Pitching Investors

By Beacon Staff

Business plans have many forms. When entrepreneurs come to the attention of potential investors, they may be invited to make verbal presentations to a select group of investors. This is commonly accompanied by a PowerPoint presentation. In his book, The Art of the Start, Guy Kawasaki provides sage advice to presenting entrepreneurs: Follow the 10/20/30 Rule! Ten slides presented in 20 minutes…using a font size of 30 or greater on each slide. Why such a large font? Two reasons: (1) To limit the amount of information on each slide. The audience has little interest in reading volumes of materials on each slide. And, (2) some in the audience will likely be older investors. Make sure the font is large enough to be read by everyone in the room.

Here is the content that should be included in your investor pitch (according to the Tech Coast Angels):
A Cover Slide: Company name, business one-liner, your contact information (doesn’t count as one of the 10).
1. Market – What solution does the product/service provide to customers that they absolutely cannot live without – a “must have?” Investors do not fund products that are “nice to have.” What is the size of the addressable market? (Assuming all customers purchased the product, what would be the annual revenues?)
2. Solution – Describe the product(s), the features and benefits of the product, the intellectual property that precludes the competition from immediately copying the product and the customer feedback that validates the market demand. What is unique about your solution?
3. Competitive Position – Who are the competitors, what are their strengths and weaknesses, and what are your advantages over the competition.
4. Marketing /Sales /Support – How will you make customers aware of the product? What is your value proposition to customers? How will you establish a recognizable brand? How will you sell the product (describe sales channels)? How will you provide product and technical support to your customers? How long is your sales cycle?
5. Business Strategy – Most of us know how to find the first customer for a product. But, it is more difficult to describe how to grow the business. What partnerships, team members, facilities and capital will be required to achieve the five-year plan?
6. Financial Projections – The usual spreadsheets: Income statements, balance sheets and cash flow projections for the first five years of operations.
7. Funding Sought – How much money do you need to achieve early milestones? How much additional funding will be necessary to achieve positive cash flow? Will even more money be required to maintain optimum growth? From what sources to you expect to raise these funds?
8. Management – What is the relevant background and experience of the existing team? Describe the characteristics of additional team members that will be required to achieve positive cash flow. Describe your advisors and board of directors.
9. Milestones – Investors want to know how this round of funding will increase the value of the company. What accomplishments can the company achieve with the currently sought capital and how will that increase the valuation of the company?
10. Exit Strategy – IPOs are no longer a rational expectation for startup companies. Yet, investors are keenly interested in achieving a positive return on investment from startup ventures. Which large public companies might be interested in buying this company and why? What does the company need to achieve to attract potential acquirers?

Don’t make one of these major mistakes in presenting to potential investors:
• Over-emphasize product and technology – Investors want a balanced presentation of the business, not simply a description of the product or technology.
• Over-estimating the size of the market – Assuming every potential customer bought only your product, what is the size of that market? If you are selling tires, don’t describe the market as that of the entire auto industry.
• Using a percentage of the market – If the market size is $1 billion, don’t tell investors you will penetrate 1% ($10 million) of the market in two years. Build your revenue projections from the bottom up. Who will buy your product? How much will they buy and how frequently will they reorder?
• First-to-market competitive advantage – Investors have found that this is not a competitive advantage. Most first-to-market players fail (for a variety of reasons). Explain to investors why another well-funded competitor will not be successful in copying your product, once introduced, and beat you at your own game.

Getting in front of several interested investors with your PowerPoint presentation is a unique opportunity. Do not bore investors with details – if they want more information, they will ask. Develop a concise presentation that makes the case for investors funding you and your company. And, practice your delivery – in front of your team, your advisors and your grandmother. If they get it, perhaps your potential investors will, as well!

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Columnist Bill Payne is an entrepreneur and angel investor. He may be reached by e-mail at bill@billpayne.com or see his website at www.billpayne.com where his book The Definitive Guide to Raising Money from Angels is available. This is the third in a series of monthly articles in the Entrepreneurs’ Corner written by Bill Payne for the Flathead Beacon.

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