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Investor presentation
A list of presentation mistakes. Looking back at recent client work, the V1.0 briefing decks I saw, here are some of the mistakes I encountered. Not a complete list, not in the right order, just some examples that came across my desk the past few weeks.
Tech product pitches are different for a enterprise IT purchase officer and an investor.
The purchasing department might be interested in the full list of user benefits, a detailed description of the features, all written in a language that sounds familiar and resembles the one that is used by the billion dollar tech giants, creating a sense of security that they are dealing with a stable product company that knows what it is doing.
The investor is probably too impatient to read through long tech marketing copy highlighting benefits such as productivity, efficiency, scalability, central dashboards. Yes, there is one box to tick whether the company is able to sell to corporate IT departments, but the bigger question is whether this technology fills a big enterprise need that should be very easy to explain. On the back of that, it should be logical to understand why existing players have not/could not have solved this.
Marketing pitch <> Investor pitch.
Image via WikiPedia
Financial projections of new business ideas are totally made up / not accurate, so being of by a few million here and there would not matter? We can make quick changes in our financials in the presentation slides, and then "forget" about updating our financials spreadsheet with the new information.
While the absolute numbers of your financial model might be totally pulled out of the hat, it is the thought process of how you got to them that is still valuable for investors. How does your business model work? What would I have to believe in order for your year-5-dream-scenario to come true?
And that model should be consistent across all your documents: presentations, spreadsheets, budgets, everything:
So, even if nobody can predict the future accurately. there is still value to create a consistent financial model the same way as you would for a business in which you know every single detail (next year's budget of an established company for example).
What can you do to incorporate the fact that numbers are highly uncertain?
Slightly more complex models might actually be simpler to understand.
A VC fund who is raising money itself asked me the other day to give some example slides of other VC fund decks I have been working on. Showing slides is not possible because of confidentiality, but I could jot down the usual pieces of content after browsing through a dozen recent ones. Here we go in random order:
The list goes on! A good investor presentation does not simple tick the above boxes. Every fund story is different and the art of the presentation designer is to pick the right topics, and sequence them in the right way.
As a professional presentation designer I deal with highly confidential information in almost every presentation I work on. Let's look at NDAs (non disclosure agreements) from different perspectives.
As a founder, inventor, entrepreneur, you have every incentive to get people to sign an NDA before sharing confidential information. You have this fragile idea that anyone could just steal and replicate. Also, NDAs are important when applying for patents. If someone can prove that your idea was "out in the open" without NDA protection, you could lose your claim as its inventor.
Investors see thousands and thousands of deals in a year. Signing an NDA for each single one of them creates some practical problems. You would have to thoroughly check 4 pages of dense legal text for each one of them, you need to keep track of all the agreements over time in order not to forget the thousands of legal obligations you entered into over the course of 20 years. That is the reason most investors won't sign an NDA.
Since investors hold the check book, they are in a pretty strong negotiation position versus the inventor. What to do? In most cases it is possible to explain an idea without signing an NDA. Simply leave the very specific bits out of the pitch. When the due diligence process advances, you might have a chance to get the investor to sign later on, as the probability of making an investment increases.
Even if the investor had bad intentions, it is pretty hard to copy a startup idea after glancing through an investor deck. You need to have the required technical know-how, the team, etc. etc. to make it happen. And even if you have all that, you need to put in the sweat to make it actually happen.
The only investors I would watch out for are those who invested in a complete, direct competitor of your product. Although most investors probably have the ethics to try to keep things separate, it is hard to "unsee" a strategy slide in a deck of a competitor when you are about to make big decisions in the Board meeting of your portfolio company. (There is a broader issue here though, whether this investor is actually a good investor for you in general).
What about designers? Like investors, I tend not to sign NDAs in the early phases of a project discussion. There are so many draft decks coming in, that it is not worth entering a legal agreement just to scope a project. I ask the potential client to send me materials that can be shared without an NDA to make a project quote.
If we end up working with each other, I do sign NDAs (unlike investors), but usually with 2 conditions: they should be capped in time, so that whatever I sign, I know that the obligation will go away at some stage in time and I won't be burdened with legal obligations that I will have forgotten about in 10 years from now. Watch out with the legal language in these contracts. One clause can say that the agreement runs for let's say 3 years, but then another one later on can state that the obligations of the contract last forever (I have seen ones where my children would have been legally bound as well). The second condition is not to include non-competes. They are very hard to define, easy to forget.
Having said that, many of my clients trust me enough that they email me the most sensitive data without any NDA (for example detailed portfolio return data of VC funds). This is usually the case when we have a lot connections in common, and/or, the other party understand that the key asset of an independent designer is reputation, I will go out of business and suffer a major personal blow the second after I spill confidential information, and that might be the best insurance of your confidential data.
Most of the presentations I design are to support a 30 minute discussion with an investor. The hardest part of the fund raising effort is often to get to that 30 minute meeting. Some thoughts on elevator pitches via email.
Most people understand that these emails should be short. But people make the mistake of making the email short by cramming in the entire pitch in as few words possible. The full story gets put on a boiler plate, but the fire is left on too long until there is nothing left: big market, great team, strong user traction, multiple business models.
You don't need to put the entire pitch in 2 lines, your objective is not to land the investment, it is to be invited to a phone call. You want to intrigue enough that it is worth 15 minutes on the phone.
Start with a strong connection. "Your portfolio company CEO [x] thought you might be interested in this." "We are in a complementary field to your other investment"
Bring a new insight, or a surprising fact, without going into the details. "In 2017, nobody pays for dating sites anymore, but 90% of our users do". "Everyone knows that electrical cars will only sell if you can get 500 miles on a charge, our batteries could just enable that". "Google just spent $400m on acquiring a company that we can beat easily"
Avoid empty buzzwords, generic statements, superlative adjectives (300% month-on-month user growth). Keep it human and surprising.
There is one particular customer segment that often requests a quote for a pitch deck: productivity apps (my own app SlideMagic falls in this category).
In most cases, I advice these clients not to invest in a professionally designed pitch deck: the story is usually pretty clear ("PowerPoint is a pain, and we are going to end it") and investors could spot easily whether this is a VC-type investment (something where they can deploy a significant amount of capital and generate a big exit), by looking at the early customer traction numbers.
What can you do without a professional presentation designer:
Image via WikiPedia
Nobody can accurately predict a P&L five years from. But, most entrepreneur have a pretty good idea about the cost of running the business over the next 12 months. Product development, giving a free 1 year subscription to new customers, designing the marketing materials, hiring an investor presentation designer, etc.
Still there is value to putting all these floating numbers in a coherent P&L. In the short term, you can fix the exact timing of your expenses. "Free subscription to new customers" is a zero entry in the budget, but in a P&L becomes a real cost. Thinking about year 5 forces you to do the check whether your business is actually vaguely plausible. Can you recruit the required 10,000 enterprise customers with a 5 person sales force? Is it viable to have $500 server cost per customers if they are only paying $400 at best, before even getting to R&D and marketing costs?
The P&L is a thought exercise, not a tool to calculate your $20m profits in year 5.
This is a complaint I often get from startups that deal with private equity investors. The analyst is asking for the number of customers, the number of sales people, the number of engineers in 2021. Who knows, right? Does this make sense?
Well, partially. Building a financial model for 2021 can be a valuable exercise in checking wither your business model makes sense. If you need to recruit 30 Fortune 500 customers in 4 years with 8 months sales cycles and head quarters which are based on a different continent, you cannot get away with 2 sales people and some search engine optimization in your marketing and sales budget. On the other hand, a consumer-focused company that needs to sign up 500,000 user does not need a huge enterprise sales operation.
It is this sanity check that investors want to do. Your "sales and marketing cost is 30% of our $100m 2021 sales" does not show - in most cases - that you have thought about what it would take to build such a company.
"Oh, [tech research company] must have a chart on that!". Many startup pitch decks features charts, forecasts, and quotes by Gartner, IDC, Forrester, and others to back up their market claims. Here is how a potential investor looks at these charts:
So how to use this type of information? Treat it as just another data point, but don't make your entire pitch dependent on it.
Image via WikiPedia
Internet / mobile consumer propositions can be constantly changing, and ambiguity can be a great driver of the creative product development process. In investor pitches though, you need to freeze the brain storming and present one consistent, stable product.
Investors need to make 2 leaps: understand what your product is about, and get a sense for the product you want to offer. In 20 minutes, you can't introduce 3 variants, discuss 10 other cool ideas, leave that for the follow on meetings.
These type of app ideas are very hard to describe in bullets or even pictures. The best way to get things across is to create a very specific user case example and describe a sequence of events, interactions between users. You can alternate between images, mock ups, etc.
The priority of all of this is to explain and show things, "pretty" comes in second. Sometimes investing a lot of energy in making screen mockups with buttons and sliders actually makes the app idea harder to understand. To show that you have design skills in house, you could take one app screen and turn it into a pretty mock up.
A side effect of this effort in an investor presentation might be that you get more clarity inside your senior team what your product should look like.
Image by Nicolas Henderson on Flickr
Investors need to pitch themselves as well to raise money for their own fund. I get to see many of these decks from clients. And in them, investors make the same mistakes that they advice potential and actual portfolio companies not to make.
To be honest, they might even be worse. Unlike a normal company, there are very few things that differentiate the operations of one PE, VC, hedge fund, from another. And secondly, the presentation culture in finance is very conservative, most institutional investors (the ones investing in PE funds), want a sit down meeting with a paper document in front of them.
Here are some of the bullet points that will show up in any investor presentation:
Think about an institutional investor who receives hundreds of these decks, all making the same points, written in the same style, using the same (blue and grey) colors.
As a fund wanting to raise money, you need to decide which of the above are hygiene factors for which you can tick the box, and which are truly special in your case and build a story around that is consistent.
And I see most funds do a pretty good job when they pitch the story verbally to me, the challenge is to get that verbal story translated into visuals. This is especially important because these decks are emailed around to decision makers who might not have been at the physical meeting.
One chart with a few circles explains the product roadmap, pricing strategy, customer segmentation, and competitive differentiation. Perfect!
When I push back, clients are often surprised. The problem: the chart works perfect for people who have been sweating over it for 6 months. They remember how they inverted the direction of the arrows back in December, how they added the color layer, how they got rid of these long sentences that used to sit at the bottom left.
The person who sees the chart for the first time misses that context. It is the visual equivalent of the poetically beautiful but utterly vague mission statement.
Two solutions:
Art: Malevich, "White on white"
"Cover letters" that introduce a pitch are often poorly written. Think about the latest spam email that you received from a head hunter offering to help you with recruiting staff for your startup. You open it (maybe the subject line was decent), and as soon as you started reading 3 words you knew what was going to come and deleted the message.
A cold email is a shot at someone who is looking for the earliest opportunity to shorten the email inbox with that satisfying "delete", "archive", "done". The skill is to postpone that moment.
In short, avoid delete button triggers: long paragraphs of text, buzzwords, lack of clarity of what it is you do, what you want, lack of clarity of how you got to the person, generic pitch deck that is not tailored to the email stage of the due diligence process.
Image by freezelight on Flickr
These observations by Jason Lemkin are spot on. By the time you have made it to final presentation to the full partnership of the VC, it is likely that the partner you were in touch with until then wants to do the deal. The main challenge in this presentation is not to make mistakes in front of an audience who has done far less homework than that partner. Do your thing that worked before, and treat ignorant questions with respect.
An investor is heavily influenced by the successes and failures of past deals. There might be no scientific evidence that "you can't make money in healthcare diagnostics", "ad tech is dead", "companies founded in Italy are hard to scale", "that sounds like IT management, and that is a feature rather than a market" but the investor, with sample size n=1, is a true believer.
In the first few seconds of an interaction with an investor, they will try to put you in a box of something they understand and/or have invested in in the past. Help them do it, and say that you will clarify later why "mobile social network" is not exactly what you are doing.
If the dialogue with the investor continues, pay careful attention to of the cough comments about past experiences where she burnt her fingers on something that sounds similar. These reservations go really deep, an investor won't trip over the same stone twice. Understand the concern, and really explain why your situation is different. If you don't know the answer right away, get back to her later after you have collected the facts.
The investor asks you a question, and the instinctive reaction of an entrepreneur is to fire back with data, slides, and arguments to prove that the investor is wrong. "No, that concern does not apply to me because, because. because". Part of the rhetoric includes a repeat of what just has been presented, to eliminate the possibility that the investor did not understand it the first time around. Boom, boom boom.
Pick your battles. Especially if the investor bases the question on 5 other startups she has seen in the same field, it is 5 people she knows and trusts against you she just met 20 minutes ago. Maybe she has a point, maybe you need to find out a bit more about the background of her concern, after which you can give a more balanced answer, which could well be, let me check and I will get back to you.
Read the human signals, if the investor does not engage anymore and says "OK, I understand", but her eyes say something different, it might well be that she simply does not want to hear a repetition of your arguments she does not believe.
I have written a guest post on Presentation Guru, the digital magazine for presentation professionals. Here you can find my post about designing presentations that will convince investors.
Google is full of free investor presentation advice and presentation layouts. The problem with all of these is that they are generic and not specific to your situation. So blindly filling out a presentation template is unlikely going to give you the best pitch.
Here is another way to craft your pitch. Think of an investor you respect, and even better, an investor whose reasoning you sort of understand resulting from conversations and or blog posts. Now, jot down an imaginary conversation that could have taken place if you find yourself next to her in the check in line for a flight. The most important part of the exercise is to anticipate the likely questions are face expressions you are going to encounter: "Really, what is it about?" "Hmm, that is a sort of [x] for [y] right?" "But are any of your users actually sticking around?" "What do people pay today for this?" "But you have no machine learning expert on your team" "Yes, I know that online video consumes a lot of bandwidth, but what does it have to do with you"
Now take you notes from this conversation and use it to craft the flow of your investor pitch. Then, go back to the standard investor presentation templates and use them as a check list to see whether you haven't forgotten anything important.
Why is the business school, standard, investor presentation structure not always the right one?
Art: Leonid Pasternak, The Passion of creation
New startups are in need of all kinds of marketing collateral: pitch decks for investors and/or potential customers, product brochures, and a web site. I think that in the beginning, people are aiming too high with the web site: super effects, video backgrounds, sparkle, and glitter.
But the experienced investor or corporate purchaser sees through the facade immediately, this is a brand new startup with hardly any customers and 6 months of VC funding left. Instead, you can build a web presence that show yes, that you are young, but that you are serious and know what you are doing.
In the early phases, especially for enterprise sales, Google will land you a lot of customer inquiries, but rather people will visit your web site after a meeting as a form of due diligence.
