You're listening to Business English Pod, the Business English podcast for professionals on the move.
Hello, and welcome back to Business English Pod.
My name's Edwin and I'll be your host for today's lesson on addressing investor concerns during a pitch.
One of the greatest skills in business is the art of persuasion.
Whether you're running a startup and wooing a big investor, or trying to convince your boss to give you a pay raise, you need to be able to persuade.
Of course, we often use a pitch or presentation to persuade, especially when looking for startup investment.
But the pitch alone won't seal the deal.
The real test is handling questions and concerns after your pitch.
Can you anticipate these concerns and be ready to address them?
Can you think and speak on the fly?
Do you have the confidence to back up what you've said in your presentation?
There are several concerns you might have to address.
For one, you may have to explain exactly why your idea is unique.
And you might also have to show clearly that you're committed to the idea.
One common investor concern is a valuation, or how much you think the company's worth.
You'll need to justify your valuation clearly and explain what you'll do with the investor's money.
And through it all, you'll be trying to show why you are backable or deserve the investor's support.
In today's dialogue, we'll rejoin Quinn, who is seeking investment for his online payments company called Moolah.
In our last lesson, Quinn gave his pitch to the investor.
Now, he has to address some tough questions and concerns from a potential investor named Mason.
As you listen to the dialogue, try to answer the following questions.
1.
What does Quinn believe shows that he's fully committed to the company?
2.
What exactly does Quinn plan to do with the investor's money?
3.
Why does Quinn believe he is backable on a personal level?
Thank you, Quinn.
That all sounds good, in principle.
But I gotta say, if I'm PayPal, what's stopping me from saying yeah, I can do that, and pulling the rug from under your feet?
Glad you asked.
And there are two reasons.
One, they don't have the IP or the patent behind this.
And two, cutting out the credit card companies would completely undermine their own business.
They're too invested in the current model.
We're the only player with an end-to-end solution.
You sound pretty sure about that.
Yes, I'm very sure about that.
Otherwise I wouldn't have given up my previous company, where I was making good money with great people.
I'm all in on Moolah, and it's because our SyncFast technology is the first real-time gross settlement system in North America.
Okay, let's put that aside for now.
Switching tack, let's talk money.
Looking at your valuation, it seems more based on hope than revenue.
I don't know about that.
Our valuation is based on an extremely conservative prediction of market share extrapolated from the past year of growth.
98% of economic activity is in non-cash transactions.
2.4 billion internet users.
40 trillion annually in AHC payments.
Right.
I get the market potential.
I guess I'm more interested in how you get to that predicted share.
I mean, what's the next step?
What's next?
We're going to hit the West Coast, saturate California and secure a foothold for a nationwide launch.
To do that, we need to build out our team and invest in infrastructure, and we need your help to do that.
Okay.
So Quinn, the numbers look good and I get the model and the whole end-to-end solution idea, but I gotta know why you
Why are you the one to do this?
Why are you backable?
Well, on the personal front, I'd say it's about leadership.
I know how to put together a good team, how to identify bright people, how to motivate them and inspire them, and how to give them the support and resources to fulfill their potential.
On the corporate front, we're a learning organization.
We've got great support and mentorship.
We're focused but adaptable.
And we know how to manage money.
Now let's go through the dialogue again and look at the language and techniques Quinn used to respond to the investors' concerns.
We begin as Mason, the investor, thanks Quinn for his presentation.
Thank you, Quinn.
That all sounds good in principle, but I got to say if I'm PayPal, what's stopping me from saying yeah, I can do that, and pulling the rug from under your feet?
If you're a small or even medium-sized startup...
Every investor will be concerned that a larger company will ruin your plans.
Or, as Mason says, they will pull the rug from under your feet.
After all, they have more money, infrastructure, and power.
How does Quinn address this concern?
Glad you asked.
And there are two reasons.
One, they don't have the IP or the patent behind this.
And two, cutting out the credit card companies would completely undermine their own business.
They're too invested in the current model.
We're the only player with an end-to-end solution.
The first thing to notice here is Quinn's confidence.
He even says he's happy Mason asked the question.
Also notice that Quinn organizes his answer very clearly.
He gives two clear reasons why PayPal won't be able to out-compete Mueller.
What Quinn is emphasizing here is Mueller's uniqueness.
Legally and technically speaking, being unique means having intellectual property or IP and patents.
Patents are legal rights or ideas or technologies.
Other people can't copy them.
Mueller are the only ones with an end-to-end solution or a system that takes care of the entire payment process.
If you're the only ones with an idea, technology, or process, then you're definitely unique.
Let's practice some more ways of emphasizing your uniqueness.
This is the only truly natural beauty product of its kind.
There is nobody else offering this service anywhere.
We own the technology behind this and nobody else can copy it.
We have the sole rights to all this content.
Now, let's get back to the dialogue.
You sound pretty sure about that.
Yes, I'm very sure about that.
Otherwise I wouldn't have given up my previous company, where I was making good money with great people.
I'm all in on Moolah, and it's because our SyncFast technology is the first real-time gross settlement system in North America.
Again, notice Quinn's confidence.
He's sure about his business.
Investors won't consider investing in you if you yourself don't demonstrate that you're fully committed to your own idea.
To show his commitment, Quinn talks about giving up his previous company.
Why would he give up good money or lots of money?
Well, it could only mean that Moolah has even better potential.
What are some other ways of demonstrating commitment to address investor concerns?
Let's run through some more examples.
I've got a million dollars of my own money and three years of my time in this.
I gave up a great job at Google to pursue this idea.
I've turned down several other opportunities to focus just on this.
I'm not going to rest until this is in every country in Europe.
Quinn's done a good job of emphasizing uniqueness and showing commitment.
So now Mason wants to switch tack or change the topic.
Let's listen.
Okay, let's put that aside for now.
Switching tack, let's talk money.
Looking at your valuation, it seems more based on hope than revenue.
I don't know about that.
Our valuation is based on an extremely conservative prediction of market share extrapolated from the past year of growth.
98% of economic activity is in non-cash transactions.
2.4 billion internet users, 40 trillion annually in AHC payments.
You can expect pretty much any investor to question your valuation or how much you say your company is worth.
Business valuation is part science, part art.
Not everyone agrees on exactly how to do it.
So you need to be ready to explain how you arrived at your valuation.
Quinn explains that his valuation is based on a prediction of market share, or how much of the market he thinks they can capture.
But it's not just a guess.
It's firmly based on their previous sales growth.
And he emphasizes that it's a conservative prediction, which means it's not the most optimistic or hopeful.
In other words, it's at the low end of possibility.
When you justify your valuation, you might rely on past sales and growth, market share or comparisons with other companies.
Let's practice talking about valuation based on these points.
This valuation is based on the past three years of sales.
Looking at our past year of growth, I think this valuation is reasonable.
We'll be a $10 million company with just half the market share we're predicting.
Our valuation is comparable to other companies at this stage of growth.
Let's hear what Mason's next question is.
Right.
I get the market potential.
I guess I'm more interested in how you get to that predicted share.
I mean, what's the next step?
What's next?
We're going to hit the West Coast, saturate California and secure a foothold for a nationwide launch.
To do that, we need to build out our team and invest in infrastructure, and we need your help to do that.
Mason's real concern is how Quinn and Mueller will capture market share, and Quinn's response centers on how he'll use the investment.
Startups are about potential, and investors want to put their money where the potential is strongest.
This means you'll need to be able to explain what you'll do with the money, and Quinn is ready with a solid answer.
If you remember our first lesson on startups, Quinn's mentor prepared him to talk about the company's growth and milestones.
Quinn is clear about his plans, which are about getting established or securing a foothold in California before launching across the entire country.
And he's clear about what they need to do that.
Spend money on building a team and developing infrastructure or the supporting technical systems.
When you're explaining what you'll do with an investor's money, it's important to mention how the money will help you achieve your growth targets, as we can hear in the following examples.
We need to build out our team and invest in new equipment.
This investment will enable us to open an office in Europe.
The money you invest will allow us to take this nationwide in six months.
How does Mason feel about everything Quinn's been telling him?
And what final concern does he have?
Let's listen.
Okay.
So Quinn, the numbers look good and I get the model and the whole end-to-end solution idea, but I gotta know why you
Why are you the one to do this?
Why are you backable?
Mason sounds pretty satisfied with Quinn's responses, but he wants to know why Quinn is backable.
If you back something or someone, you support it, especially financially.
This is ultimately what investors are looking for, backable entrepreneurs.
Let's hear how Quinn responds.
Well, on the personal front, I'd say it's about leadership.
I know how to put together a good team, how to identify bright people, how to motivate them and inspire them, and how to give them the support and resources to fulfill their potential.
On the corporate front, we're a learning organization.
We've got great support and mentorship.
We're focused but adaptable, and we know how to manage money.
Quinn's got two parts of his explanation of why he's backable.
First, he talks about the personal side of things, or front.
Notice he doesn't emphasize his intelligence or his ideas or his technical knowledge.
Those might be important in a startup's early days, but as the company grows, investors want to see leadership.
Secondly, he talks about how Mueller is a great organization that is adaptable and good at managing money.
In this way, he's reassuring his potential investor that they have the right combination of skills.
They're a solid organization that will take care of his investment.
Explaining why you're backable is key to attracting investment, so let's try some more examples.
Our executive team has a combined 50 years experience in successful startups.
We've got the technology, we've got the team, and we've got the motivation.
I've led three other companies past the half billion mark.
We have the right industry connections, and we're the first to market.
Quinn has done a good job of addressing Mason's concerns.
And it's not just about coming across as confident.
Quinn has clearly prepared his ideas, his reasons and his explanations for different aspects of the business.
Now let's practice some of the language we learned in today's lesson.
Imagine you were the founder of a small manufacturing company.
You've given a pitch to an investor, and now you're addressing his concerns.
You'll hear a cue from the investor.
Then I'll give you a suggestion for what you can say in response.
We'll guide you through each step in the practice and provide an example answer for each response.
Ready?
Let's give it a go.
Alright, now, don't you think a big company could out-compete you on this?
Start by saying that you are the only ones with the technology to do it.
Answer Well, we're actually the only company with the technology to do this.
Still, you're in for a tough battle making this successful.
Now, show commitment by saying you're prepared to do anything to make it work.
Answer.
Yes, and I'm prepared to do anything to make this work.
Alright, but I'm still not so sure that it's worth 10 million as you say it is.
Next, justify the valuation by saying that it is based on your past two years of growth.
Answer.
Well, that valuation is based on our past two years of growth.
So you have some growth, but why do you need our money?
Answer.
We need the investment to increase production so we can meet demand.
Okay, that sounds good.
But if you want my money, tell me why you're backable.
Finally, say you're a proven business leader who knows how to grow a company.
Answer I'm backable because I'm a proven business leader who knows how to grow a company.
Now let's practice some of the vocabulary we've covered in this lesson.
In a moment, you'll hear a series of sentences with a word replaced with a beep.
Repeat each sentence, including the missing word.
For example, if you hear, I was earning really good when I worked for IBM.
You can say, I was earning really good money when I worked for IBM.
After each response, we'll provide the correct answer.
Let's begin.
We're hoping to capture a 10% market share by next year.
A good manager knows how to help people fulfill their... Answer.
A good manager knows how to help people fulfill their potential.
Let's put that for now and talk about your business experience.
Answer.
Let's put that aside for now and talk about your business experience.
Answer.
I'm really afraid a bigger company will pull the rug from under our feet.
We've reached the end of this lesson, the third in our series on startups.
We've learned how to emphasize uniqueness, demonstrate commitment, and justify your valuation.
We've also looked at explaining what you'll do with the money and explaining why you're backable.
Thanks for listening and see you again soon.
