How Do You Navigate the 3 Trust Curves to Close Deals?

TL;DR

To close more deals, build trust in three areas: the leadership team, the industry, and the local opportunity. Being high on two of the three trust curves makes a deal more likely, while being high on all three makes it very likely unless the deal itself is poor. Pitch materials and meetings should address whichever trust curve is weakest, so read on for practical ways to strengthen each one.

Transcript

foreign moving up the trust curves we talked about the breakfast I had this morning with Michael who said trust is the number one reason they got 400 million dollars worth of deals done in two and a half years and what we've found is that there's three types of trust that lead to getting the deal done and if you're an investor you can look at this ... Read More

Key Insights

• 😚 Trust is the number one factor in successfully closing deals and securing investment.
• 😤 There are three types of trust: trust in the leadership team, trust in the industry, and trust in the local opportunity.
• ✋ Raising capital from friends and family is often easier due to the high trust curve associated with personal relationships.
• 🍧 Being local to the opportunity and having knowledge of the industry increase the chances of securing investment.
• 🤝 Tailoring pitch deck materials to the average investor's understanding of the industry can improve the chances of closing deals.
• 😤 Meetings should have clear goals, whether it is to showcase the team's expertise, educate investors about the industry, or provide on-site tours to demonstrate the potential opportunity.
• 😚 Moving individuals up all three trust curves greatly increases the likelihood of closing a deal.

Questions & Answers

Q: What are the 3 trust curves for getting a deal done?

The three trust curves are trust in the leadership team, understanding of the industry, and familiarity with the local opportunity. A potential investor generally needs to be very high on at least one curve, while being high on two makes the deal more likely.

Q: Why is trust important when raising capital?

Trust gives investors the conviction needed to proceed with a deal. Michael attributed $400 million worth of completed deals in two and a half years primarily to trust.

Q: How many trust curves need to be strong to close a deal?

Being high on one trust curve can be enough to support a deal, but being high on two out of three makes completion more likely. If an investor is high on all three, the deal is very likely to happen unless it is simply not a good deal.

Q: Why is raising capital from friends and family often easier?

Friends and family already know the person raising capital, so trust in the leadership team begins at a high level. They may invest even without fully understanding the industry; the transcript gives the example of a brother-in-law putting $50,000 into a fund without understanding layer 1 crypto.

Q: How does industry knowledge affect an investor’s trust?

Investors who made their money in the same or a related industry can understand the opportunity more easily. For example, someone who made money in biotech may understand health care to some degree, making that person easier to approach for capital.

Q: Why does being local to an investment opportunity matter?

Local familiarity can strengthen an investor’s trust in the opportunity. Someone may know the team for 10 years and have invested in four self-storage deals, yet still hesitate over a self-storage facility in Singapore because the opportunity is not local to them.

Q: How should pitch materials address the trust curves?

If the industry is confusing, the materials should clearly explain how it works. If the industry is simple, the pitch can focus more on trust in the team or make the opportunity tangible by showing proposed improvements at a facility, manufacturing floor, or dental clinic.

Q: How can meetings move investors up the trust curves?

Each meeting should target the trust curve that needs improvement. The goal might be to demonstrate the team’s expertise, teach the investor how the industry works, or arrange an on-site tour of the assets being purchased.

Summary & Key Takeaways

• Trust is the primary factor in closing deals, as it leads to $400 million worth of deals in just two and a half years.

• There are three types of trust that contribute to deal-making: trust in the leadership team, trust in the industry, and trust in the local opportunity.

• To increase the likelihood of closing a deal, one should strive to be high on at least two out of three trust curves.