How to secure investment when doing things differently

Being different is no bad thing. But it can be scary – and also pretty unpopular. This is especially true for purpose-led businesses where you may be trying to solve a problem for an underserved community, whether that’s people of a certain gender, sexuality, ethnic background, socioeconomic status, or another underrepresented group.

But don’t let that stop you. From climate change to social inequality, our chances of solving the biggest problems facing humanity depend on weird and wonderful ideas now more than ever. On these issues, the status quo isn’t working, and the solutions won’t come from tried and tested methods.

A powerful purpose is an incredible motivator in business, and self-belief is essential. The question is, how do you convince other people to believe in you too?

The three types of investors you’re likely to meet

There are a few different types of investors out there. The most elusive is the investor who completely “gets it” when it comes to your business, right off the bat. These are exceptionally rare (get them on board ASAP – they’ll be great promoters for you!). But if you’re doing something unconventional you might never find one.

More common is the investor who is actively dismissive of your idea or approach before you even get started. This is the worst kind of investor: some will laugh, some will belittle, others won’t even let you in the door. The bad news is that there’s almost nothing you can do to win these investors over. The good news is that you don’t have to try.

The third type of investor is the most important. These are investors who will be keen in principle but may struggle to relate or empathise. This is something that we encountered repeatedly when setting up RideTandem: unusually for a VC-backed company, our main customer base is the poorest section of society - people in poorly-connected areas of the country outside of cities and big towns, who are unemployed or in low-income jobs, and for whom digital services are often the exception rather than the rule - not thirty-something millennials with significant disposable income who live and work in relative comfort in London, tech early adopters with any number of high-convenience digital services at their fingertips.

While things are changing (albeit slowly), the investor community remains mostly made up of men who went to “good” schools and universities before going on to live in (or in easy reach of) big cities and work in high-paid, predominantly desk-based jobs. And they invest in a lot of founders who look, sound, and experience life much the same as they do - and whose customers do, too. If you - or the audience you’re serving - fall outside that category, bridging the “empathy gap” will always be a challenge. That doesn’t mean they won’t invest, but they’ll need convincing.

How to get investment from investors who don’t get you

VCs are always looking for the moonshot winner that delivers mega returns. But they are human. They’re vulnerable to fads and trends, and they’re especially vulnerable to falling into a habit of pattern recognition – looking out for indicators of future success that are almost solely based on previous wins, and not looking at the company in front of them right now.

If you’re doing something similar to thirty other entrepreneurs, there are plenty of precedents for success that a VC can look at and pronounce you a likely winner. This is how you end up with a veritable encyclopaedia of 15-minute delivery or e-scooter startups in London alone. If your idea is genuinely new or has very few precedents, there’s less data on which an investor can base a decision.

The first and most obvious way to win over investors is to have strong revenue figures or be able to demonstrate profitability. Most investors can get over a little bit of scepticism when presented with a healthy and rapidly growing income statement.

Of course, not every business is able to provide those strong revenue figures yet – and fewer still are profitable. This doesn’t mean they can’t or won’t be good businesses. So, what should these businesses do?

The most important step you can take is to prioritise your customer. It’s easy to spend a lot of time fussing over the opinions of investors, but your customer is the one who really matters. If investors see strong customer demand or even just positive feedback, the “empathy gap” shrinks. 

Secondly, don’t be afraid to look at how your idea can be expanded to include other demographics or markets. Your original purpose may be to improve the wellbeing of a small subsection of society, but if you can show that your business model has the potential to be expanded to include many more people - even if, or perhaps especially if, those new customers will use your product or service for a different reason from your original users -  investors are more likely to buy into its commercial potential.

Replacing tried and tested with weird and wonderful

There’s a reason the most successful startups are so polarising in the early days. Invent a widget that helps a multinational sales employee or engineer do a job more quickly and you can make a lot of money - but you won’t necessarily change the world. Build something that’s radical and which genuinely changes the lives of hundreds of millions of people – think Facebook, Netflix, or Uber – and the scale is incomprehensible in those early days.

The key to not becoming disheartened is to find ways to remind yourself of the purpose that led you to build the business in the first place.

For us at RideTandem, it comes from hearing from our blue-collar passengers – the good, the bad and the ugly feedback - for whom even one day’s wages can make the difference in keeping the heating on and putting food on the table. It reminds us of the pressure to make sure we deliver outstanding service for our B2B clients and passengers every day, but also the privilege in providing a transport service that makes such a difference to people’s lives.

The fundraising journey is rarely easy for any founder, let alone those building purpose-driven businesses off the beaten path. In the darkest moments, dig deep and remind yourself of the impact you’re creating in the world.