Investor presentations

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About the strategic planning and business planning topic, I have talked about in previous posts. Why you do this activity has already be explained in the earlier posts. The current post will focus
on one topic that is also important for some businesses, the investors. ip

So one other reason for doing strategic planning and business planning is to attract investors and their investment money. One of the alternatives to assure funds for your business project or business idea is by the attraction of private equity from potential investors. Depending on the chosen financing alternatives you have certain advantages and drawbacks. More details about financing alternatives can be found in a previous post on Equity / Debt Financing.

If you decide to go for the investor financing you have to understand their point of view and approach to what they’re doing.

There is no right, wrong or definitive way to get the attention of investors.

Sometimes chance encounters at events or cocktail parties lead to meeting invitations. Sometimes years of press mentions and a good track record get you in the door. And on rare occasions, a well-written cold pitch email to the right person at the right time might be just the ticket.

No matter how you get your foot in the door, the real challenge is selling investors on why they should commit their capital. While there are many tips for the best ways to go about negotiating a deal, I thought it best to first cover the investor presentation contents. [1]

The investor presentation has to have a solid backup in your strategic plan and business plan. In these plans, you show in detail how and what makes your business tick.
ip3The most important goal of an investor presentation is to get the investors trust. If you succeed to gain their trust by your sincere and open presentation you will most likely gain also the investor money. The most important fact for an investor presentation is to show that you know what you are talking about and that you have detailed and clear actions and needs defined for the required funding.
Tell stories. Stories are powerful and emotional, yet unappreciated in many business presentations. Angel investors tell me they’re different than venture capitalists. They both want to make money, of course, but while VC’s are much more focused on data, angels often take a mentoring role and are making an emotional and financial investment in the idea and the people. “The most memorable presentations don’t start with data,” according to one investor. “They start with a compelling personal story. It’s not about data; it’s about engagement.”
Use pictures to tell the story. Pictures are far more memorable than words. Studies have shown that people will remember 10 percent of information when the content is delivered verbally. Add a photograph and retention soars to 65 percent. Angel investors—like all investors—want to see charts, graphs, tables and other slides showing the hard numbers behind an idea. The key is to break up the slides to give the eyes and brain a break. Tell stories and use pictures to complement the narrative. On a related note, it’s important to keep your entire slide deck to a minimum. One angel told me the kiss of death is a 45-slide PowerPoint deck. Investors prefer 10 to 15 slides at most.
Express your passion. Angels invest in relationships and they want to build those relationships with entrepreneurs who have a fire in the belly, a consuming passion to move the world forward. Over the past several months I’ve been pouring over academic research studies, which have found that angel investors weigh passion as one of the top three factors or variables that influence their ultimate investment decision. Passion is contagious, literally.
Introduce a villain and a hero. Great stories and movies have a villain who causes problems and a hero who saves the day. In the context of a business presentation, think about villains and heroes as problems and solutions. What is the problem your idea solves?
Share the stage. Investors want to see a team. I urged the entrepreneur to avoid delivering the entire presentation on his own. He decided to introduce his marketing director who demonstrated the product, and his CTO who explained the back-end technology behind the product.[2]ip2

This table, from Guy Kawasaki’s The Art of the Start, summarizes the key information that should be included in the initial pitch deck. Remember the “10/20/30 rule of PowerPoint”—10 slides, 20 minutes and no font smaller than 30 points.

TitleInclude your business’s name, your name and title, and contact information.The investor can read the slide—cut to the chase and summarize what you do (for example, we sell software, we protect the environment). Open simply with, “This is my company and this is what we do.” You want to get investors thinking about the potential for your company and the size of the market.
ProblemExplain your investors the pain that you’re alleviating. The goal is to get everyone nodding and buying in.Avoid looking for a solution that is searching for a problem. Minimize or eliminate citations of consulting studies about the future size of the market.
SolutionDescribe how you alleviate this pain and the meaning that you make. Ensure that the audience clearly understands what you sell and your value proposition.This is not the place for an in-depth technical explanation. Provide just the gist of how you fix the pain.
Business modelExplain how you make money—who pays you, your channels of distribution and your gross margins.In general, a unique, untested business model is a scary proposition. If you truly have a revolutionary business model, explain it in terms of familiar ones. This is your opportunity to drop the names of organizations that are already using your product or service.
Underlying magicDescribe the technology, secret sauce or magic behind your product or service.Aim for less text and more diagrams, schematics and flowcharts on this slide. White papers and objective proofs of concepts are helpful here.
Marketing and salesExplain how you will reach your customer and your marketing leverage points.Convince the audience that you have an effective go-to-market strategy that will not break the bank.
CompetitionProvide a complete view of the competitive landscape. Too much is better than too little.Never dismiss your competition. Everyone—customers, investors and employees—wants to hear why you’re good, not why the competition is bad.
Management teamDescribe the key players on your management team, board of directors and board of advisors, as well as your major investors.Do not be afraid to show up with less than a perfect team. All startups have holes in their team—what’s truly important is whether you understand that there are holes and you are willing to fix them.
Financial projections and key metricsProvide a three- to five-year forecast containing not only dollars but also key metrics, such as number of customers and conversion rate.Do a bottom-up forecast. Include long sales cycles and seasonality. Making people understand the underlying assumptions of your forecast is as important as the numbers you’ve fabricated.
Current status, accomplishments to date, timeline and use of fundsExplain the current status of your product or service, what the near future looks like and how you’ll use the money you’re trying to raise.Share the details of your positive momentum and traction. Then use this slide to close with a bias toward action.

Your pitch deck should fit in with your business plan but is not simply a regurgitation of the plan. Consider using a whiteboard to scope out the content of the slides rather than jumping right in with PowerPoint or Keynote. Make sure that the content flows well.

The ten slides outlined in the table above provide the core content for any pitch deck. The goal of the first meeting using the pitch deck is to engage the investors sufficiently such that they take the next step with you.

The next step could involve doing further due diligence, referring you to another investor or introducing a strategic partner. If the investor is not willing to invest any further in the opportunity (either within their own firm or by opening their Rolodex to help you), do not expect any additional feedback.[3]

I know it looks like a lot of work to convince some investors, but hey what would you do in their place ? You would like to be convinced that the place where you invest is safe and well managed and that you’ll get your expected return.

Do your planning , strategic and business plans, set up a convincing and compelling presentation and if you have done your homework right you might have got yourself a business partner.

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