| No. 12, February 2009 |
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Winning Over a VC Manager – Preparing a Convincing Presentation
I recently helped a customer develop a PowerPoint presentation used to support a venture capital solicitation with the ultimate goal of raising equity. This is an amazingly difficult task. Finding suitable investors is one of the biggest challenges in a company's early stages. In the current ailing market, it is more important than ever to be absolutely certain that the presentation you deliver is effective and convincing. This is a dozen times truer when trying to raise money from American VCs. These people are totally unforgiving and you must look very professional to be able to get beyond step 1. A business plan presentation has one fundamental purpose – to convince potential investors that you have a product or service that will capture the market. What do these people want to see in your presentation? They realize that you have a fair chance of making money (or you wouldn’t have gotten through the door). They want you to convince them that you are worth the investment. You must sound exciting. You must be unique and brash so that they will select you over the other dozen companies that they will consider during the same week. WHO AND HOW? Don’t believe for a moment that these people are any smarter than you are. I have met some less-than-average individuals working for VC management companies. And don’t think they really understand the technology which you are dealing with. It is very likely that the particular guy who has been designated to handle your account – although he has probably worked in the general domain – does not have a clue about the nature of your implementation. They are often stuck in the past, with out-of-date information and views. There are some popular formulas for structuring business plan presentations. One of them is the “10/20/30 Rule” – a presentation should have no more than 10 slides, last no more than 20 minutes, and contain no font smaller than 30 points. I am certain that more than one struggling startup has fallen by the wayside by trying to rigidly remain within such constraints. Flexibility is a factor of complexity. You should certainly keep your presentation down to about 15 slides – and this depends on the nature of your offering – as you will not have much more than 30 or 40 minutes to talk. (Don’t, for a moment, think you will have a graceful question-and-answer period at the end of a friendly chat. They will bombard you with questions and criticism from your opening statement). The 30-point font size allows you no more than 10 lines per slide. You should indeed try not to substantially increase the content beyond that limit. With some careful planning, you can handle each key area in one or two slides. Many Israelis pack their slides with dozens of lines of text because they are unsure of their speaking abilities and want the audience to read ahead of them. This is a dreadful process and will quickly bring the disdain of your audience upon you. The presentation should have sufficient content that it can be read and understood but, under no circumstances, is it intended as a stand-alone document. You should have a well-written business plan for that purpose. Even, if not explicitly requested, you should always prepare a comprehensive executive summary to hand out during the general introductions at the beginning of the show. THE FIRST FEW SLIDES The first thing to do – before you talk about your company, the product, the market – is, in a single slide, to convince the VCs that you have an exceptional solution for a real problem. Explain the problem before you explain the solution or talk about yourself. You need to make it clear that there is a problem that you are going to solve, or an opportunity you are going to exploit. They must be certain that you understand the market you are targeting. There is a cliché that several bloggers have repeated – that you should be able to summarize the company’s business on the back of a business card. I am not that demanding but the idea is to be able to provide a lucid overview of your goals in a few sentences. Remember how people used to talk about elevator pitches. It is the same idea. Technical details about your product or services are important as long as they deliver competitive advantages, open new markets or change the balance of power in an existing market. To the average VC manager, technology isn’t that interesting. If you get into the bits and bytes, you'll lose your audience. Spend no more than five minutes discussing technology. Any more time is wasted. On the other hand, they have probably heard something similar in the past. Explain what has changed in the technology, market, business model or something similar, that will make your company succeed where others have failed. In the next two slides, introduce the company and the team. Open with your core value proposition: What unique benefits will you provide and what needs are you addressing? Clarify your target markets, the uniqueness of your product or solution, and your status. You must then give investors the feeling that there is a credible core group of talent that believe in the company and can successfully execute the program. Don’t be shy about telling them how professional you are. MARKETING AND SALES Ignore the usual nonsense about how you are going to capture the Chinese market by 2012. Discuss the difficulties that you anticipate in bringing the product to market and present a clear statement of the hurdles that must be overcome and how you plan to do it. Try and answer the following questions:
GO TO MARKET: BUSINESS DEVELOPMENT PLANS Have responses ready for the following type of questions:
If you have you any planned partnerships, stress the market importance of these arrangements. COMPETITION Provide a list of all major competitive players giving their strengths and weaknesses – and, of course, your advantages over them. Don’t try and hide anything. It is quite likely that the VC manager has done his homework. NEVER claim that you do not have competition. It means you’re clueless or pursuing a market that doesn’t exist. PROJECTIONS AND MILESTONES Milestones make you get specific and help to measure your tangible progress. You must push a considerable amount of detail into a few lines.
FINANCIALS What is your revenue model? List the two or three key metrics that will drive revenues, expenses and growth (such as customers, sales, markets), as well as the revenue, expense, profit, cash balance, and headcount issues. The most important thing to convey on this slide is that you really understand the economics and evolution of a growing, dynamic company, and that your vision is grounded in an understanding of practical reality. The easiest way to prove that you have a real business case is to show that you have already generated revenue. It is considerably easier to get people to take the leap and sign on with you if you can show previous sales. Be careful with your figures because you are going to have to defend them. If a VC senses that you are uncertain about your arithmetic, they will trounce you. You must be ready for critical questions: how much money do you want to raise and how much do you need per milestone. Also, do your math and work out the potential worth of the company. SUMMARY Imagine that this is the only slide you will be able to present and then condense the really critical points of the whole presentation to a few bullets. I never said it’s easy. VCs see dozens of presentations. Fifty presentations later they will not remember much about the meeting with you. If this slide puts the message across, you will see it on their desk the next time you meet. A FEW ADDITIONAL THOUGHTS
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