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Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com
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All investors are bombarded with requests for meetings. Entrepreneurs put a lot of effort into networking and building relationships that will allow them to make a presentation to a possible source of funding. They have honed their elevator speech and given it many times. Mostly the results of these contacts are non-committal or an outright expression of no interest. All investors say no or maybe much more frequently than they say yes. But, there are the times when you say yes and a meeting is scheduled. Here are a few thoughts on how to handle that meeting.
Request an Advance Package: It is a very good idea to require an advance package; something considerably more extensive than the executive summary. This will allow you to go through the preliminary materials, request any additional materials or clarifications and do some diligence yourself. One of the ways to make this initial meeting more productive is to get very familiar with the details of what is going to be presented. This will also give you a chance to research the competition and prepare a series of questions or talking points. Providing some, or all, of these questions well prior to the meeting can go a long way towards making it more productive.
Set Expectations: Make sure that you let the entrepreneurs know how you would like the meeting to go. If it is scheduled for an hour, set the expectations for how that hour should be used. Their initial presentation should take up no more than half the time. This will give both you and them a change to discuss any issues or questions that come up. Setting expectations will also help them focus on providing the level of information that is appropriate. One of the faults of many presentations is that it is too detailed for an initial meeting. I have seen stacks of twenty five to thirty slides. You need to let them know what information you want to see presented. It is a good idea to contextualize the meeting in a broader process. Let them know what your procedures are following the initial presentation.
Avoid Redundancies: You have probably already heard the elevator speech and seen an executive summary. If the meeting is going to be productive, it should focus on new information. Some of these new requirements may not be covered in the package that they have put together. For instance, if you are particularly interested in their success developing paying clients or their advantages over the competition, a prior request will help make the meeting more productive. Make sure that you communicate your needs early in the planning process. You want to avoid simply going over materials that have been presented in prior, less formal conversations.
Outline an Extended Process: Many entrepreneurs get very excited when an initial meeting is agreed to. They approach it as if one clean swtroke will result in their getting funded. Most investors I work with take between six and twelve months to make a final investment decision. The presenters should know that this is the first step on an extended journey. It is a good idea that, as a condition of taking the first meeting, your normal schedule is clearly understood. In some ways this will help the presenting team. Many entrepreneurs get very nervous that they will ‘blow their chance’. You should make it clear that the initial meeting is only a prelude to an extended process. The likely outcome will be a decision to go the next step.
Watch the Team in Action: The initial meeting will be your first chance to see their team in action. Are they well prepared? Have they anticipated important questions? How do they deal with hard or unexpected questions? Do they understand your perspective? You can begin to assess the strengths and weaknesses which will determine the probability of their success or failure.
The first meeting should be a team presentation. It is a very good idea to open a file on each team member and keep notes on their performance. You will also be able to see holes in the team. Many entrepreneurs put together teams from the ‘choir’. They avoid bringing skill sets onboard that are not directly focused on the technology. Often, when there are ‘outsiders’, they tend to be weak and unlikely able to meet their responsibilities. Three critical areas are business management, financial management and sales. Remember that you are assessing the team as well as their value proposition. One result of the meeting may be a set of recommendations for strengthening the team and an invitation to return once those recommendations are implemented.
Put them on the Spot: You need to know how the team and critical members will respond under pressure. They will certainly experience a lot during the period following funding. It is a very good idea to put them to the test very early in the game. Nobody comes to such meetings having all the answers to every question which will be raised. One of the things you should be looking for is the ability to say ‘I don’t know but will find out’. You need to weed out those who tend to try to bluff their way through such situations. Look for tensions within the team. Do they disagree without an apparent ability to resolve the disagreements? Teams that have figured out how to work productively together have a greater chance of succeeding. Remember, it is one thing if the team is well prepared for the presentation; it is another if they are prepared to build a business.
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85 Responses to “Presentations from the Investor’s Perspective”
Sorry, the comment form is closed at this time.
David, Thanks for your comment. Deal flow is the holy grail of all investors. Most of the investors in my area spend a great deal of time looking for investment grade opportunities. The search is particularly difficult in the start-up game. Such a high percentage of these companies never make the grade and turn out to be bad investments. The situation is complicated by a number of players who add cost but little or no value. Many so-called funds are just consulting companies or boutique investment bankers looking to drive their fees. This often results in added fees but not added value. That makes the search just that much more difficult for the real funding sources. In the DC area, there are organized angel groups and early-stage funds. They frequently run ‘presentation’ events and have no trouble filling up the schedule with companies seeking funding. But they face the same challenge – finding investment grade opportunities. Good luck in your search. The strength of your reputations locally may still be your best asset driving success. Dr. Smith
Morten Nicolaisen wrote:
Do you have any advice to an entrepreneur struggling with typing a business plan that convinces potential investors, yet we are having paying and referable clients using our solution?
We are not a start-up, but have been working for years to build up thrust to help enterprise customers to solve their business critical processes. Our work has given us good insight to all aspects of the struggling of the semi-automated processes of oil and gas, pharmaceutical and wholesale enterprises.
We are about to undertake phase two of a RIA-based ecommerce portal designed for wholesalers using Lawson M3. Our approach gives both internal and external users one point of entry for information stored at 6 different internal and external systems, giving the users one easy to use point of access to all order related activities.
I’ve in a need of partner to further product development and increased sales.
Any advice is appreciated and most wanted
Kind regards,
Morten Nicolaisen
m: +47 9901 4001
e: morten@eprocess.no
Steve Wightman wrote:
Dr. Smith, I read some of your articles and I honestly felt myself holding my breath a few times, like when reading about the “crazy eight” entrepreneurs not to invest in. We miss any direct pies in the face but I think it is plausible that we might look ‘crazy’ from 30,000 feet due to circumstances we are not clarifying well. Valuable insight for me to make adjustments from.
Yosef Lifshitz wrote:
thank you for this article, Earl – you are supporting all points I’ve been presenting to my clients as Equity broker. you added more value to preparations we go thru when initiating contact to private equity investors.
yosef L.
MS – Beyond
Posted by Rasim Huseynov wrote:
I greatly enjoyed reading articles. Thank you Dr.Smith!
Very useful and I will go trough it more than once.
If we will look at many aspects major is value creation and monetizing. As soon as entrepreneurs starting to realise their role as a guardian and prophet of value creation things should not go as bad as they can under different circumstances.
Best advise is try to start trying investors shoes and always keep him in mind first. It is not all that simple of course. Good chemistry, team spirit and luck also must be there.
Manoj Shah wrote:
Good insight, would definitely help. Thank you
Peter, I appreciate your post and sympathize with your frustration. Unfortunately the lessons run in both directions. Most entrepreneurs fail at raising funding because they cannot see their company through the eyes of investors. See my response to Raj. Successful funding requires a professional approach and a sophisticated understanding of the investor’s perspective. When I have helped entrepreneurs master the challenge, the hardest part is always to get them to understand that – hence the series of articles on my website. Take a read – I hope they will prove useful. Dr. Smith
Peter Samuel Cugno wrote:
Your article was well done. I only wish I could run into a genuine potential equity partner that had the good sense to do at least ‘most’ of what you suggest — boy oh boy have I wasted a bunch of time on clueless ones!
One small bit of humor I would like to add … as I have carefully read the details of websites of some 500+ venture capitalists – private equity funds (worldwide) it’s surprising MOST of them have been in business only about has long as some of my neckties!
I wonder what that tells me about them?
Janet McGinty wrote:
Entrepreneurs focus on opportunity, but investors often focus on risk. The other area that is sometimes not addressed is a clear exit strategy. How is investor going to realize return.
Dr-Smith.comdr-smith.infoDr-Smith.comdr-smith.info
Raj, Thanks for the comment. My experience has been that the process generally runs in spurts. Investors who know the space are quick to identify companies what interest them. But, once that stage has been passed, the process slows down considerably. Investors want to know a lot about a series of issues. I have described them in my series of articles on ‘investment grade’. You will find the articles on the website http://www.Dr-Smith.com in the category ‘venture capital’. Here is a link to the first one – http://www.dr-smith.info/the-money-chase-what-does-investment-grade-mean-part-1/. Dr. Smith
Rajeev (Raj) Seshadri wrote:
The gulf between the power-point and the funding: However, the ‘dance’ is led, the question, “is there a business here?” and the ROI calcs need to to get answered quickly. The longer it takes, the less the likelihood of a positive conclusion….my 2c worth.
Mohan Dharmarajan wrote:
Dr Smith,
Here is how we went about it !
> What we have done is to have identified a market of investors. There were about 100 or so. We are not talking about individual investors. Am talking about institutions (Say banking, financial institutions and so on)
> Read their background, called each one of them – had a quick chat
> Found out if they had an interest in the industry that I represent.
> Spoke quickly to the person who represents the industry within the PE
> Identified their expectations.
> Took a list of 5 key deliverables from them which will make them put my project to the board for approval. Cheked internaly if we can match up.
> We found – can talk to only 5 out of 100 of the FIs
> The rest I removed (frm my list of PEs) one by one – either they are too large or their expectations are not realistic, impolite behaviour or do not know what to look for in a project – there are many.
> I kept posting projects that I want to be involved with to all of these 5.
> It went through some iterations. From this process we knew there are a few PEs who are serious to invest.
> Thats when you capitalise.
> If one has industry expertise, we can easily align ourselves with the PE. It could be a project which both teams will have a passion for.
> Then there are no presentations, long and winding discusions, arguments, convincing games, trying to establish that you are comited and so on.
> You just come together, make a begining, travel together and at the end of 3-5 years, split with your bread. Or hang in there together and do more.
First thing that we ought to know is that there are no two different perspectives : that is the investors and ours. They have to be one and the same. If you are not a good investor, how can you be an entreprenuer in the first place ?
So, if one has an eye of the entreprenuer he would, but naturaly have looked at all – before he ventures in.
Regards
Mohan
Phillip, Thanks for the comment. I do agree that presentations should be a team effort. I am a fan of platooning. No single individual should take the burden of presenting the entire time. From an investor’s perspective such a ‘hogging of the mike’ is generally seen as a weakness in the team. Dr. Smith
Phillip Rather wrote:
Dr Smith…great article. I am in the very early stages of fundraising and think this is a great read for setting yourself up mentally for the meeting. You definately have to understand the audience you are pitching to.
One thing I may add, and you may disagree, is to have another member of the team with you when going into an investor meeting. No matter how eloquent and prepared you may be, sometimes 2 individual personalities may have a communication breakdown and you need to have someone there to steer a conversation thats obviously gotten off track back to the points at hand. I once met with an investment group on my own, and I knew one of the people took the conversation off course and we got hung up in the weeds. I could have used someone to identify that point to both of us and reel it back in.
Ron, That would be a good question if things were that simple. But, in the real world, each party pursues their own best interests. The result is an accommodation rather than an election. The point of the article – and of several others I have recently written – is that, without a more sophisticated understanding of the process, simplistic approaches result in train wrecks. Dr. Smith
Ron Worman wrote:
Buyers and sellers may get invited to a dance. The question is: who leads?
Lorraine McNair wrote:
International A/R Financing……NEED CAPITAL?
We have financed borrowers in foreign jurisdictions including:
1) Canada
2) Mexico
3) UK & other countries in Western Europe
4) Hong Kong
5) Singapore
6) Australia
Our borrowers export to customers in over 60 countries around the world. We can lend in over 15 foreign currencies. Instead of listing over 60 countries, I can tell you that we won’t accept A/R from unlikely countries such as Cuba, North Korea, Iran, Iraq, Afghanistan, parts of West Africa, Venezuela, etc.
Our facility size is $500,000 – $15M with our sweet spot being deals of up to $5M. The minimum borrowing for US based operations is $500,000. Our minimum to finance a foreign jurisdiction is $1M. We advance up to 85% against the receivables. We are industry agnostic, meaning we finance companies in a variety of industries. Even if there is another senior lender already in place, we can carve out just the foreign piece that they may be considering ineligible. We have numerous intercreditor agreements in place with other lenders. The average turnaround time for funding a US entity is typically 4-6 weeks; for a foreign jurisdiction, it takes about 6-8 weeks.
Guy Jarvis wrote:
Great suggestions.
I wonder how easy it is for the entrepreneur to walk in the investor’s shoes.
Too often the situation is reactive ( to declining capital) as opposed to being proactive (proper planning), and the reason for the frustration in a pace any slower than immediate.
britishchambers.org.uk2Ebritishchambers%2Eorg%2Euk*3fsb.org.uk|leo:2Efsb%2Eorg%2EukJulie Stanford wrote:
After running a business for years without an established network, I then had the good fortune to start one 6 years ago where I had no option but to get out there and meet people. (Up to that point, I had thought that business owners only networked when they needed business. How wrong could I have been?!)
Getting out there and talking to people transformed my experience of business. Networking isn’t just about finding new clients, it’s about peer support as well. No-one understands business quite like another business owner, and when I joined our local Chamber of Commerce, I met people who knew just what challenges I was facing and were generous in their advice and ideas. Added to that, I could be open and honest with them in a way I couldn’t be with clients, or even my partner at home.
Networking is the ‘water cooler’ for small business owners and sole traders.
I couldn’t imagine doing business without my network of business friends! It is they who turn on the lights for me…
Links:
[ http://www.britishchambers.org.uk/|leo://plh/http%3A*3*3www%2Ebritishchambers%2Eorg%2Euk*3/N4o9 ]
[ http://www.fsb.org.uk|leo://plh/http%3A*3*3www%2Efsb%2Eorg%2Euk/6bBJ ]
Jeavonna Sutherland wrote:
Assuming your asking for input on how to present each series of “threshold questions” you describe in your article. (?) I offer the following:
All investors are the same in that they want to know what’s in it for them. Regardless of their specific questions/concerns THAT question is under all of them.
Investment Focus: Illustrate why it is in their interests to diversify their assets. This can be done thru industry comparisons showing ROI and volatility. Get their investment list if possible.
The Founding Team: Highlight why *this* team is the way to go. What have they accomplished individually and collaboratively?
The Market: Focus on why *this* idea is the disruptive/unique one that will work. Be fully prepared with talking points explaining why a previous or similar product/service didn’t work and how this is an improvement to it.
The Business Model: Communicate flexibility and be open to ideas/suggestions. If the venture is capital intensive in the beginning, explain why it can’t be outsourced and have ROIC figures available.
The Competition: Know your audience!!! If these investors helped to establish the market, be prepared to discuss *this* idea’s SWOT (Strengths, Weaknesses, Opportunities, Threats) in detail.
The Exit Strategy: When researching investors know the history for their exits. Be prepared to discuss THAT timeline and what you can do for them during it. It’s all about cash flow and returns.
Lastly…Quantify whenever possible!
Jeavonna Sutherland
Financial Analyst
Maureen Sharib wrote:
Here’s what would encourage me to invest:
Be trustworthy (be prepared to offer credentials and references).
Be knowledgeable.
Be brave (have guts). If you don’t have this last, don’t come calling.
Ryan Sovelius wrote:
Good info! Thank you for posting.
Thomas M. Loarie wrote:
Well done. Since I am one of those legacy people in the industry, I always pitch first to those who know me well initially. I am able to discern the gaps that need to be filled in very quickly. It is most important for those that have not traveled this path before to remember that each presentation is a learning experience. Accept the learnings and integrate them into a revised pitch. The pitch and the plan will have a life of its own. Be flexible but be persistent.
Mohan Dharmarajan wrote:
Dr Smith,
Here is how we went about it !
> What we have done is to have identified a market of investors. There were about 100 or so. We are not talking about individual investors. Am talking about institutions (Say banking, financial institutions and so on)
> Read their background, called each one of them – had a quick chat
> Found out if they had an interest in the industry that I represent.
> Spoke quickly to the person who represents the industry within the PE
> Identified their expectations.
> Took a list of 5 key deliverables from them which will make them put my project to the board for approval. Cheked internaly if we can match up.
> We found – can talk to only 5 out of 100 of the FIs
> The rest I removed (frm my list of PEs) one by one – either they are too large or their expectations are not realistic, impolite behaviour or do not know what to look for in a project – there are many.
> I kept posting projects that I want to be involved with to all of these 5.
> It went through some iterations. From this process we knew there are a few PEs who are serious to invest.
> Thats when you capitalise.
> If one has industry expertise, we can easily align ourselves with the PE. It could be a project which both teams will have a passion for.
> Then there are no presentations, long and winding discusions, arguments, convincing games, trying to establish that you are comited and so on.
> You just come together, make a begining, travel together and at the end of 3-5 years, split with your bread. Or hang in there together and do more.
First thing that we ought to know is that there are no two different perspectives : that is the investors and ours. They have to be one and the same. If you are not a good investor, how can you be an entreprenuer in the first place ?
So, if one has an eye of the entreprenuer he would, but naturaly have looked at all – before he ventures in.
Regards
Mohan
Mohan Dharmarajan wrote:
Dr Smith
I have seen your post and the web article. The investors that I am working with go exactly as you have said. Its not only the content, but even the order of preference and process is the same as is in the article. In addition, in our location and platform lot of work also goes on in the title chek – which is a large part of due diligence.
Regards
Rudy Mollo wrote;
Very good advices to the people that are looking for investors Dr Smith !!
I select two items as very usual according to my experience in Brazil : ” avoid answering questions about results and avoid redundancies ” , during these meetings !
I am sure that this article will help many people to improve them projects, including my team !
Congratulations,
Rudy
William Melendez wrote:
Good advice to, not just investors, but guys like me looking for funding!
Alberto M. Correa wrote;
Good article. Thank you Earl.
Randy Mayley wrote;
Good Article, thanks, I’m in the same boat. Randy
Philippe G. Mitterrand wrote;
This is network sharing at its very best. Thank you for such a great article.
Philippe
Martin Johnson wrote;
I must admit I’ve had my share of presenting my business plans to investors.
Some have given me additional knowledge which has yielded no initial financial gain but intellectual know how which has contributed to me raising over $3 Million in investment covering a diverse business portfolio.
Also some entrepreneurs or “so called entrepreneurs” do not learn by their mistakes when presenting their concept or business plan.
Howard Fowler wrote:
In my opinion, the most important element for a successful relationship between entrepreneurs and their investors is credibility. Investors are presented with numerous opportunities to invest, especially with early-stage companies, and they have developed the ability to ‘tune out’ those who have ideas, but not much in the way of viable plans. Credibility is achieved by executing one’s plans. It is also gained by successfully managing through adversity, especially since we all know that plans do not always proceed precisely as expected. During the investment process, entrepreneurs should show investors how they will execute their plans. At this stage, details are critical to demonstrate that there is a good chance for the plans to succeed.
Sarma Bhattiprolu wrote:
Hi, I guess I am not competent to talk on these affairs, which is totally not my line. However, would like pass on a thought I got when I read the topic.
What I think is it is a question or process of luring the investor as he see it. Investors baseline is – returns, risk and mitigation mechanism. If fund seekers can show them these in a nutshell, it has two very good implications – take much less meeting time of potential investor and paves way for easy & hassle-free appointment for a detailed next meeting.
You already addressed a couple points in your article on how to address the baseline considerations of potential investor like preparedness and a couple more. The remaining points addressed can be saved for detailed meeting. Am I making sense?
Bill Abel wrote:
Dr. Earl. I want to thank you for your incredible wealth of information and direction. You have a great way of writing with easy understanding. I look forward to reading more of your work.
Again, thank you!
Barry Borden wrote:
Dr Smith – nice article and sound advice. Of particular value is advance setting of expectations/goals by both sides. This can keep the conversation focused.
Another frequently missed opportunity is a keen understanding of both the market decision process but also “adoption rate”. While adoption rate is usually speculative, discussion should focus on depth of understanding of the market segmentation and recognition of the “walls” that adoption usually hits. While failure to foresee and be prepared for adoption barriers doesn’t necessarily mean lack of a good idea… it correlates with lack of vision, unrealistic enthusiasm and inexperienced management.
Rudy Mollo wrote:
Very good advices to the people that are looking for investors Dr Smith !!
I select two items as very usual according to my experience in Brazil : ” avoid answering questions about results and avoid redundancies ” , during these meetings !
I am sure that this article will help many people to improve them projects, including my team !
Congratulations,
Rudy
K.Rama Krishna. Koppaka wrote:
Please do not take potential investors for granted.They are always one step above on the ladder on which we are standing.Our prospects depend on how we hook them before some other hook them.In my opinion it is better to be frank and stright forward in our presentation to them,with welcoming more queries.To day’s investors are knowing the nerve of a business in which they really want to invest and when to invest.
Ilan Kolof wrote:
I beleive what potential investors are looking for is something I call “the 3 Rs”:
Revenue – a good, but not too bright of an outlook, overlooking several secenrios and detailed cornerstones for success.
Risk – SWOT analisys and preamitive and reactions to threats and weeknesses.
Return – what will be the Investor’s return? over what period of time?
Full data coverage will assist you and them analising the data. full transperancy is required in order to have good and solid relationship with your investor. over a long period of time you might need them again, or they could withdraw their investment if they get the feeling you have not been fully honest with them.
Doug Hering wrote:
Perhaps I read the article too fast, because I agree with you.
The entrepreneur/investor relationships has to be honest and open. This isn’t a shell game. I also agree about the diligence issue. Some investors don’t invest in technology. So, why solicit them? Or if you do, make sure you aren’t throwing out jargon, etc.
Doug
Doug Hering wrote:
The article is helpful, but perhaps I’d disagree in that it seems to me that you’ve put the presenter in the driver’s seat. In some ways, I suppose that’s true, both parties are looking for something. If you have a great project and it’s promising, then the investor wants it and wants to give you money.
However, I think the keys to presenting to investors is to make sure you know what they want, what they expect in return for their money, and demonstrate exactly how you are going to give it to them. Make sure you have a back up plan.
I think your point about asking for what you want. Is good. There is no use leaving the investor guessing about what you need to start your company, but make sure you tell the investor what you’ll give in return.
Thanks William – I am glad that you found the article useful. Dr. Smith
Derek Excell wrote:
Good point of view – respectful time management with this type of communication process is everything.
Yu Chengcheng wrote:
Thank you for your sharing. It is useful for me.
Jim, Thanks for the comment. I am glad that you found the article useful and the source of reminiscences. The piece was drawn from many experiences – both mine and others. I also hope that it will help aspiring entrepreneurs better navigate the money chase. Dr. Smith
Jim White wrote:
Read the article and the three part series ” The Money Chase” and found them to be very good. As an entrepreneur who has raised funds from VCs, Angels and Corporations, I chuckled and cringed as I saw my own early efforts depicted.
Over much time, frustration and yes, success, I learned these lessons but it would have been great to have had these insights in those early days.
I commend you for your contributions and hope many aspiring as well as”well healed” entrepreneurs take advantage of your insights. I also think many investors could benefit as they are sometimes as clueless as some entrepreneurs.
Continued success!!!
André D. Henderson, Sr. wrote:
Thanks again for an excellent read!
William Melendez wrote:
Good advice to, not just investors, but guys like me looking for funding!
Phillip, Thanks for the comment. I do agree that presentations should be a team effort. I am a fan of platooning. No single individual should take the burden of presenting the entire time. From an investor’s perspective such a ‘hogging of the mike’ is generally seen as a weakness in the team. Dr. Smith
Phillip Rather wrote:
Dr Smith…great article. I am in the very early stages of fundraising and think this is a great read for setting yourself up mentally for the meeting. You definately have to understand the audience you are pitching to.
One thing I may add, and you may disagree, is to have another member of the team with you when going into an investor meeting. No matter how eloquent and prepared you may be, sometimes 2 individual personalities may have a communication breakdown and you need to have someone there to steer a conversation thats obviously gotten off track back to the points at hand. I once met with an investment group on my own, and I knew one of the people took the conversation off course and we got hung up in the weeds. I could have used someone to identify that point to both of us and reel it back in.
Earl;
Thanks for the insight. You’re right on target. Though I am not an investor (startup entreprenuer) the advice and viewpoint helps me understand better the mindset and expectations of investors I might be talking to. Thanks.