Most VCs are reasonably smart people

Here is an excellent post about 16 startup metrics on the Andreessen Horrowitz blog. The content of the post is interesting, but what is even more interesting is the tone in which it is written. The tale of a sober, reasonable person having to undo reality distortion fields in investor pitch decks. Investors try to understand what is going on.

Here is what you should do:

1. Understand what is going on yourself. Pick the relevant metrics for your business. See what is happening.
2. Present what is going on reasonably honestly. There is no need to emphasise a poor statistic with highly effective data visualisation. But pulling a totally obvious trick (like a broken axis) will have zapped all your credibility before the VC is even trying to understand what the chart means.

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Should you add financial projections in a startup pitch presentation?

Everyone knows that you made them up, nobody knows the future, all startup pitches predict hundreds of millions of revenues at some stage in the future. Why bother putting these shaky financials in?

Yes, there is no point in including your highly precise 10 year financial forecast model, exactly for these reasons, but, there is still a place for financials in your pitch. Here is what I usually do.

• A reasonably detailed and precise "forecast" of the short term financials. In most startups, this usually involves only costs. And unlike the revenues, you can be pretty certain about where you are going to spend that investment on in the near future. The benefit: 1) investors know where their money goes, and 2) investors see that they are talking to a CEO who seems to know what she is doing, has things organised.
• A very high level annual revenue outlook for the next 5 years. Nobody will pay much attention to this hockey stick chart.
• But - and this is the useful bit - add another slide that shows in a few simple calculations what you would have to believe in order for that year 5 revenue and profit number to be true. The best is a multiplication of 5-10 simple numbers: # countries, people / country, market share, price / user, gross margin, fixed $ million cost. You teach the investor how your business model works (what factors are important) and provide a way to evaluate whether your forecast is highly optimistic, or totally insane. The underlying Excel model can still be very detailed (it should be), but the 5-10 numbers should be very simple. I have had design projects where the company went back and revisit the Excel model because of an inconsistency in these high level numbers. 

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Art: Albert Anker, The Fortune Teller, 1880

Table or bar chart?

Back in the good old days at McKinsey, we tend to put any range of data in a column or bar chart, even if that meant a chart with just one column, or one chart.

A nice clean bar/column chart works beautifully to visualise a data range. Especially if there are big differences between the values of the chart. If the differences between the numbers is not that big (I do not like broken axes), or you have lots and lots of data to present (the data labels just become too small), I resort back to a simple table. 

Stick all the data in, round things up nicely, and use accent/shading background colour to make your messages pop.

I must admit, I start using tables more and more. (And that is why they are so easy to make in SlideMagic)

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Art: Louis-Philippe opening the Galerie des Batailles, 10 June 1837 (painted by François-Joseph Heim)

Confusing ranges

A large of the data presented in business presentations is uncertain: future forecasts, market (share) estimates, competitive comparisons. Many people express that uncertainty by presenting numbers as ranges: cost per bottle as between $1.50 and $2.00.

While working with ranges might be required in a spreadsheet calculation, I don't like to use them in presentations:

• It clutters the slides with double the amount of data labels, and/or double the amount of text in tables
• It becomes hard to work with totals, add things up. Five of these 1.5 to 2 becomes 7.5 to 10. Adding negative numbers into the equation will give totals that nobody can work out from the top of their head.

So what to do? I would stick the mid point of the ranges as a point estimate in the presentation, and makes sure it is a nice, rounded number (7.49544 looks to certain). Much simpler and much clearer.

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Art: a painting depicting women inspecting silk, early 12th century, ink and colour on silk, by Emperor Huizong of Song.

Stock image sites come second

My use of images has changed a lot over the past year. I have now reached a point where stock image sites come in as a last resort. And when I do, clients often push back and ask me to look for something different than that cheesy, cliche, polished stock image.

So, most of my image search starts with Google Images, with the option "labelled for re-use". or I browse through some of these excellent sources of free presentation images. (Although I must say that the latter now become so popular that you start recognising images instantly because of over-use).

Thoughts on user interfaces

As I am making progress with my presentation design app SlideMagic, I spend a lot of time thinking about user interfaces (UI) for office applications.

Part of the reason that it is so hard to wean people of Microsoft Office applications is that they have gotten used to the mouse/click/dropdown user interface. Spreadsheets, word processors (who uses them still?) and presentation design software all basically have that same UI.

The drop down UI started out pretty simple. File, edit, help menus. Over the years ribbons and tool bars have complicated things. Most people now use a fraction of the functionality that is available to them. As soon as a program does not have that familiar dropdown UI, people are in trouble. I had a hard time understanding the new Adobe Acrobat UI. It is beautifully simple, but it takes time to figure out how to do very basic operations (zooming in and out, combining multiple files into one, rotating mixed up pages of a scan).

Over the past years, user have gotten to know a second UI: the mobile device. The solution for office apps is super simple functionality that draws heavily on icons, UI elements that we have learned from mobile devices.

See how it can work in SlideMagic.

Sales presentations can be technical presentations, and vice versa

Often, clients tell me that they have to present to an audience of engineers, so the presentation should not be a "marketing" presentation.

The bad interpretation of this is: we are engineers presenting to engineers, so we can get away with text-heavy slides and diagrams full of numbers. We engineers understand each other. As soon as we add pictures or try to make the presentation more visual in other ways, we lose credibility.

What is really going on is this: if you are selling a high tech product there is no way you can avoid well, talking about the technology. But the high tech world is full of presentations written by people who do not really understand the technology, for an audience who does not really understand the technology. These presentations lack substance but are rich in marketing buzzwords. Engineers will recognise them in a second, and don't want you bring "one of those".

We need to eliminate two misconceptions:

• Technical presentation content cannot sell
• A senior (and/or) sales presentation audience does not understand technology

Here are some of the things I do to create technical sales presentations:

• Insist on explaining how it works in human language without "black boxes" or "secret sauces". The Einstein quote about a 6 year old who can understand everything if told in the right way applies here.
• Very focussed data visualisation. Technology advantages are often beautifully simple: things are faster, cheaper, smaller. Rather than writing a bullet point "we are 33% smaller", put in that very complicated data chart that shows the full richness of your research, but add 2 big bold lines that are 33% apart. 

Do you need the "Thank you" slide as the last page?

Here in Israel everyone puts a "Thank you" slide as the last page of the presenting. Almost to thank the audience as it is impossible for the voice to be heard during the roaring applause. People ask me, should you use it?

It depends how.

The huge "thank you" with a big cheesy stock image of applause is definitely not the way to go. A dense page the repeats/summarises the entire presentation in detail also won't work.

You want to end any presentation with a strong upbeat message. The worst ending is, "well, this is it, we are running out of time, and I just managed to stay in my slot". It is better to put up a slide that puts in some call to action: "Sign up now to change the world!" or something.

For investor presentations, this is a bit harder. "Wire to this bank account" is pushing it too much. In these cases I actually put up a slide with a small/subtle "Thank you" (for your attention) title and the contact details of the person in charge of fund raising at the bottom. 

As a visual I tend to use the a memorable photo, graph, concept from the presentation that works as a memory shortcut to my entire story. 

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"FolkRetabloRoomChalma" by Thelmadatter - Own work. Licensed under CC BY-SA 3.0 via Commons.

Raw data in due diligence

Fundraising involves multiple interactions with investors. It could be along these lines

1. The opening 1 minute pitch
2. Some slides that you send ahead to give a bit more detail
3. A first one-on-one "coffee meeting" with an investor
4. A full stand up pitch to the VC investor committee
5. Follow up in due diligence meetings

For stage 5, investors probably ask you to show them answers to a 1000 different benchmarks and ratios. It is tempting to create a dedicated presentation with all the answers to all the questions that looks exactly as polished as your first investor pitch.

But maybe that is not necessary?

• Investors want answers to specific questions, and are probably comfortable with browsing raw Excel data in an informal meeting. Some VCs actually like to query tools like Google Analytics or Mixpanel "live" in a meeting
• Raw data shows authenticity and freshness, you are not trying to hide something
• After one week, one month, all your custom-made PowerPoint charts will be out of date and you can do the whole exercise again
• A CEO of a startup has better things to do than prettying up Excel data

If you go the raw data route, make sure though you understand your own numbers and do not get caught off guard in the meeting.

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Image credit: Ralph Aichinger on Flickr

Thoughts on the iPad pro and presentation design

The inevitable is happening: tablets get more powerful, screens get bigger, and we are getting pressure sensitive screens and a stylus. What are the implications for office applications and presentation design?

I think the big screen is the most important factor here, not a stylus. Until now, tablets screens were too cramped for design work. More breathing space makes for a more manageable user interface. I think only a very small subset of users will use the styles for making sophisticated sketches.

A highly precise input device (the stylus, the mouse) is actually bad for the layman designer. There are just too many degrees of freedom to move, drop, stretch objects. That was the thought behind the design of the SlideMagic user interface (try it out here).

I did not design SlideMagic for use on smaller tablets and phones, but on a 2732 x 2048 screen, it might just be the perfect fit, a lucky coincidence.

Don't take it personally

Some of my clients probably recognise case examples I use in my blog posts, which is not a coincidence. As inspiration, I take something that happened in my work recently, generalise it, strip out confidential information, and write something that could be useful to my readers. 

But don't take it personally! I never use blog posts as an indirect communication channel. And, I do apply a reality distortion field here and there.... Your case was just inspiration that blends in with other experiences I had.

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Art: Elena Kostenko, Offended, 1963

How to format a spreadsheet

A few simple rules to keep your spreadsheet readable and error-free.

• Use one set of column headings through the entire worksheet and freeze the panes to the top of the sheet. If you need a completely different table, create a new worksheet in your workbook
• Avoid using too many colours, use shades of grey instead
• Round data by dividing by thousands, millions so that they are readable. Round to 1-2 digits behind the comma. Excel will continue to calculate things with the highest precision, even if you do not see it
• No underlines, italics, but use bold, uppercase, and bold upper case
• Use long, descriptive row headings
• Write your formulas top down, a lower row depends on a result that was calculated the line above. Keep formulas as simple as possible. A spreadsheet is a form of computer code: it should be readable the week after you created it. One formula with 15 cell references is the equivalent of code spaghetti.
• Add totals where ever you can to check for formula errors and to keep things readable. The brain often memorises a number quicker than a description (35.4 instead of "North Africa sales 2014 H1")
• If you need to source data out of a "data dump" keep that data in a separate worksheet and pull the numbers via links into your analysis. It creates a nice clean separation between your data source and the analysis, and makes it possible to over write your source data with new information and have the analysis updated instantly (always double check)

This, this, this, this, and this!

Startup CEOs usually have their heads full of ideas for future growth. Investors usually like this. But, investors also like CEOs who have a clear prioritisation and what happens next.

• Use your core business, most important activity to introduce the pitch to the investor. Adding too many tangents before the audience has grasped your concept fully will just confuse people.
• Now, make a clear break and introduce future growth options. If there are lots, rank/time them somehow.
• And yes, it is OK to be not 100% certain of which growth options you are going to use 5 years from now. Present the most likely case in full detail, and show the sort of trade offs you need to be making. (Obviously, don't reveal this lack of confidence for things that are going to happen in the next 5 weeks).

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Art: Fritz Beinke, The Juggler, 1873

Google uses "glow" to put its logo over images

I don't think it looks very good. Adding a glow around an object always makes it look "dirty". The better solution in my eyes is to create an all-white version of the logo and put that over the image.

Experience versus facts

During my holiday, I visited the rebuild house of Nelson Mandela in the Soweto township just outside Johannesburg. The house was turned into a museum and full with information, awards, factual information, and artefacts in glass vitrines. It was a museum, not a house.

I would have designed the exhibition differently. Mandela's presence is so huge that very few visitors would need the facts about the honorary awards he received. What is interesting of the place is the incredibly small and modest surroundings he used to live in (he tried returning there after his release from prison but the press attention made it difficult for him to stay there).

The best way to design the museum would be a simple replica of the house, including furniture to give an experience what it would have been to live there. People would take time to soak it up and take the impression with them. No facts needed.

The one-way-communication tour guide

On one of the trips I did in South Africa I encountered the one-way tour guide.

• "You can stand here"
• This was followed by a rehearsed, line by line, explanation of what is on display. I know it is literal because she repeated it exactly the same way later on without realising that we already heard it before
• End the explanation with "Right, any questions? [no pause] Let's move on"
• This process repeated about 12 times

This tour guide was obviously new, very young, and mostly concerned that she could remember her lines, and serve the maximum amount of visitors in a day. I doubt that any of the readers of this blog would present slides in this way.

Still, when potential clients run a first pitch of their project to me, it is surprising to see how many ignore body language and simply press on with the story as if they were rehearsing in front of the mirror.

• One group of presenters fails to see obvious questions (elephants in the room) that almost any audience will have, and proceeds with a general pitch (problem, solution, etc. etc.). For example, you ignore the obvious question: "this sounds exactly what Google started doing in 1998".
• The other group of presenters spends too much time on concepts that are common knowledge among an expert audience (i.e., the basics of "the sharing economy").

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Art: War Elephant by an anonymous artist, 1558

Investor presentations are not (exactly the same as) TED talks

TED talks have done great things for presentation audiences. They set the standard for minimalist slide design, carefully thought through story lines, and well-rehearsed on stage performances. These are great things for investor presentations as well. However, there are differences.

• TED talks have a broad general audience, investor presentations face highly specialised, knowledgeable audiences that will have heard dozens of similar pitches by similar companies trying to do similar things
• TED talks have big audiences without Q&A, investor presentations are dialogues before a smaller audience
• TED talks are watched live or via online videos (i.e., the presenter is there to explain), investor presentations are often read on a screen without someone present to make the points
• TED talks aim to change the audience behaviour or stun the audience with a new/little known fact/innovation. Investor presentations aim to get you through to the next round of a due diligence process
• TED talks do not require detailed information, audiences of investor presentations might obsess over the value of very specific benchmarks (web site visitor behaviour, clinical research results)

In short, use all the good things that you learned from TED performances, but don't copy a TED format blindly when pitching investors.

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Image by urban_data on Flickr

I am back

I just returned from a fantastic holiday in South Africa and will pick up my daily posting schedule soon. Apologies for the radio silence.

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Art: Henri Rousseau, The Hungry Lion, 1905.

Can you test the new color picker in SlideMagic?

We have just deployed a new color picker in my presentation design tool SlideMagic. It extracts suggested colors from images. By default, it takes your logo image and offers a menu of accent colors that can be selected with one click. 

You can also select any image that is in your SlideMagic image library.

This feature had some especially stubborn and unpredictable bugs. It would work on one machine, not on another. Maybe you can check and let me know if it works (well, especially if it does not) together with your OS/browser combination that you used.

Not a user yet? You can sign up here for SlideMagic.

Apologies for infrequent posting, I am driving through beautiful South Africa at the moment. 

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Art: Vincent van Gogh, The Yellow House in Arles, 1888

Product structure versus presentation structure

Product architectures evolve over time. For you the owner of a company, or the manager of a product category, there is no easier way to structure your story then the structure along which you see the world: the product architecture. Customer issues, competitors, customer segments, it all fits brilliantly together.

That is, it makes sense to you, not necessarily to your audience. Product structures tie your hands and force you to follow a certain story line. Not all products are interesting, not all products are relevant. 

Maybe it is time to take a step back from how you organise your internal reports and take a fresh look at how to tell the story of your company.

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Art: Paul Signac, Railway Station near Bois Colombes, 1885