Filmmakers and novelists come to mind first when I think about “stories.” They are the naturals, grappling over whether a story always is made of three acts and a conflict. Is it a journey to the ‘inmost cave’? Is it heroes and villains and mentors and sidekicks? Is it Homer or McKee? Syd Field or Shakespeare?
But—what of the lawyers, wrestlers, reporters, songwriters, stand-up comics, and the many others who rely on storytelling within their professions? After all, stories are everywhere. They’re pervasive in human nature, and in human history.
This is the first in a series of posts featuring interviews with a wide range of individuals, from all walks of life, to explore where stories reside and how they are defined, varied, and utilized.
The first interview is with Bob Okabe. Bob is a former investment banker and CFO, who teaches investors and entrepreneurs how to tell their story at The Angel Resource Institute. Bob spent twelve years as an investment banker, working at firms such as BancAmerica RobertsonStephens and Lehman Brothers, where he spent much of his time helping companies hone their business stories.
What is financial storytelling and why do you have an interest in it?
Bob Okabe: I learned about financial storytelling as an investment banker. I’m a member of the board of trustees at a non-profit called the Angel Resource Institute, which tries to improve the dialogue between entrepreneurs and investors, to make it easier for investors to understand entrepreneurs and why their companies might be worth investing in— what they’re looking for and the types of things that resonate with them, so that it’s easier for the entrepreneurs to acquire the capital they need to grow their businesses. That’s where the financial storytelling comes in.
The biggest difference with financial storytelling versus other kinds is that it’s not necessarily natural for the recipient of the story to want to invest or to lend money. They have to be convinced to do so. This is versus, let’s say, going to see a film. You see a certain type of film because you want a certain type of entertainment—drama, romance, comedy, action—so you’re happy to spend money to get it. When an entrepreneur is looking for capital, they’re the movie trying to get the investor to buy a ticket. And, while the person listening to the entrepreneur’s story might be willing to invest, they rarely have this burning desire to go invest. They haven’t said, “I am going to invest money today”or, “I’m going to lend money today.” It’s more, “I may if…” and the “if” has a lot to do with the quality, tone, and tenor of the story.
What does it mean when a potential investor says that “a company has a good story” or “I didn’t really like their story”?
Bob Okabe: If you are a commercial banker and you’re trying to lend money to a company like About Face or your local hardware store, it’s more about the numbers and results and analysis. When you are an entrepreneur seeking money for your company, or if you are an angel investor or venture capitalist raising and investing money, it’s much more of a subjective analysis. Do I believe in the investor’s or entrepreneur’s story? Do I trust that this person will do their utmost to achieve what they say they can do? What they say they can do has the ability to be an attractive investment opportunity.
So when an investor says, “I like that story,” it’s usually centered on how much they have developed a belief or trust. “I trust or believe that the entrepreneur can do it. And I believe that story will help achieve the goal I have for that investment.”
So I know that sounds a little general, but it’s also somewhat subjective, just as some people might like a film or a painting and other people might not like the same film or the same painting.
It’s the same with a pitch for a startup, or an early stage company. I might like that story about a mobile application company because I was stuck in an airport and I would have liked to know where the nearest airport lounge was—so that resonates with me. Somebody else might say, “I hate airports—I just want to get in and out—so a mobile app to find the nearest lounge would be stupid.” The level of individual subjectivity plays quite a role.
When you’re telling the story of a company does it go beyond here’s who’s on the board and here’s the financials? Are you using more traditional story elements like a hero on a journey facing obstacles, and the like? Is there actually a dramatic arc being put together?
Bob Okabe: In the long term there’s a story, but not in the short term. In the short term, let’s look at the example of film. When somebody puts together a film, they have to put together a trailer—the coming attractions you see in the theater. You watch the trailer for Skyfall and they generally show you three things: impossibly good-looking people, cool gadgets, and things blowing up. They don’t lay out the story. They don’t have time to. They try to portray the three most compelling things that will get you to be receptive to that story.
I think financial storytelling starts that same way. What are those two or three most compelling things that will get the investor to drop their guard and be receptive? Then, at that point, the story can be told in a more traditional way. Sometimes it’s a really experienced management team, entrepreneurs who’ve been through this before. Sometimes it’s unbelievable science, like “this molecule will cure cancer.” And it may be different for every entrepreneur and every company but it’s really kind of breaking the ice, breaking down that wall of the willing-but-not-eager and turning it over into “I’m getting eager, I’m getting interested, I want to be involved with this story.”
Beyond that trailer-like icebreaker, I think the story has common, traditional elements, as you mentioned. The quest of the hero is the goal of the company. They may want to change the way people shop. Or the way people engage with the community. That’s the journey that the hero goes on. The hero is the entrepreneur or the founding team. They have to be generally likeable. You have to have that trust that they will succeed.
The hero conquers escalating tasks as they go, overcoming obstacles to do so. Your management team has to have that ability to overcome the obstacles on the way and stay on the path – it’s a very important part of financial storytelling.
I think the next part of it is, what tools do they have? What will make it easier for that story to be accomplished? What new technology, what cool gadget, what competitive advantage do they have that’s going to make that journey easier?
Is there a villain? In most stories, there’s usually some sort of a villain working against the hero.
Bob Okabe: That’s a great point. Well, I think there should be a villain and not enough financial stories focus on that. That villain might be slow adoption, it might be competition, it might be inertia. But there is a villain and financial storytellers need to address how they plan to beat the villain.
When somebody thinks they’re going to change the world, or the way people wash dishes or whatnot, the presumption is, to a certain extent, if you build it they will come. But, of course, some people like the dishwasher they have—or they don’t believe in using electricity and wasting resources to wash dishes, so they wash them by hand.
The competition can also be a villian. Competition can be a product that’s similar, or the previous generation of a product. The villain can also be inertia—it’s just not that important to me to adopt a new way of doing the dishes.
A lot of financial storytellers don’t concentrate enough on how they’re going to defeat the villain. It takes a certain amount of courage—or willingness to suspend fear—to make the entrepreneurial leap. Sometimes you can have so much courage that you don’t recognize the competition or pitfalls along the way. If you don’t talk about that, you lose credibility with investors. Experienced investors understand that there is a villain.
When is a financial story told? Is it through the press? At investor meetings? In investor pitches?
Bob Okabe: Financial stories should be told more often than they are told. They have to be told when you are trying to build your business. You are telling a financial story —or the potential success story of the company—certainly when you’re raising capital or getting bank loans. A solid financial story helps in other ways, such as when you’re trying to do things like develop strategic partnerships. If you’re a restaurant, you want the best meat from the best butcher shop. You have to convince that great butcher shop that your restaurant is going to be great. You need to sell them on your story.
Often you’re trying to deal with suppliers to extend credit, give you a little slack, give you a little extra time, because the result will be worth it. So you’re telling that financial story—that success story of where the business will go. You probably should tell it—and be ready to tell it— more often than you think.
Are you talking about story and story elements because that’s how I’m framing these questions, or is this something that people in the financial business talk about?
Bob Okabe: It’s been under analyzed in the financial industry. When you’re an angel or venture capital investor, you’re investing in something yet-to-be—the unknown, right? Will this phone become the new iPhone? Will that social networking application become the next Facebook?
So to a certain extent investors don’t want you to know what really pushes their buttons. They don’t want to be fed a formula. It’s kind of like dating web sites. They don’t want to tell you their algorithm, which matches you up with the potential significant other, because they don’t want people to game the system.
Investors tend not to have a discussion similar to the one we’re having because they don’t want to be fooled, they don’t want to have their buttons pushed. So, not revealing that formula is actually a strategy on the part of investors. I would say that it doesn’t get talked about at all.
When you present to more than one investor—whether its multiple partners in a venture capital firm, or multiple angel investors in a group—they talk about it among themselves: “Here are the parts I didn’t like about this story. I didn’t like the assessment of the competition” or, ”Gee, I wish the CEO were more experienced.” Those discussions happen between investors, and I think that there is some discussion of business storytelling in that safe environment of… “Hey, we’re all on the investor side.”
Who are the best business storytellers—the people that tell the story of their companies really well?
Bob Okabe: It’s really hard to say who is good at it unless you were there at the beginning. You could argue that Mark Zuckerberg is good at it. Look how much money he raised and he didn’t give up much of the company. It’s really hard to tell how much of it was the way Mark Zuckerberg told the story, or the consensus that Facebook as an idea was just so compelling: “It’s okay that we let this young kid in a hoodie run it.” It’s in a lot of ways impossible to break those two pieces apart. You could argue that anybody who makes it from founder to CEO of a multi-million dollar company is great at telling the story, because the story came true.
Are there certain people who just know how to present their case in a way that’s really dramatic?
Bob Okabe: It’s important. I listened to a business plan pitch yesterday for these two people who wanted to create an app for your phone that helps you find craft beers. And, it was kind of like, why would you do that? But they told the story so well. There were five of us listening to the plan. “Wow! That’s a pretty good story.” So there is that certain part… it’s like when you read a restaurant menu, it may have Maytag bleu cheese or organic New Zealand spring lamb. You know they tell you those little components that make you feel better, or increase your anticipation of what you’re going to taste. Good financial storytellers do that, too, because they are relaying something that may or may not happen. To a certain extent, they are telling a myth or a fable about a future that doesn’t exist yet, and you have to suspend your skepticism to be willing to invest in that.
Barry: Thanks so much for giving me your time and expertise.
Bob Okabe: My pleasure.
Barry Poltermann is CEO of AboutFace Media, a company specializing in storytelling through short-form documentary video distributed online via social media. His clients include 3M, Kmart, Trek, Sears, Staples, MasterCard, Unilever, and Wilson Sporting Goods. He can be reached at firstname.lastname@example.org.