Importance of Relatability

Importance of Relatability
Read time 1.1 minutes.

One of the dirty secrets of the venture capital industry is that it’s easier to raise capital for products that investors will use (or can imagine their friends/family using) than it is to raise capital for products they can’t relate to.

This is a significant reason why black or female founders struggle to raise. It is not that VCs intend to discriminate in their decision-making. It’s far simpler; they don’t understand the problems faced by women and minorities the same way they can instantly understand the market for products that they will use.

A few real-life examples

1. An app to help women predict the symptoms of menopause

One founder I recently held a strategy call with is building an incredible app that can use AI to predict when specific symptoms like a hot flash might happen and to give real-time warnings through your phone/smartwatch so that women can be prepared.

The major problem is that most investors (including myself) can’t relate to the problem.

How do you fix this?

We start the pitch by saying: Imagine you're at work and suddenly have horrible cramps; you can barely stand. Or maybe you are out with friends, and without warning, your body starts to heat up; you are sweating, unable to socialize, then suddenly, and before you know it, you are shivering at the table, and everyone is staring at you.

This small introduction allows men like me to relate to the app, understand the problem and see the value of the solution being built.

2. A fintech company giving loans to institutional real estate investors

This incredible company I met last week has a fantastic service where they provide massive loans to institutional real estate investors who own big buildings to cover the cost of unforeseen repairs.

You might not relate to needing a $1M loan to remove a rat infestation in one of your 50 rental buildings. But what can everyone relate to?

Imagine if you spent every last dollar you had to buy your house, you are leveraged to the max, barely able to make your mortgage payments. Then the worst-case scenario becomes a reality, your roof leaks, and you need $5,000 to fix it. What would you do? You are forced to pay the bill on your credit card. We provide this credit facility to large real estate investors. Many are asset-rich but cash poor, and our credit allows them to cover unexpected costs without liquidating their assets. Their monthly rental revenue and significant assets make the loan low-risk for us while providing high value to investors.

Comparing the company to a regular issue we can all relate to, then scaling it up, allows investors to understand the value of the company better.

Takeaway

Try to make your company relatable to investors; if they can feel and understand your problem in the first 30 seconds of your pitch, then they will have emotional buy-in and a connection to your solution.

BTW: If you are interested in investing in either of these companies, reply to this email, and I can make an introduction.

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Onwards and Upwards,

Liam Gill

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