After being involved in many startups, consulting and coaching startups as well as working on the investor side of the equation, I feel that it is time for me to share some key bits of information to those entrepreneurs who are going to be or are actively pitching their company for funding to prospective investors. The list is not everything I know, there is much more I can write on this topic and therefore this is in no way a complete guide - just a summary of many key points you should be aware of before meeting investors.
Preparation
Be over prepared! Starting with all your financial data — know it off by heart. Every C level and founder should be able to answer the most basic financial questions, with your numbers guy (CFO) being able to deal with every possible situation. This is an area where many people fall short — you are going to get grilled for everything that has to do with numbers be it projections, valuation, expenses, etc., this also includes milestones. When it comes to sales, be sure that your team (as mentioned above) is well prepared as to what the strategy for sales and marketing is going to be with your CMO at the helm. Keep in mind that digital marketing, growth hacking, and social media play a major role in the strategy, so make sure that it is well thought out and that you have the right team to execute it.
Compensation
Be sure that the cofounder’s salaries are included — but are reasonable. When investors see at the early stage of a company that founders are receiving a compensation package that is too large they question your judgment and also have issues with a large portion of the money going into founders pockets. This is especially so as when the company grows, the founders will still own equity in the company, so the short term financial gain over the long-term value of the company is seen as short-sighted — in some instances.
The Team
Every investor is concerned with whom they are investing with, not necessarily just a company or project. After all, it is people who will execute and implement the business strategy, so be sure that your people are very good (at a minimum) at what they do, and if they are proven — even better. Business acumen is often just as important or more important than academic credentials — unless a person is coming from an Ivey League school, experience tends to make a huge difference. So in your deck and when you introduce your team, keep in mind that investors are going to be listening carefully as to what you say and in their minds, they will be thinking about the probability of your teams’ ability to competently pull this off!
Advisors
It may be seen as optics, which it is to some degree, but selecting individuals for advisory or board of director’s roles also adds value to your startup. Investors will look at those individuals’ track record, skills, academics and reputation for credibility and how much their contribution can play a role in your startup being a success. This is not a necessity, but if you are able to do this it can make a difference — how much depends on whom you select.
Your Reputation/Personal Brand
Before you present to anyone, be sure that everyone on your team (founders, senior executives, and advisors) have a quality reputation. This means that things like their LinkedIn profile should be stellar; they should have a twitter page that is somewhat active etc. The reality is that investors will perform their own background check on your team and will also search you out online. It is important that you understand the value of personal (digital) branding. Your name is your reputation. So be sure that people have a proper professional photo, have recommendations, maybe a contributor on Medium or the likes etc.
Impression
Dress to impress and always look and act professionally — but also be yourself. Using humour is also a very good tactic to gain comfort with your audience. Sharing some laughing moments also helps make certain points stand out, allows your personable character to shine — provided the humour is done in a way that is still professional, on point and well timed to the content.
Communication
This is a very important point everyone should value. When you speak, speak clearly and loud enough that everyone can hear you. Do not rush through the information, allow for a pause for people to be able to absorb the information, make some notes and perhaps as a few questions. For those people who tend to speak too fast — learn how to slow down. This is an especially big challenge for individuals with Attention Deficit Disorder & Attention Deficit Hyperactivity Disorder (ADD & ADHD). If you are ADD or ADHD, there are many techniques that you can use to train your mind to speak at a more slower pace. One tip I can suggest it to buy a metronome. If you would like more information about how to manage this feel free to contact me as I also am an ADD & ADHD Business Coach.
Personality
Be positive, motivated, driven and bright-eyed — show your commitment. Investors want to see that you are a highly driven person who will be able to overcome the many pitfalls and challenges of a startup — the long run, or at least until the exercise their exit strategy.
Passion
I can not tell you how many times I have seen investors elect to invest in companies that may not normally have had a chance — due to one major ingredient. The ingredient is PASSION. When investors see your energy, listen to you speak about the project with such a high level of excitement it strikes their own emotional chord and moves the decision slightly away from all logic and numbers to include some emotional as well.
Emotions
There are two types of emotions you need to know about, one is your own emotion and the other is the investor(s).
During the entire time you are with prospective investors or even actual investors, never take it personally when they say something that may make you feel attacked or being put down etc. Look at every critique, comment, question etc., as a learning moment that can make you a better business person as well as add value to the project/company — so consider everything they have to say and make sure that they see you making notes of their comments. So be receptive and let them know this in advance, as they tend to be impressed with individuals like this (my personal experience). Investors and intelligent people alike tend to be impressed with people who are humble and confident and view feedback as a positive thing — generally speaking.
On the investors' side of emotions, this is where you need to think about how you can bring out an emotional connection with your audience. The idea is that if you can cause your audience to become as excited as you are about your project, they will be positively charged and even somewhat positively biased towards your project — all things being equal that is. What you want in your pitch is within the first minute or two — max is to communicate the right information where the investor feels like he has to invest in this as this is going to be a huge success.
Strategy
Have a well thought out exit strategy. This could mean that you may not do public, but that the co-founders will guarantee the buyback of the equity at a predetermined value based on an agreed to a formula in advance. This can also mean that you are planning to get bought out (acquired) or perhaps even go public (IPO — ICO).
Promises
Make sure that when you speak that everything is 100% accurate and valid. After a pitch investors will check what you have said if you have made any claims. Additionally, be careful about what you tell investors on the subject of having an IPO or going public in any fashion. There are many rules and regulations with the Securities Commission in any country, and generally, the takeaway point here is that if you indicate in any way or elude in any way to your investors, that you intend to go public and that if they were to invest now their shares will be worth x-plus… this is illegal and you are now treading on an area that you should first speak with a lawyer who specializes in these types of activities so you know what you can and can not say and how to speak on certain matters as well.
Valuation
Waffle on numbers pertaining to your valuation. This means that when you present your ask, you can explain how you came to the valuation that has to lead to the equity offering. When you are pre-sales — expect to get a significantly lower valuation. Forget what other (existing functioning) companies are doing in this space, you are relatively unproven and without sales, contracts, MOU’s etc., the valuation will be costly. So ask for as little money as possible at the beginning — enough that it will take you to a place where your MVP has proven to be validated with sales and client contracts etc. After this stage, you can go for another round at which point your valuation will be much higher.
The Pitch Deck
Be sure that individual professionals who are not part of your company have scrutinized your deck from top to bottom. Having an outside set of eyes gives you a much more critical and unbiased opinion of the deck. Remember to be succinct in your communications. No more than twenty minutes to present the deck and leave about 10 minutes for questions. There are many deck templates out there, some include the Y Combinator deck, the Guy Kawasaki deck and you can also look at http://bestpitchdecks.com/ to view hundreds of companies decks from a variety of industries — a great learning tool. There is a rule that I always use when writing and in general it is making it memorable, meaningful and impactful — this combined with “less is best” when writing a deck is a good combination. Your deck font should be 100pt+ and the preferred font tends to be Helvetica — as it is easier to read.
Some key points to avoid in a deck that you should avoid are:
· Random slide progression — make sure every slide flows to the next logically.
· Too many animations and busy graphics distract the viewer.
· Random humour in a deck is not appreciated — it is a business document.
· Including of videos that are either too long, take too long to get to the point, do not load up properly or require an Internet connection.
· Over explaining things at nausea
I’m Avy and I provide strategic business consulting and executive coaching service to companies around the globe and in varying industries. I work with startups and founders, with public company CEOs, and I help companies and executives reach their personal and professional goals with respect and pride as we overcome hurdles together. Over the last 10 years, I’ve co-founded three companies, am presently a co-founder and COO/CSO of a tech company, invested in some early-stage startups as an Angel investor, acted as a consultant and advisor for a US-based VC firm, and mentored hundreds of individuals and startups.
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