Why investors engage with brands with purpose
Serious investors are on the lookout for purpose-led brands with long-term impact.
It’s wrong to say that business owners and investors have no feelings. How can you otherwise say that you are pricing goodwill into a share, have high or low expectations of a share or give a share a P/E in relation to what the investment market believes? Being an attractive corporate brand in the investment market is, therefore, of vital importance to ensure a supply of capital so that you can continue to invest and develop the company. The trust and the good links the brand creates with its owners and investors are the same ties of trust that you generally see the brand creates with both employees and customers.
The choice for companies is often between maintaining the status quo or building toward greater future success. For investors, this represents stability versus risk. To allow investors to support the riskier option, you can’t treat them like wallets that open and close at your behest. They’re building portfolios based on industry knowledge, expertise, and alignment on values and beliefs. Perhaps more than anyone else you consult, your investors understand the landscape and see the big picture. Investors are invaluable partners for the business.
To allow investors to support the riskier option, you can’t treat them like wallets that open and close at your behest.
Some companies choose to keep their investors out on the fringes. They see them as necessary, but not essential to the day-to-day. These out-of-mind investors may see the hard data but never meet the people behind the numbers. They are consulted on decisions, but not part of brainstorming ideas. When they aren’t embedded into the company’s purpose-driven culture, they’ll reciprocate with the same lackluster level of effort they’re given. Personal feelings won’t be a factor in decision making. They’ll accept fewer risks. They’ll only give as much as they get.
Making investors share your dreams
Founders often prepare long presentations to close deals. They talk at length about logical conclusions and roadmaps based on customer data, price points, market research, revenue models and more. But we already know that customers are emotionally-driven, making purchase decisions in a fraction of a second. Wouldn’t an investor be the same? Sure, facts are essential in these pitches, but before you launch into realities and complexities, go for the heart. Talk about the reason why this all matters: Why the company exists and what it contributes to the world. This is your purpose.
Investors will feel compelled to take bigger risks when they believe in something greater than data points. People don’t invest in products, they invest in brands. They’re attracted to sentiment. For example, a brand can feel human and good. Its purpose might be about bringing people closer together. Another brand might feel daring and cutting edge. Its purpose might be creating a better world through science and technology. Whether or not an investor sees a fit with your organization depends on the sentiment you inspire for them.
Think about what else drives purpose-minded investors, what they look for beyond financial performance measures. They evaluate the companies they support based on leaders’ experience, capacity to execute corporate strategy and ability to build a strong brand. Investors know that strong brands with meaningful purpose will be rewarded by the market. It’s a safe bet to support organizations with noble beliefs. Moreover, investors today want to make sure there are plans in place for corporate social responsibility, ethical and impact funding and other purpose-driven initiatives. Investors are just as likely to support a company with a strong CSR program, even with reduced profit.
What does this tell us? It says that purpose is greater than profit. Investors are people, too. Just like your employees and customers, they respond best when there’s meaning behind the work. They’ll take risks for opportunities that are worthwhile. They’ll pay more to be part of brands that changing the game. They’ll back crazy ideas with lofty aspirations. Their goals are grander than money.
Sustaining ongoing investment
One of the reasons why companies with meaningful purpose are more profitable is because people believe in what they’re doing. When we study workplace productivity, we know that employees who sense a higher calling are happier, more engaged and higher-achieving. Shared values help the whole organization operate more efficiently, and these companies attract top talent who are more competent and more experienced. Investors are no different.
The task of staying well-funded in order to grow and implement projects can overtake a founder. When business is booming and teams are excited, they’re spending money. Success begets more success: new product lines, better customer support, increased brand visibility, improved operations, etc. Advancements require working capital to spend on hiring, operations, technology, and advertising. When a company is doing well, it’s pumping tons of cash through it on a daily basis, and founders are responsible for making sure the cash is there. This can be really hard. It means spending a lot of time out of the office networking, wooing and pitching. This is time spent away from the organization, leaving a lot of important decision-making to other people.
One of the reasons why companies with meaningful purpose are more profitable, is because people believe in what they’re doing.
Or, this can be really easy. When investors believe in what you’re doing, they’ll attract other serious investors. These are people who have a stable of investments across their portfolios, and the ones they talk about are the ones they care about — over casual dinner conversations and in off-the-cuff observations, they drop clues to friends and colleagues. They like these people they’re working with. They believe in their purpose. They find fulfillment. It’s a safe bet. It’s worthwhile. When the business needs more capital, investors will mobilize. They already know who to talk to, and their word is better than any pitch deck.
Attracting the right investors, in turn, attracts others. This is why your company’s purpose needs to be so strong externally. Your network is more valuable than any P&L report. Genuine belief and enthusiasm from many individuals are magnetic to serious investors. Employees, suppliers, partners, and customers are all inclined to support organizations with meaningful purpose. Investors know this will make you more successful. They’ll be inclined to go the extra mile when it matters most, and will happily tap into their own networks when needed.
When you have purpose, everything else is easier. People will support you. Purpose is more enticing than profits. Having a purpose that sounds sensible and smart both internally and externally would be in the investors’ interest because it is their role to secure the future of the company. As brands and markets change, investors will prosper by understanding the context, so that they are able to take the company into the future in line with the company’s purpose. It is actually more important to have a purpose-led company than just having a purpose. A purpose that is just there for decoration is of little value.
This article was written by Bård Annweiler. On Mission’s website, you can find out what other fascinating issues we write about.
