How do we present before investors?
Discussion of Presenting: Perfecting Your Sales Pitch
If you have not already met for an initial informal meeting over coffee, after reading your Executive Summary the venture capitalist will normally telephone you to ask some basic questions and to see how you sound in real life.
The VC will also go over your basic deal points and test the chemistry and the fit of your personalities. If all signs lead to a “Go” then the VC will invite you for a formal meeting at the firm’s office before the partners. And congratulations—the odds are going in your favor, you made the first cut. Out of 1,000 business plans, maybe less than 100 are considered for a meeting, maybe less than twenty get to due diligence, and only about ten are actually funded.
Consider the VC’s viewpoint of the meeting. As Arthur Rock says, “I don’t talk much during these meetings; I’m there to listen. I want to hear what they’ve got to say and see how they think.”
VCs want more information about your venture and how it will make them money. The meeting provides an opportunity to evaluate you, your team, and the organizational dynamics of the team. They are checking the “fit and finish” of your team. They are interested in laying the groundwork for getting a deal to the closing table. They are trying to determine how your deal fits with them, what obstacles there are, and what the probabilities are of it closing. This is ultimately what they are thinking, hanging on every word said by you and your team.
First of all be prepared to energetically SELL, SELL, SELL!!! The first few minutes of your presentation are most critical. John Martinson, past-chairman of the NVCA and partner at Edison Venture Fund based in Lawrenceville, New Jersey, says that “the person giving the presentation must be engaging and convincing. They will have to sell their idea to many people in order for their company to succeed. So if their presentation is weak and uninspiring, one has to think how it will affect their customers and suppliers.”
Position your deal clearly and early on. Avoid using buzzwords. Be sure to just speak “English” and do not use “techie” jargon or fancy VC lingo. As Jesse Reyes of Venture Economics says, “Don’t be cute. Everyone uses [buzzwords], and no one believes them, and what’s worse, it speaks of hype.” “We all come back to a common-sense litmus test,” says Joe Aragona, general partner at Austin Ventures. “If in the first ten minutes or the first couple of slides you still don’t know what this company is doing, the chances are you probably won’t make an investment.” We know that writing a business plan is tough for everybody and creating a presentation that represents your best points is even more difficult.
How to Get the Best Out of Your Meeting
Be sure to weave a great story. As Ann Winblad from Hummer-Winblad says, “Everybody needs to be a great storyteller.” Remember that investors are looking for reasons to believe you and they are looking for reasons to not believe you. Revisit our Introduction, where we first discuss effective storytelling. Through a well-practiced story you can be more comfortable to create a sense of energy, excitement, and commitment around your deal.
The lead entrepreneur/CEO will have about twenty minutes to describe strategy, business model, differentiation, size of the market potential, and how to execute and capture customers. The CFO will typically have about fifteen minutes to describe the financials from a “ground-up” approach: how the revenue model works, the performance metrics, and assumptions of the revenue drivers.
Following your presentation there will be a period of questions and answers. VCs spend their days asking entrepreneurs questions. You might get the feeling that VCs think of themselves as amateur psychologists attempting to discover “what makes you tick.” Do not take any questions personal, do not give them vague answers, and do not lead them around in circles.
It is far better to give an approximate answer to the right question, which is often vague, than an exact answer to the wrong question, which can also be vague. And never, ever, push against their suggestions, comments, and feedback. As Rock points out, “There’s a thin line between refusing to accept criticism and sticking to your guns.”
Be forewarned: there are really tough questions, and then there are the live hand grenades that will be rolled across the table to you. Andreas Stavropoulos from Draper Fisher Jurvetson, who likes to ask entrepreneurs hypothetical questions, says, “I’ll even ask about scenarios that are extremely unlikely, just to see how entrepreneurs react to situations that they couldn’t possibly have spent much time considering. What’s most important is that you display adaptability, creativity, and intelligence. I don’t want people just to tell me that the situation would never occur and leave it at that.”
Another VC puts it this way. “We ask a lot of peripheral questions. We might not want answers.” Then why ask? They might be testing to see whether you are open to looking at things in different ways. They may want proof that you can respond articulately to unexpected questions and observations. And your answers may reveal an essential quality they need to see in a venture team: malleability.
Be sure to manage the closing of the presentation. You will be able to tell whether your presentation and your excitement and passion are communicated to the right investors at the right time. Consider their chemistry and feelings: If you have made an impression they will invite you back to meet with the other partners in the firm, or with other colleagues who are other experts in your space.
If unsure, simply ask, “What should I tell my partners/venture team/board members that we accomplished today?” And if you have an insecure feeling, simply say something like this: “Let me get this straight—what I hear from you is that you are doubtful and need to see more information from us. So, if I complete the competitive landscape report you requested, are you going to fund our venture?”