Presentations to investors – worked for you and what seemed to misfire?
Posted by Dr. Earl R. Smith II in Questions, tags: adviser, advisory board, angel investor, board of directors, CEO, chairman, coaching, consulting, director, dr earl r smith, dr earl r smith ii, earl r smith ii, earl smith, Executive Coaching, federal circle, federal contracting, funding, Governance, government contractor, investing, investment, investor, Leadership, leadership assessment, leadership coaching, leadership development, leadership styles, management assessment, managing partner, Personal Growth, the federal circle, turnaround, Turnaround Management, Venture CapitalDr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com
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In a recent series of articles, I tried to define ‘investment grade’. I used the term to mean the characteristics of a company that make it attractive to investors. In part six of the series, I turned my attention to the initial presentation. (http://www.dr-smith.info/the-money-chase-what-does-investment-grade-mean-part-6/ ). I am collecting stories about these initial presentations – strategies that worked and ones that did not – and would be very interested in hearing from you about your experiences. How have you approached initial meetings with investors? What worked for you and what seemed to misfire?
© Dr. Earl R. Smith II
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Related Articles:
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The Money Chase: What Does Investment Grade Mean? Part 2
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The Money Chase: What Does Investment Grade Mean? Part 3
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The Money Chase: What Does Investment Grade Mean? Part 4
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The Money Chase: What Does Investment Grade Mean? Part 5
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The Money Chase: What Does Investment Grade Mean? Part 6
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The Money Chase: What Does Investment Grade Mean? Part 7
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Dr. Smith is Managing Partner of The Federal Circle. The Federal Circle partners with teams and existing companies. We help them up their game and win big in the Federal space. We also arrange funding for acquisitions and expansion by acquisition. Our model is based on the belief that, if you select the very best and work with them in a highly professional and focused manner, the results will be truly amazing. He is the author of Amazing Pace: Turbo-charged Business Development – a book that shows how Advisory Boards can dramatically increase revenue. Dr. Smith is also the author of Dream Walk: Parables for the Living – a book of Raven Tales and exploration.
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This is a very pertinent observation. One of the key roles of an independent governing board is to help founders to make the transition and to provide the insights and guidance that are required as companies grow and external investment plays a larger role.
Any founder that is thinking of bringing in external investors should look first to create a strong governing team. That will give investors confidence, assist with maintaining strategic control if investors want board seats, and provide the guidance and supports that CEOs need as they progress.
Posted by Julie Garland McLellan
I appreciate that you do not say that the company should send their powerpoint deck in advance of the meeting. This is something that I would never agree to do as it takes away from the delivery of the presentation — basically steals my thunder. Great post from a different perspective, thanks!
Posted by Lisa Hjorten
Excellent article about the process. All entrepreneurs should read this before doing their plan as it outlines in broad strokes how to think about what they need to do and what investors look for. I am amazed most times I talk with entrepreneurs about how little they understand or know about the process, especially in today’s market. I actually had one ask me to read their plan and comment about the plan. I pointed out items that I felt would be necessary for an investor to even begin to consider investing and the entrepreneur’s response to me was your telling me this is a dead opportunity for me. I told him no, but you are going to need to research this and provide answers to these questions before an investor considers your project. He was missing basic items such as a complete team, cost projections only were for construction cost, etc. He felt all he needed to do was to present his idea to an investor and they would jump right on it. He was asking me to present it to some of the funding sources I have. This why he asked me to read his executive summary. I could not in good conscious present it to my funding sources as it would be a waste of time and hurt my credibility. I passed on something I felt if done right with the correct team was a solid investment oportunity.
First of all my expertise is as an architect. I have worked with and been involved with developers for many years and have a good idea of what is needed to approach an investor. I am by no means an expert so if I see some very obvious holes in the presentation I am not going to fray my relationship with my funding sources by asking them to review something I know will not be considered. I try not to waste anyone’s time yet many entrepreneurs get so caught up in what they consider a unique idea they want to jump ahead into producing it without going through the process of developing the idea in a logical manner and looking for all or as many scenarios that they can come up with that might cause the idea to fail. A good process for developing a presentation would be to list every item you need to accomplish to make your idea happen, list what it takes to make each of these items to happen and then develop a plan to make each item happen. When I say this I think the list should extend at least five years after opening the business not just include what it takes to open the business. As you say the projections are almost always a best guess. Entrepreneurs seem to think the best way to impress an investor is to have best case numbers laid out. Maybe that was true at some point, but today they want realistic numbers. If I can spot numbers that look wrong them more than likely the presentation is d.o.a. and you do not get a second chance in today’s market.
The one item I seem to never see in an executive summary is an exit strategy and yet this is one of the most important aspects for an investor. Today’s investors seem to want some basic information expressed clearly. A good idea, a solid, experienced management team, realistic numbers and an exit strategy. Missing any of these in the presentation is probably going to eliminate you from any consideration. Depending on what the deal is there will also need to be other items considered, but I think these are the minimum to start.
Once again excellent article.
Thank you.
Posted by John E. Burk
This is an excellent and fortunately very true set of observation.
I have had a number of interim roles leading transitions from founder managed to private equity. In every case, the founders have been so tightly coupled to their dream – that seeing it through the eyes of others has been difficult. Often there has been a spouse behind the scenes that made the challenge even more difficult.
Invariably in these founder led firms… I have battled a desire to “sell” what was done over the past twenty years and then extend that as “more of the same, but bigger”.
Depending on the fund raising stage (and personal network); angel partners can be a “more forgiving” starting place. I do think the understanding of external value and the presentation building process has been simplified when there were already angel partners in the picture who could help drive objectivity into the VC search.
Posted by Barry Cole
Earl, this is an interesting concept. I have devoted significant time to helping companies maximize their employee productivity and to further help companies succeed. Part of my strength comes from my work as a mediator and arbitrator in the field. The first rule is to look at things from all sides.
I think that yours is a great concept.
One challenge is that many who seek money have a great idea but lack the business experience to drive the project. They often lack the ability or willingness to invest in a team that can help see the project through. Further, they have no exit strategy.
Posted by David Gabor
I am impressed by your thoughts and would be happy to find some time to speak next week.
Regards,
David
Posted by David Gabor
Dr. Smith, I find your articles very helpful.
Posted by Martha Retallick
adeedle.comHello Dr. Smith.
Thanks again for your wealth of information.
Would you be able to provide any resources or input on angel and seed investing for a fully functioning web site model? We have a site that is already generating revenue in the very lucrative local online advertising arena. This is a particularly hot area right now. I would love your input on raising a small amount (under 250K) for marketing and PR as we move into more markets.
The site is call adneedle ( http://www.adeedle.com ) Its basically an easy way to buy, create and track online ads in a regional market. It is scalable, super easy to use, and free with no subscription. We push a higher CPM on space, and that benefits the publishers as well. We also have amazing decisioning tools, and an abuilder that lets anyone build rich media ads with no coding required. And we have a proprietary ad format called the WonerBar® that gets great exposure.
Any feedback you can provide would be great. Thank you for your time and consideration.
Sincerely,
David Weinstein
d@adneedle.com
Its running in beta in the Albany market. We are prepared to “flip the switch” into all US markets though ad inventory resale, and initial reaction has been great.
David Weinstein
David Hudson wrote:
I agree with Howard, that the presentation can be as much about the relationship between presenter and investor as it is about the plan itself.
What we, as investors, look for is a team that knows its stuff, can be trusted to deliver, and that will work with us as a partner.
I’m turned off by excessive glibness “all we need is 1% of the market”, and I’m much more impressed by someone who answers that they don’t know (so long as they don’t give that as their answer to everything!), rather than by someone who blusters.
Successful presentations also tend to be 2-way affairs. An entrepreneur who asks (sensible) questions about my fund and how I might help is doing two things: demonstrating they are thoughtful and making me feel like they have other funding options.
Mark Montgomery wrote:
Hi Earl,
A couple of things I’ve seen work universally from both the entrepreneur and investor perspective — in syndications that included funding large numbers of young companies, including some of the most successful, and some not.
1) The source of the information has a very strong track record– a referral from someone like me who nailed MSFT, Google, and many others before almost all other professional investors is insane to ignore for an active investor. A few do anyway, but to their own losses as case history has proven many times. Most investors are totally ignorant of reality at the early stages.
2) Multiple credible customers attached to the offering with references — letters of intent at the least– contracts work much better. Most investors fuel growth– particularly VC today — very very few invest pre- revenue.
3) The content of the offering resonates with those who are in a position to know whether the tech is valid, claims are real, and markets healthy and conducive. This only works with smart investors and smart individuals who refer to investors — a small group of angels, consultants, etc. with deep knowledge of the specific sector.
.02
Alexander Afanasyev wrote:
If someone will buy an asset for the reason of money making only he is at a big risk, since risk assessment is one of the greatest issues that end at employee level. I doubt that institutional investors look that deep. They put much believe in CXO competence and that is another greatest issue in the business. Who can tell one leader from another under different risk factors?
Any initial meeting is where we sense each other. If you’ve done enough homework to due diligence the partner you already know him and this makes him fade. The art of a salesperson (definitely the entrepreneur seeking an investment) is to use this preliminary information in his hands to make a good contact and “take the control” over the mind of a buyer. Do not go to those you can find a little about – a waste of time. And that’s a very short story about it.
Another end is investor. I would say they do not spread much information on themselves. And that makes first and eventually any contact an act of a chance. Establishing human contact is essential for partners whatever position in life they take. One cannot establish investor-PM relationship in a lack of information about each other.
All sad gives excellent grounds for fraud and commissionaires around the topic. Strange but somehow I figured it out the more sincere and open you are the less confidence in project and team it gives. Exclusions exist.
Sorry that I have not sad a word about presentation – for me it is merely a tool that works only in the hands of a good master (salesperson). Tuning your tools is a different and extremely personal (in this case) issue.
Howard Fowler wrote:
Presentations to investors are not just about products and services and how they will be marketed. Presentations to investors are a tool by which investors gauge the capability and integrity of management teams. No projection is executed precisely according to plan. The skill of the management team will determine how the Company adapts to changing circumstances to fulfill its mission. No manager is 100% correct. The integrity of the managers will determine whether they fully disclose what did not work as well as what did work. An equity or debt investment is a long-term relationship and must have mutual trust at its foundation. While it is not possible to fully illustrate superior capabilities and high integrity in a single presentation, one can still demonstrate these traits. For example, management can present a range of contingencies and the plans to meet them. Management can discuss prior plans for new products or markets and how the team dealt with actual results that differed from expectations. Essentially, investors are seeking capable managers who will be transparent and honest in their business dealings.
George, Thanks for the comment. I have used exactly the approach you recommend and found it very useful. The availability of a short presentation comes in handy when the investors ask a lot of questions and jump around. It also comes in handy when it becomes clear early on that the investors are not likely to want top proceed with discussions. The civility which it allows offers the possibility of more productive discussions later on. Dr. Smith
George Cinquegrana wrote:
Presenting to potential investors requires you to change gears quickly since every investor group has a different evaluation process.
Some will want to understand the business opportunity and financial returns estimates first before they ever take a serious look and others will want to understand if you have an industrial strength solution before they get into the finacials.
So having just one presentation or one a canned approach to market yourself is a dice throw.
I suggest you have a short, meduim and long presentation and be very flexible. In all of them though you need to answer the question why should they invest.
Dana Price wrote:
Dr. Smith, two quick things that also help (in my experience) are:
1. having help- you don’t need an advisor to write the presentation for you, but you do need someone who has been through the process to help you in advance
2. you need to be able to read the audience- this is especially true with PE firms- sometimes there is a lot going on in a room that is non-verbal, and people can be pretty stressed out handling the presentation which can lead to missing the “signs”
Best,
Dana Price
Bob Luzzi wrote:
I have learned there is no trick or magic formula. Everyone should know what the essential elements are for a good deal if you did a little homework. For the presenter, what works is also not a secret: honesty; passion; knowledge of the space; and a coherent plan. You all know that.
Here are 2 aspects that have not been mentioned yet:
Honesty is indeed the best policy. Every smart investor knows that you don’t know everything. But do you (i.e. Socrates quote of to know you don’t know is to know a lot)?. Just have a plan, and not a “deer in the headlights” look when asked something you don’t know. They are going to ask you questions that you should have anticipated anyway. If you didn’t, then it’s your fault for not being prepared.
Second point I want to make is you can not forget you are SELLING. Any book on sales will tell you that a sale comes down to an emotional decision. The really good salespeople are great communicators, honest, and have a high level of intregrity. After adding up all of your feedback, if you don’t get funded, the deal is missing something, or you have not communicated something.
Scott, Thanks for adding an important perspective. Many founders do not ‘reality check’ their presentations or business plans and end up presenting ‘fictions’ to investors who know better. Dr. Smith
Scott Shemwell wrote:
In recent years, I have been on the receiving end of many painful presentations, not only from start-ups but from estalbished firms as well. It is amazing to me how many people will simply not do their homework prior to meeting with key decision makers.
Most of the value propositions I have heard in the past 2-3 years (and I have heard a lot of them) are not based in reality and are effectively a version of “my dog is better than your dog.” This quote I especially like, and it is from an actual presentation by an established mid-size software company–“Decreased human errors by 100%” Does this mean the humans go away completely? And what about the humans that wrote the program?
Questions I ask in my head are always, Overstated? Demonstrable? Defendable? If the presenter does not meet this test, then there is most likely not a follow on meeting.
By way of disclosure, I am also writing a book on the subject of value propostions–the good, the bad, and the ugly.
One other quick story. Years ago we were making a presentation to the Director of Planning for a major firm. The question from out team was along the lines of “what is your biggest source of pain ?” In the short silent period as he formulated his response and just as he was beginning to speak, one of our engineers (abhorring the silence) jumped in with a joke and sent the conversation in another direction. We left the meeting without an answer to that question. We did not get the sale either.
This is an interesting discussion, and i look forward to following it. If anyone has any questions about my perspective please feel free to contact me.
BTW, I can make critical comments because throughtout my career I have made all these mistakes and more–as they say “been there, done that and have loads of T-shirts”.
Best Regards,
Scott
Ken, You had many of the key things that investors look for. The more specifics and actual results you can show, the more receptive they will tend to be. Dr. Smith
Ken Talentino wrote:
Did a presentation for stock analyst as part of management team. We provided data on markets, products and customers but we also exhibited actual products. This worked well since they were able to actually see quality and feature of our products.
Craig McCord wrote:
Thank you very much for your efferts and considerations to share some very good articles that satisfy the minds of all who have not been there yet.
Craig McCord
c_mccord@msn.com
Erik, Thanks for the response. I have also found that some investors are very proactive when it comes to asking questions. It is sometimes difficult to keep the presentation on track or within the time limits set by the schedule. A carefully crafted presentation takes into consideration the order that information is delivered – making sure that what is said is supported and explained by what has gone before. One of the drives for getting things off track can be rising investor enthusiam. the more they like your company, the more aggressive they are likely to become in trying to jump ahead. Of course, the other side is also true – impatience and lack of interest can also cause the same behavior.
Your point about ‘telling the same story and we used the same numbers’ is particularly important. I once sat in on a presentation to investors where the team appeared to be presenting three different companies. The resulting confusion on the part of the investors did nothing to advance the possibilities of funding. Dr. Smith
Erik Vanrompay wrote:
I prepared the initial meetings by presenting it at 4 different occassions to executives that had some experiences in investing. It allowed me to tune the initial presentation to the investor. We had a tuned story about the founders team, our technology, the market, our positioning, where we wanted to go… and so on.
What worked :
- we were well prepared so we could answer all questions as there was no surprise
- all founders were telling the same story and we used the same numbers
What was different :
- the investors were a lot more interested in market shares, market initiatives and items we would implement to create market awareness.
What went a little bit wrong :
- we could not roll out our presentation as one of the investors asked a lot of questions… so we answered his questions but by giving these numbers/information somewhere out of context, we lost sometimes the focus. For instance, how to sell our product became more a financial issue than a marketing/sales discussion.
Erik
Thanks for some great answers. I think that Vijay and Maureen are closer together than it might seem at first. Investors are interested in established results – for instance, the unambiguous validation of a value proposition, establishment of price points and margins and a growing customer base. Without that, it is very difficult to get them to focus on the passions and vision of the team. If the first challenge is met and passed, investors then look at the more ‘future related’ stuff like business plans and financial projections. The good rule here is, just because you say it will be so, there is no reason to accept that it will be so unless you can demonstrate that you are well on your way to making it so. Investors regularly fund companies that need the funding. Unlike bankers, they put money to work in higher risk situations. Most venture funding – particularly early-stage funding – is for companies that need the financial resources to grow. To return to the theme above, investors prefer to put their fund to work with companies that are going to use it to extend markets, expand customer bases and like. They have more reluctance to invest in R&D or product development – particularly either cutting or bleeding edge R&D. Dr. Smith
Marco Monfils wrote:
Unfortunately i agree with Trevor.
Ideally, interest level by investor (in the relationship) > interest level of investor interested
Everything else serves to either validate or reject our original premise/interest level.
Im not sure if that helps, but lets see.
Trevor Lobel wrote:
The only time you stand a chance with any investor is when you are able to prove that you actually don’t need them……
Maureen Sharib wrote:
Vijay, “buy your story”? Respectfully, I think it goes beyond that. Investors don’t invest in “ideas.” They invest in hard facts and proven sales. Don’t present air- ball stories of what could happen, what will happen, if only/if only… Present something they can stick their teeth into and most of them are looking for opportunities where they can see the cash, not the pipe-dream.
Vijay Menon wrote:
I’ve presented both early stage and later stage companies to investors at various times in my career and I’ve always been struck by how that final decision to invest in a new idea boils down to instinct. Of course we always went with the standard revenue and earning breakouts, capex and hiring plans and all the rest of it.
But I’ve sat in meeting after meeting where the fund manager or analyst needs to go beyond this well rehearsed dog and pony show and take a call on whether to bet on the story. This is specially hard when the company represents an idea or its execution that is a little different from what the investor has seen before. In all such cases, it boils down to gut — do you trust the promoter to do what he says he will do?
So what have I learned? Match the best practices in your industry on disclosure because investors expect it. Tell your story with passion because passion is what tides you over the tough times. Show management bandwidth to reassure people that the company won’t stop just because you got hit by a bus. And don’t fret if you don’t convince a particular investor — there is always someone else who will buy your story.