It’s all too familiar to the startup executive: the marathon of presentations — from angel investor elevator pitches to full-blown venture capital partner-meeting grillings — that are fundamental to getting money for a new venture.
For me, the experience is all too fresh in my mind, since this month we successfully closed the first $2 million venture capital financing for KnowledgeVision Systems. And there was a little extra pressure on us, because our company is all about tools to help people present better and to reinvent the business presentation for an online, on-demand world. My four-month fundraising presentation marathon drew on everything I’d learned from a career as a journalist, a columnist, an executive, and a documentary filmmaker. Yet, curiously, I found myself, early on, making rookie mistakes that are embarrassing in retrospect.
There is an asymmetry in the world of entrepreneurial finance: while in an entire career an entrepreneur might only have an opportunity to pitch a handful of companies and ideas, the audiences are viewing dozens of pitches every month. The audiences have seen it all before; the entrepreneurs, by and large, have never done it before. The best ideas may well be forever buried by a clumsy presentation.
Many venture capitalists and angel investment groups recognize this, and have taken to gentle coaching of entrepreneurs, sharing advice on how best to present to them. Mind you, this does not spring from a sense of sudden generosity on these financial gatekeepers: many actually are relieved to have an excuse to say “no”, as they must to more than 95% of the pitches they see. It is doubtless also motivated to preserving their own sanity as they watch the endless parade of hopefuls ramble through their presentations…wondering if there’s a pony in there somewhere.
So here, with the blessing of 20-20 hindsight and the relief of an entrepreneur who made it through the gauntlet, is my favorite advice from leading venture capitalists about successful fundraising presentations:
The team at Highland Capital Partners reminds us that it’s as important to understand what you’re not selling as what you are.
“You are not selling your products, technology or assets. What you are selling is your stock and the opportunity for us to join you in a business partnership. To accomplish this you need to demonstrate not how great your product is, but how great your team is, and how well it’s suited to the project you are undertaking. In short, your job is to offer a convincing story about who you are, what you have accomplished so far, and what you plan to do.”
The Highland team also suggests that you be willing to ask questions of the firm, too. After all, a venture capital relationship is a partnership and you’d better know what you’re getting into.
Your primary goal is not to describe everything your system might one day become, but simply to convince investors you’re worth talking to further. So approach this like an algorithm that gets the right answer by successive approximations. Begin with a description that’s gripping but perhaps overly narrow, then flesh it out to the extent you can.
Guy Kawasaki talks about how to interpret the secret language of venture capitalists, and the “Top Ten Lies of Venture Capitalists”. His account is a riveting tale of VC’s who string entrepreneurs along because “there is no upside to communicating a negative decision” and the eternally optimistic entrepreneur, who, “if they don’t hear a conclusive no, assume the answer is yes.”
Draper Fisher Jervetson Managing Director Warren Packard urges in a video on the firm’s website that entrepreneurs stress points of uniqueness for their ideas, but that they do it within the firm’s particular framework.
“You need to do your research on what markets they’re pursuing, how much risk they’re willing to take.”
DFJ offers entrepreneurs a useful checklist of the items that should go into an investor presentation and business plan.
Ben Yoskovitz, a founding partner at Year One Labs, advises that you need to “tell your story quick”. He points out that you have a captive audience when you pitch to investors, but they won’t stay captive for very long unless you set the hook early.
To-date I’ve seen two things that keep investors’ early attention on you versus their Blackberrys:
- An entertaining story on the problem you’re solving
- An entertaining story on the founders and how the company came together
Both of these points are about putting some context and relevancy on the upcoming pitch and discussion. If you make the problem feel real and explain it in an entertaining way it’s going to resonate much more strongly with investors.
To all of this insight, I would simply add that you should remember always that you a storyteller. And it’s important to remember that how you tell the story is just as important as the substance of the story you tell. In contrast to your presentations to customers or to professional conferences, your audience is sizing you up as much as they’re sizing up the business opportunity.
A final thing to realize is that there are a lot of invisible players in the audience in addition to those who are actually in the room. For every person who’s hearing you first-hand, there are probably several who will be hearing about you and your company second-hand from those who attended the live presentation.
The challenge of arming your audience to retell your story accurately and powerfully is an important one, and not always easy. The more clever your PowerPoint deck in the live presentation, the more difficult it can be to decipher when it’s handed around. Part of the answer is to arm your audience with powerful catch-phrases (ours was “reinvent the business presentation for an online, on-demand world”) that will stick in their minds, particularly with repetition. But we also had a secret weapon, which was our own product, KnowledgeVision. KnowledgeVision is a way of recreating an on-demand version of a live presentation, and making it easy to pass it along to those who weren’t in the room. And we know for certain that the KnowledgeVision version of our investor pitch was viewed 3-4 times more than the number of people who were in the room at our various investor pitches. More about this “not in the room” phenomenon in a future post.