High quality investment funds see hundreds of business plans a year and even more executive summaries; however, they fund maybe three to five companies per year. Most companies that submit plans never get a first meeting. Those that do still face incredibly long odds. Here’s the math – both for funds and the entrepreneur:
Investment Fund Math
Meets 100+ companies/year
Goes deep on 20
Funds 3 to 5
Targets 25 to 30 investors
Meets with 8 to 12 investors
Goes deep with 3 to 5
Gets term sheets from 1 to 3
Therefore, for entrepreneurs, first meetings with investors really are make-or-break events. By building and delivering a high quality Investor Presentation, you can pave the way for a successful first meeting and an on-going dialog with investors about funding your company.
In this post, I’ll show you how to build a winning investor pitch. In Part 2, I’ll lay out the secrets to delivering your pitch – successfully – in person – to people with funds to invest.
The Right Presentation
The ground rules for an investor presentation are simple:
- Length – Unless there is a really good reason, an investor presentation shouldn’t exceed 25 slides and fewer than 20 is much better. Therefore, you’ll have to build a greatest hits of your business and not fact your audience to death.
- Time – Investor meetings are seldom more than 2 hours long, and you really should be planning on 60 to 90 minutes. First meetings are shorter the further West you go in the country, and at least half of the meeting time will be taken up by dialogue. Interaction is good, but it means that you really only have 30 to 45 minutes to make your pitch. That’s maybe 2 minutes per slide.
- Readability – Your deck lives on after you are gone. It can get forwarded around an investment firm wantonly, and the partners who aren’t sponsoring you may read the deck to avoid slogging through lovingly created 20-page plan. Therefore, the contents of your deck can directly impact your company’s fundability weeks or months later. Investors need to be able to read your deck cover-to-cover quickly and feel comfortable endorsing your business. If a slide requires you to “be there to explain it,” you’ve failed. This happens frequently with technical charts and graphics of business models. Clear and compelling – on paper as well as in person – are the magic words.
- Slideology – There are many ways to build slides – simple vs. busy, graphics vs. text, animated vs. static. There is no right answer. Some people maintain that the difference between West and East Coast presentation styles is extreme – like an epic West Coast vs. East Coast battle in the music business. West Coast slides tend to be simpler, because presentations are shorter and more dependent on the personality of the presenter. East Coast slides are busier, and the story is present on paper even when the presenter isn’t there. The style is really a personal choice by the entrepreneur; however, note that East Coast-style presentations work fine on the West Coast as long as entrepreneurs account for the generally shorter presentation times and don’t read their slides while presenting.
Most people think of an investor presentation as 20 discrete slides and concentrate on making each slide individually outstanding. In reality, slides are given in groups and should be written and delivered that way. The groupings are:
- The market opportunity
- Products & services
- Go-to-market strategy
- Operations & Management
- Financials and Uses of Funds
Not surprisingly, this slide structure mirrors the table of contents in most investor-grade business plans. Now let’s review the specific contents:
Introduction (3 to 4 slides)
These slides provide the grounding for the rest of your presentation and provide the basis for the content of the investor meeting. The typical slide titles and contents are:
- What You Do – Start your presentation with a simple statement – or statement and picture – of what you do. Too many times, entrepreneurs will be working through their presentation and, at about page 12, an investor will ask, “What is it you do again?”
- Key Facts – provides the basic facts on your company – when you were founded, where your headquarters is, who your key customers are, and possibly a small financial snapshot.
- Investor Highlights – outline the themes for the rest of the presentation. The most effective themes are almost always some combination of:
Protectable defensible business model and IP
Strong market traction, including these great customers
Super management team
Aggressive, achievable financial plan – maybe including rapid, current growth or great profitability depending on the state of your business
You have to prove out these highlights in the rest of your presentation, so don’t highlight any area where you weak or are going to ignore in the next 19 slides.
- Why We Win – simply explains why you’re going to win in the market. Sometimes this slide goes later in the deck when you discuss your competition. You’ll then decide where to put this slide.
Note that, if your company is very young, investors put a much higher weight on the quality of management – sometimes as much as 50 percent of the total evaluation. Therefore, very young companies should move the management slide to the beginning of the presentation – just after the Investment Highlights.
The Market Opportunity (2 to 4 slides)
The market gets the meeting. If an investor thinks you are operating in a big, untapped market, then he’ll take the meeting. If your company will drive big changes in an existing market, that’s good, too. This section of the presentation should cover the following topics:
- Market Landscape – explains market conditions today – highlighting existing problems in the market, such as lack of integration between products or huge and unnecessary spending by customers.
- Target Markets – describes the areas of the market where your company is or will concentrate its efforts. Sometimes, an area includes companies of a particular size (small businesses); other times, it’s a vertical market or particular demographic. Investors want you to prove that you know your target customer.
- Market Size and Drivers – discusses the size of your market and why customers will buy your products. This slide is easy to write if research fimr, such as Gartner or IDC, tracks your market. Frequently, however, no credible third-party analysis exists. Then it’s about creating your own defensible forecast and set of market drivers. Investors won’t completely believe your rosy, self-generated forecast. Instead, you win points for the logic and thoroughness of your market analysis.
Products & Services (3 to 6 slides)
A big market is good; great products are better. Therefore, the most critical part of the investor presentation covers your products. You should cover some combination of these five topics:
- Product Overview + Features/Benefits (required) – describes what your product does and why it’s important to your customers. You may have done some version of this earlier on the What We Do slide, but, here, you need to go deeper. Investors need to imagine your product in action – solving problems for customers.
- Technology Platform/Architecture (almost always required) – explains how your product is built and why your approach provides an advantage. In some instances, investors will be intensely interested in this slide; other times, in crowded markets where there are a limited number of ways to create a solution, the slide shows that your technical approach meets industry norms.
- Unique Intellectual Property (sometimes required) – Not every company has unique or protectable IP; however, for inventors of new things, demonstrating their unique IP can sway a funding decision. Plus, unique IP that is translated into business value can drive rapid growth and create strong defensibility as the market becomes crowded. Here are some examples of unique IP that have made a difference the market:
The Apple iPhone
Algorithms for high speed financial trading
The Amazon.com recommendation engine
- Product Roadmap (often required) – outlines how you are going to evolve and improve your products. Investors want to see that you are capable of creating winning enhancements to your current products and that you can invent new products that will expand your market and customer base.
- Business Model (required) – describes how your company will make money. In high tech markets, typical ways of making money are:
Software or hardware maintenance
Monthly services fees – for SaaS or other types of recurring revenue offerings
In addition to talking about the how you are going to make money, you should provide examples of typical deal sizes and customer types – both in terms of total deal size and the customer value provided.
Go-to-Market Strategy (2 to 6 slides)
A strong market and product are good; a sound strategy for selling your products to customers is equally important. You need to show that you understand the channels you’ll use to sell to customers. If you have good sales traction, you should highlight your successes. Here are the topics you could cover:
- Sales Model (always required) – summarizes in a single slide your go-to-market model in terms of direct and indirect channels, target horizontal and vertical markets, and marketing programs.
- Sales traction (required if you have traction – can be multiple slides) – discusses current customers, your pipeline, and important sales metrics, which could include:
Average sale price – tends to trend up as products become more accepted in the market.
Average first-year revenues – is similar to ASP but is used for companies that operate in a recurring revenue model.
Total contract value over a 5 or 7-year period for a SaaS product.
- Customer Case Studies (advisable if the customer will vouch for your company when the investor calls) – show how you have made your customer successful. Typically, these slides describe the customer challenge, the solution you provided, and the result.
- Key Partnerships (important if the partner is well-known and respected and the partnership would be viewed as substantive) – highlight how you are working with key partners to expand your market or improve your products. You need to explain the terms of the partnership and the expected results.
Competition (1 to 2 slides – required)
No company operates in a competition-free zone, so you’ll need to talk about who you compete with on a daily basis. The goal is to show that you understand the competitive landscape and your specific competitors. You also need to demonstrate why you’ll win in the marketplace. Generally, you’ll need a graphic that lays out your competitive environment – and sometimes specific competitors – and bullet points that outline why you win. Depending on the nature of the graphic, you can do this on one or two slides. There is one absolute rule to building your competitive slide: Don’t create your own “Gartner-style” Magic Quadrant. Investors won’t believe it, and you won’t be able to defend it.
Operations and Management (1 to 2 slides – management required)
On the operations slide, use either a bulleted list or a stylized Gantt chart to show past accomplishments and future plans. Investors should be able to digest it quickly and appreciate that you are making progress. On the management slide, some form of grid or easy to read list works best. Place summary text that describes the strength of your management team at the top and then include a table with the following information:
- Who – contains the name and title
- Years – includes years of experience
- Experience – consists of two lines: key employers and a short summary of experience
Financials and Uses of Funds (required)
It’s rare that you would enter into a detailed discussion of financial projections in a first meeting, but you do need to show logical financial projections and be prepared to explain the drivers behind your business. Presumably, you will have built a financial model that generates these numbers. The actual financial slide should include:
- A simple profit and loss statement no more than 2 to 4 lines long. Projections should extend out 4 to 5 years. 5 years is better.
- A bar graph of financial performance over the planning horizon that showcases revenues and either EBITDA or net income.
- 3 to 5 bullets that list your key financial drivers.
Next is your slide for Uses of Funds, which lists your level investment to date, the amount of money you expect to raise, and how you are going spend your investment dollars. Be specific. For
- Develop the next two versions of our product to expand our reach in the X and Y markets.
- Expand our sales efforts to serve Fortune 2000 companies in the US.
- Sign and ramp up distribution partnerships in the UK, Germany, Mexico, and China.
Generally, we recommend ending your presentation with the same investment highlights slide that you used at the beginning. It reminds your audience that you have kept your promise to explain fully what is best about your company from an investment perspective.