Investors don’t always make it easy either. For example, if an innovator wants to find out if an investor might be interested in a pitch – e.g. in biotech or climate tech – it’s often hard to find this out via their website or social media.

Investors tell the world that they have, and want, access to the best deals out there. But if they really want to attract a wide range of innovators, they need to make it clearer through their communications channels what they are looking for. Clarifying what industry verticals they are interested in, or what scale of funding they can provide, would go a long way.

Innovators tell us that they are struggling to simplify their message. This is always hard, but it’s even harder with a new technology.

If you have created something that’s never been seen before then it’s harder to explain it to investors, because they don’t have any way to put it in context. The better the innovation, the harder this is.

And as companies gain traction they typically solve more problems – and find it even harder to explain what they do.

They consistently tell us that the biggest challenge they face is how to prioritize what they say to investors - and how to squeeze the complexity of their business into something that’s easy to understand.

Worst of all, innovators consistently tell us that their competitors are doing a better job than them. Some of this is natural, and commendable, competitiveness. But when we dig into this, innovators already have an idea of what they need to do better.

While telling a great story can be challenging, we find that one simple step can help to simplify things. Find a non-technical relative - maybe a 13-year-old niece, or possibly your grandfather. Tell them what you do, simplified as much as possible. Then, ask them to repeat the story back to you. You will often find that they do a great job at simplifying what you do – in a way that you would struggle to do with all the knowledge that you have.

Innovators think that their competitors are doing a better job of communicating by exaggerating what they can achieve, or more positively, simplifying their message successfully.

We do not have the data to show whether their competitors are really exaggerating what their technology can do - but we suspect that this reflects competitor communications which are focused, clear and perhaps coming from an incumbent.

Innovators could learn from their competitors. Once they have simplified a story, then it’s time to find a way to make it more interesting. While you shouldn’t exaggerate how your innovations work, creativity can transform how investors understand your message.

Innovators tell us that they want expertise in their sector above everything else. And that means that there is a substantial advantage for venture capitalists (VCs) who can show their knowledge of an industry vertical. That could be through their in-house team, their portfolio companies or their thought leadership.

Yet very few VCs tick this simple box. We conducted a survey of a dozen European VCs designated as “prominent” by startup data provider Dealroom - two-thirds do not clearly define their industry vertical. Three-quarters fail to highlight their in-house experts and advisors who could support a portfolio company in scaling their HR or other function.

For every A16Z, there are scores, if not hundreds, of investors. That means competition to fund innovators, but also, a confusing landscape. If investors want to attract more innovators, they could start by making it clear who they are actually trying to invest in.