Bootstrapper.com - Confessions of Serial Entrepreneurs

So those of you that know me, know how much i talk about “Entrepreneurial Burn Out”. What that is - is the equivalent of post traumatic stress for entrepreneurs. After a major blow out or being fucked by partners or investors etc… an entrepreneur rarely does anything successful for a year. More often than not, the entrepreneur will experience one of the following (if not all) symptons: 

1. Insane ADD - attempting to “spread risk” by doing too many things. Both end up done half ass and go no where. 

2. Scared of the world - inability to partner or give up equity in situations where it makes sense. Often times, the entrepreneur will go into hoarding mode with their ideas for the fear of giving up too much and getting screwed again. 

3. Total Burnout - depression & a day job

In this fourth installment I continue to breakdown your Angel presentation into sections, each part being equally important to the overall presentation. As stated in my last post- I do this to allow you, the entreprenuer aka the soldier, an opportunity to begin pacing yourself in preparation for (and also during) the presentation aka the war (don’t forget that stopwatch!). To refresh, please read parts 1-3 again before continuing.

So guess what? Those first 5min that just flew by were great, but the war is just ¼ over my fellow entreprenuer- there’s the 10min presentation followed by a 10min follow-on Q&A session. Therefore, you must remain focused as ever when transitioning into this part of the presentation. The first 5min was meant to give the prospective investors an overall “gist” of your venture. It’s great that you’ve gotten this far soldier, however, recognize the next 2min necessitate a complete gear shift and are vitally important to whether an investment is on the horizon or far off into the sunset.

Fifth Minute – Seventh Minute:

During these next 2min you need to be mentally prepared to keep your presentation on a macro-level, essentailly skimming over the highlights. Read again….only macro-level and only skim…. do not fall into the trap of regressing back into the micro to explain additional points you may have missed previously or feel are important to parlay to the Angels now. You don’t have the time to divvy away from the macro at this point and resist the urge to do so at all cost. Here you’re not trying to get into the nitty gritty- because like I’ve stated, you simply don’t have the time. Furthermore, you will be drilled during the Q&A on points you may have missed- I can gurantee you of that.

Choose just a few key points to touch upon (but only macro-level) which reinforce 3 things:

- The validity of your venture

- How and when the investor will recoup their original investment (projected)

- How and when the investor will exit at 10x -15x their original investment (projected)

As you transition into this 2min phase take a deep breath and realize you need to present a completely different case for investing in your venture then during the first 5min. During the first 5min the Angel Group wanted to hear how, where and why you’re going to capture and solve a need of the consumer. Now within these next 2min you need to hone in on how you’re going to grow your product/service into a venture with a multi-million dollar top line in revenue. Do this by emphasizing, leveraging and hammering home the key points you’ve chosen and relate/intergate them into the 3 things outlined above.

The best way to transition into this gear change is to simply talk dollars and cents with your respective audience of Angels. The most effective key points to articulate and briefly touch upon in a macro-level capacity in my opinion are:

- Initial target market for your product/service and the descretionary dollars they possess

- The total market (keep in mind the macro-level impact of your product/idea as referenced in post 3/4- ie “taking XYZ drug”) and the descretionary dollars they possess

- The name/grouping of your market. This is extremely important because your market is what drives the multiple investors will value your company with. For example, a media services company normally has a cash flow top line multiple of 1.2-1.5x, meanwhile a media content firm has current multiples ranging from 10x-12x. Therefore, it’s extremely important to understand the broad market your product/service fits into.

Now my reccomendation here on how to present these 3 key points is acutally opposite of what most Angels/Consultants/Investors will tell you to do- almost everyone is used to, shown and given macro-level presentations which are eventually boiled down to the end consumer (“top-down” approach). I disagree with this way of presenting your venture. As the founder and expected domain expert for your venture, you need to tell me how you’re going to efficiently, effectively and precisely grow your business from customer #1 through customer #10,000 and beyond. If this isn’t clearly articulated, then how can any Angel trust you with their hard earned money? Of course there is the long-term “big picture” of where you want the venture to go. But hold on there soldier- you need to walk before you can run- meaning every Angel wants assurance (seen as a risk mitigator) that your head is not already in the clouds and that you understand ramping up your venture is a hard fought battle not won overnight. You need a clientele base before you can even remotely ponder your 100x exit, so focus on building a strong foundation with your clientele base as the anchor, while also continually churning out the same high quality transaction each and every time. Because a strong foundation is anchored by a solid clientele base (which is vitally important in a start-up) the “bottoms-up” approach is much more of an appropriate (and immpressive) presentation technique.

Next I will detail how you should present your “bottoms-up” approach to the Angels who are hopefully now listening quite intently (if you’ve kept their attention to this point it’s almost a given because in the end it’s all about ROI!!). As previously stated, your multi-million dollar vision is a byproduct of consumer tastes, interests, viewpoints, etc so present strong concrete evidence to the Angels (which you should leverage) to explain why consumers need your product/service (we’ll call it XYZ reason). Whatever the XYZ reason for your product/service, you’ve now identified your initial target market (the “bottom”). In addition, you should be able to comfortably estimate:

- The number of consumers who will have the same XYZ reason to purchase your product/service

- The cost/benefit consumers see with your product/service versus other ways and/or competitors which solve the same XYZ problem/issue for the consumer

As a side note: The bottom line is that you must have an immensely well defined scope of where, what and who your business will target from day one and also as far as four and five years down the road. Angels want to see a roadmap of where you’re going to start based on XYZ reason and how your pipeline of innovation to the original product/service offering(s) will generate increased expansion into a larger and more diverse consumer base. The larger and more diverse the target consumer base, the better, as Angels only want to see ventures with a total available market >$500MM. Why? Because that size of an available market is a huge risk mitigator for your venture and the investor- the more consumers available to target, the more likely you’re able to attract and retain the necessary 3%-6% of consumers who will make your venture a success.

Then detail your overall total market drivers- what is going to make consumers buy your product/service besides their initial XYZ reason? This is a more generalized (or higher level) description of the XYZ reason that the consumer is going to buy your product/service, which could be (but not limited to):

- First Mover Advantage

- Convenience

- Marketing

- Distribution

- Price 

There must be at least something (and hopefully numerous things) uniquely different about your product/service that distinctly separates your venture from the competition. If there is no direct competition and you’re creating a new vertical, then explain how your firm intends to address (and eventually differentiate from) the flurry of competition that will undoubtedly enter the marketplace. Don’t be naive enough to think you’re the only one with this idea- chances are 20 others have already thought of it, but didn’t have the time, resources or know-how to execute. Therefore, realize once you hit the market- others will know their idea is worthwhile because its now been vetted, verified and legitimately proven since its launched in the marketplace. Thus, others who haven’t yet acted upon their initial ideas will now do so, with a great case to go back to their family & friends, Angel Group or local VC Firm to get funded. Then, poof… within no time you’ve gone from entering (and creating) a new vertical to struggling to keep market share in a hypercompetitive marketplace. In addition, competitors will attempt to outdo your venture by studying the first mover mistakes you’ve made with the intention of catapulting themselves past your venture (whether it’s through price, service, distribution, etc) based on what they’ve learned from you! This has happened many times throughout history and across many industry sectors where the first mover becomes a learning tool for the second and third entrants; who ultimately, because of the lessons learned through first mover mistakes, end up as the long-term winners in a the marketplace. Point being- no matter whether you’re in a hypercompetitive marketplace or creating a new vertical- competition will come and it will be fierce- so be prepared soldier (this is why strategic planning, and especially its execution, are vitally important).

Last is your market category (the “top”). This is an increasingly broad and macro-level description detailing essentially what business your product/service is in and your positioning in the minds of consumers (and also against the competition). This description should be the launching pad for your sales and marketing plans. In addition, it will also function as a metric for the investor when determining an appropriate cash flow multiple- utilized to produce a valuation that’s as accurate as possible. In addition, this is where the aforementioned roadmap becomes extremely valuable. Investors are quite fond of visual aids in a presentation and here is where you satisfy that craving by drawing now (DO NOT PRE-DRAW) a diagram of how your venture stacks up against the competition in your specific market category. The main mistake entrepreneurs make here is spending time discussing competitors- Angels aren’t there to listen about competitors; they’re in attendance to hear about your venture! Therefore, focus on:

- Your Company’s Strengths: On one axis of the diagram begin to draw (and also verbalize) the metric you’re going to use relating to an aspect, such as a core competency (and not just intellectual property), that your venture encompasses and will produce/execute on exponentially better then the competition. Make sure to draw out a projection of where/how competitors and the marketplace will change over time based on your entrance. Investors will critique your drawing/diagram/projection by asking themselves:

o If the metric relates directly to the product/service

o If customers will realize its value for XYZ reason (and retain your product/service because of it)

o If your projections are achievable (DO NOT SHOW A HOCKEY STICK PROJECTION!)

 - Your Company’s Weaknesses: Don’t be afraid to admit at least one challenge your venture will have to endure/overcome based on this graph- believe it or not, investors appreciate that you realize (and are willing to admit) that the venture has downfall(s) because it exemplifies an impressive level of maturity and strategic thinking. There’s nothing wrong with admitting that you don’t know it all. However, you must have a well thought out reply to your weaknesses in relation to scaling the business model because they’ll be apparent to any domain expert in attendance (you’ll get hammered on it in the Q&A). Investors are not just random people giving you $$$$, they’re domain experts with specific competencies who bring value to the table through what are called “value-added services” such as coaching you on how to overcome your venture’s weaknesses based on their prior experiences in the space. Any entrepreneur that says either: 1) They don’t have competitors 2) They don’t have weaknesses- is immediately discounted by an Angel Group and looses most (if not all) credibility.

As a side note: Do not pre-draw the diagram. Investors, as previously stated, can loose focus easily if you throw too many bells and whistles at them upfront (hence why you don’t hand out any materials at the beginning of your presentation). Thus, you want to draw the diagram on a white board as you verbalize your story. You want the Angels to follow the story with dual attention: both visually and through attentive listening.

By no means are any of these 3 segments easy to articulate in a short, concise and impactful manner. Usually most companies present this section from the “top-down.” In addition, most entrepreneurs utilize overly broad data, leading to an overly broad target market, which steamrolls into a venture that cannot correctly identify its target category- leading to a venture that all of a sudden encompasses just one marketing plan with one sales approach and a product/service offering that supposedly suits all- which obviously isn’t fathomable.

By far this is the hardest section of the presentation to get through. Segmenting your market is nowhere near as easy as it sounds, which is why I estimate that less then 3% percent of entrepreneurs relay this information in an impactful and memorable way which flows (and connects with) the rest of the presentation. Most Angels “go to town” on this part of an entrepreneurs presentation because there are almost always numerous dislocations between what’s projected as the available market for XYZ reason a consumer desires your product/service and what the projected available market actually is and/or turns into going forward once vetted out through due diligence.

Seventh Minute – Eighth Minute:

In this next section, remember the phrase “less is more” because in one minute only (yes you read that right… ONE MINUTE ONLY) you need to clearly articulate:

- Marketing Strategy: Choose your top marketing strategy (ie- branding, promotion, public relations (pr), web presence, how you’re going to market, etc) and support it with evidence-based reasoning for choosing that specific path. Do not get bogged down by going into detail thinking an investor needs to hear every little point behind why you chose a certain strategy- if there are questions (which there undoubtedly will be), they’ll come in the Q&A section. If you’re somehow ahead in time at this point, give a macro-level “taste” of your second/follow-on marketing strategy.

- Sales Strategy: Describe what verticals you’re attacking (not “seeking” as most entrepreneurs state- but attacking!!) and the way(s) in which you’re going to get there- ie through a sales force (hourly/salary/commission) or other distribution and/or sales channel strategies. Be clear and be short. In addition, detail the precise time it takes for a sales cycle currently (or upon investment) with your existing target consumer and how that lead-time changes going forward. Also detail your pricing structure and how it changes with volume, over time or through innovation. Focus extremely hard on this section- when articulating this strategy most entrepreneurs give the impression that they care more about creating and evolving their product/service then actually selling it. Angels care about selling the product/service because that’s the only way they’re going to get a ROI- so please don’t leave a bad taste in their mouth by gingerly glazing over this important section. 

- Product Strategy: Here once again is the roadmap concept referenced previously. Show an openness to future tweaks, critiques and redirections of your product/service offering and its pipeline of innovations. Investors want assurance you’ve thought about how to attract, target and retain additional target segments and that you’re also willing to accept other viewpoints on what’s ultimately best for the venture. Therefore, quickly detail what you envision as the future for your venture and how you see it maturing and evolving as the market adopts your product/service.

Trust me, one minute is more then enough time to spend on this tri-strategy section. These parts of your venture will be hammered upon in Q&A and mostly likely are already deeply understood by your current audience. You’ll be able to rely on this audience for advice upon investment in relation to this tri-strategy section because it’s in an engaged Angel’s best interest to take the time to “flush out” these strategies for the best holistic long-term result.

 Eighth Minute – Ninth Minute:

Any investor will tell you that the management team is one of the most paramount reasons for investing in a venture. I’ve actually known some Angels who’ve invested in companies they knew were going to fail because they wanted to be at the forefront for investment in an entrepreneur’s next venture. Why? Because they knew the entrepreneur would learn great lessons from that failure and next time out would develop a rock solid company.

Some investors are fond of having an entrepreneur speak about their own background upfront- when the presentation first starts. I disagree with utilizing this tactic to keep investors attention because without anything in front of them (since you didn’t hand anything out yet/the projector is still off/etc- as I advise) they have nothing else to focus on but you.

Based on what you’ve already collectively stated and portrayed through your mannerisms, the group has a good idea of your competencies, strengths, weaknesses, background, charisma and personality in general. Now they want to know the entire management team’s competencies, backgrounds and qualifications; as well as what specific value each team member brings to the table. Here you’re not establishing credibility for your venture, but personally for yourself and the rest of your management team. In addition, you must explain your Board of Directors and specifically why each person was chosen. There must be specific value-add reasons for each appointment including: experience, competencies, connections or even for investment purposes.

Most Angels are weary of the team you project and will focus on vetting each member out during the Q&A and also after the presentation (usually through other connections)…Why? Because many start-ups think it’s fine to place hallmark names onto their management team or board who in reality are only working part-time (or on a limited basis) at the venture. The entrepreneur thinks this raises the profile of the venture considerably, with the outlook that it’ll bring a heightened investment success rate.

This is completely false, and to tell you the truth- the more of a hallmark name brought into a venture, the more that person will be vetted out by investors in the Q&A session. Every investor has seen a venture where a hallmark name is supposedly intimately involved, when in reality they’ve just signed on as a non-employee and defacto-advisor. During the Q&A session, investors will focus on this person and continually drill into their capacity at the venture until they’re sufficiently satisfied (it doesn’t take long to figure out whether they’re truly involved or not). Do not give a lineup of players whom you think will simply impress investors. Names don’t impress investors. However, a truly intimately involved hallmark name certainly is impressive and would be seen as a huge risk mitigator- unfortunately most of the time the situation turns out to be the latter.

If you cannot relay this section credibly, then you’ve shot yourself in the foot and wasted the past eight grueling minutes. Only 25% of entrepreneurs get through this section unscathed because surprisingly this is usually where the most “puff” is within a presentation. Normally everything in an entrepreneurs presentation is backed by well thought out, solid and evidenced-based fact; however, in this section somehow entrepreneurs feel inadequate, and a need to essentially “puff up” their management team and advisors. Word to the wise: DO NOT do this under any circumstance. Sadly though, many cannot resist the urge to do so and face a barrage of questions that ultimately bring the truth to light quite quickly.

Ninth Minute – Tenth Minute:

This last minute is a tough one I’m not going to lie to you. In the span of just one minute you need to go through macro-level financials (DO NOT have a 3 page excel spread sheet- investors want 5 columns and 5 rows at most), the investment required, the deal structure, exit strategy and most importantly- overall recap and a strong close on your audience. Yes, your presentation will mostly likely run over about 30 to 45 seconds; however, if your presentation has told the correct story and you’ve captivated your investor audience- they’ll be more then willing to forget the 8% time overrun (to be honest they probably won’t even notice you’ve gone over if they’re that engaged in your presentation- which is obviously the goal here soldier). The fact that your time overrun is or isn’t acknowledged/recognized serves as a good barometer for the Angel’s level of engagement in your presentation.

Thirty seconds, that’s all you need to describe a macro-level version of your financials. As previously stated, financials should be no more then a 5×5 square- short, concise, easily readable and easily referenced. Of course projections can be an immensely long discussion simply by themselves, but that’s exactly why you only have thirty seconds now- because in the Q&A you can let the investors drill you time and again without affecting the quality of your presentation. With financials it’s quality not quantity- ie 3 page excel spreadsheets impress nobody. However, well thought out, evidence-based assumptions that you’re ready and able to defend which are condensed into a 5×5 square are quite impressive to an investor. In this square you need to have either 3 or 5 year projections on revenue, gross margin, earnings and cash flow- that’s it. In addition, it would be useful to have a note regarding when the venture is going to achieve its break-even point. Overall, your financials simply need to make sense in these thirty seconds (again AVOID THE HOCKEY STICK) and the rest can be discussed during the Q&A.

These next thirty seconds must focus on the investment. Any Angel who’s been around the block a time or two will tell you that they’re most concerned about the “cram down” their initial investment may incur during follow-on rounds (simply stated- a decline in the value of their initial investment due to a follow-on investment at a lower valuation). Obviously follow-on investments at a higher valuation make the company worth more, increasing the value of an investor’s original investment.

Therefore, the best way to approach this normally uneasy subject is to strap up your shoes tight and flat out state (with confidence) what your valuation is and how much you think you’re going to need to raise in total to reach positive cash flow. For example, in an equity scenario- you project having to raise X amount now, XY amount in two years to reach positive cash flow (called a Series A Round) and XYZ amount in year three to scale infrastructure (called a Series B Round) before exit in 4-5 years (there may also be a Bridge Round somewhere in there). Either way, in this part of the presentation heed my advice and be forthcoming in your valuation, your capital structure (detailing current shareholders with percentage ownership), what you’re willing to give up and why. The big question here: what is the fair value of your current early-stage venture based on the projections you’ve provided, the market and comparables? To ensure you’re valuation is of “fair value” Angels look for your valuation to be reinforced in one of three ways, based on:

-         A multiple to last years revenue or profits

-         A multiple to next years revenue or profits

-         A recent comparable transaction

The third valuation methodology is usually quite rare since ventures are hardly ever similar enough to justify a reasonable valuation based on a specific transaction. Either way, the agreed upon valuation isn’t determined during this presentation or the Q&A- it’s decided at a later date after investors complete their due diligence process. End this part by alluding to your exit strategy and the time frame the investor can expect for monetization of their investment.

As a final note- don’t be shy with your valuation but don’t be overly aggressive. In either instance you’ll be hurting your credibility and ultimately turn investors away from investing. Instead, have a solid valuation that you can justify with solid fact-based evidence- and stand tall against the firestorm you’ll face on this front during the Q&A session.

Lastly, it’s time to recap and close your audience. Its been one heck of a fight so far soldier, I certainly know trust me. But do not loose focus simply because you’re so close- the best salesmen make the sale in the last few minutes and close like a shark- not during their presentation. Therefore, this is the time when you proudly state why the story you’ve detailed over the past 10min is best of breed, why you and your team are credible and the right individuals to lead this venture forward as well as why your product/service deserves an investment from this specific group of Angels. This is important- do your research upfront and close with a specific reason or two why this exact group MUST invest- whether it’s their backgrounds, past investments, current portfolio companies, etc. Other ways to close include: alluding to the fact that you’ve given a compelling value proposition by XY, a multi-pronged growth initiative with steps 123, you’ve mitigated risk through XYZ and your valuation is fact-based and reasonable for all parties involved based on WXYZ. Say this confidently and with conviction. Stand up straight, annunciate and look each investor in their eyes while rotating around the room- believe in yourself at this moment and also in your venture. If you don’t- trust me, it will be apparent.

Sadly, it has been my experience that very few entrepreneurs present this section successfully. To be honest I can think of only 3 out of hundreds who’ve taken this opportunity and used it to their advantage. Every other presenter has either lost me somewhere during the presentation or simply reiterates information they’ve already stated within the past 10min of the presentation. This is an opportunity to close your audience one last time with new invigorating arguments and information- leave a lasting impression, don’t be the closing dud that most turn out to be.

Here is it soldier… the home stretch…. but guess what? You’re only half way done- 10min up and still 10min of Q&A to go. Stay strong during this upcoming line of fire soldier, as stated in previous posts, it’s the investor’s job to try and pick apart every weakness, bottleneck and loophole they see in your venture. Just because you’re berated with questions doesn’t imply the Angels aren’t interesting in an investment. In reality, most of the time- the rule of thumb is the more questions you get (and the more in-depth and thought provoking they are) the more likely you are to get that long sought after investment.

Never forget that your odds of receiving an Angel investment are roughly 1 in 10. A gambling man would say these odds aren’t the best and a little luck certainly plays into these odds. Therefore, always remember that luck is an accumulation of hard work. If you put in the time and effort, while following the steps I’ve outlined, your presentation will be a blockbuster that will blow away investors. Furthermore, as an ancillary byproduct of following this outline I’m confident you’ll gain a much more in-depth understanding of your venture and its marketplace if nothing else.

As stated in my first post, the top 10% in presentation quality is where you want to be soldier. The big bucks are given to those in the top 10% because they’ve presented an efficient, effective and concise argument for investment. Best of luck in being the next venture funded- either way it’s a ride you’ll never forget and something you can hang your hat on for the rest of your life.

In this third installment (and also in the fourth) I break down your presentation into sections, each part being equally important to your overall presentation.. I do this to allow you, the entreprenuer aka the solider, an opporunity to begin pacing yourself in preparation for (and also during) the presentation aka the war. Please use Part 2/4 as an outline for moving forward and use a stop watch to time yourself at each of the intervals. It’s a great habit to begin using a stop watch because it’s almost guaranteed you will either lose course during your presentation or be side tracked. As a result, you need benchmarks in your presentation for ease of use in getting back on track- using a stop watch and acclimating yourself to these benchmarks should do just that.

First off, as refereneced in my previous post, there should be a maximum of ten slides total in your presentation- DO NOT waste a slide on the company name, officers, address, etc. Now obviously there’s a method behind this madness….. the reason you shouldn’t waste a slide on this is simple- because you only have ten slides total!!! In addition, you can simply place a cover page on the materials you’ve handed out to the Angels and reference to it before putting up your first slide. This anciallry information on a slide is a waste of precious space. Furthermore, if this information is put up ahead of time (before you begin your presentation) it will distract the Angels- which is obviously counterproductive. That’s why it’s best to have this information as the cover page of your packet so that your first slide dives right into the material and engages the Angels.

In my last post I alluded to the fact that your presentation starts the minute you open your mouth and that it’s a war moving forward once that silence has been broken. That is partially not the case solider as Angels actually begin evaluating you BEFORE your first words. Angels begin their due diligence process by critiquing every detail about your appearance- your dress, posture, grooming, etc. All of these factors contribute to how Angels view your stature, how you view yourself, your company and your investors- ie how much confidence you have- which speaks volumes to the Angels.

Remember, Angels are successful and seasoned professionals, they know what to look for in a great company and a great leader. These seemingly small points are actually quite imperative- so pay attention to them ahead of time. Everyone knows you don’t show up to an interview in a tee shirt and jeans without shaving for 2 weeks- and this is 50x more important then a simple interview- thus, you should be immaculate. When you’re asking an Angel Group for their hard earned cash you must be very conservative in your attire selection, stand as straight as possible throughout the presentation (keep the lower back muscles flexed) and make sure all hair is groomed neatly and properly whether man or woman. Men can have a perfectly groomed beard/goatee and that’s it! These are rules of the road even before the first words out of your mouth are heard.

The First Minute:

During the first minute of the presentation the Angel Group wants you to connect with them. As stated in my first post- it’s critical that you make a connection with the Angels within the first 2 minutes max! If you fail to do so, you’ve lost the group for the rest of your presentation. Within this first minute, give a short “elevator pitch” about where your idea came from, who was involved, why and what you see as the ultimate “best case scenario” for the company in 5 years.

This explanation needs to be short, concise, to the point, engaging and full of energy. Look eye to eye with each Angel at the table, rotating clockwise and then counterclockwise. Keep your head up and always smile. Your mannerisms, posture, tone of voice, energy and enthusiasm are gauged and noted by each Angel. If you cannot do this successfully, you’ve already lost the Angel Group- which is why it’s so important to prepare heavily upfront (see Part 2/4 for further explanation).

As a side note, during this first minute (and before the “bulk” of the presentation starts) DO NOT pass out any documentation/handouts/or have the PPT presentation up. These all serve as distractions for the Angels and take focus away from your presentation during a critical time of engagement. 

In this first minute I would estimate only 35% of presenters take full advantage of this “engagement window.” What most entrepreneurs don’t realize is the first minute dictates the tone (and success) of the rest of their presentation because if the Angels aren’t already engaged before the “bulk” begins, they simply won’t pay attention to you. It’s simple why most (the majority of the other 65%) fail to accomplish engaging Angels with their elevator pitch- they lack adequate mannerisms and communication skills (both verbal and non-verbal). This could be anything from having a monotone voice like Ben Stein (boring your audience to death) or crossing your arms in front of you throughout the presentation (implying that you’re defensive).

First Minute – Third Minute:

Now that you were able to connect with and thoroughly engage the group of Angels in front of you it’s time to get to work. In this next interval of time you should give a macro-level overview of your target market- describe the addressable market size, who the target consumer is and how your product/service adds value (essentially how the product/service benefits the consumer both physically and mentally). Your product/service value-add is most important- is it cheaper, easier to use, a more advanced and/or proprietary technology, etc? If you cannot clearly articulate the value-add or USP, better known as the unique selling proposition of the venture (versus other competitors) then the odds of you receiving any Angel funding is minimal at best.

Any seasoned Angel Group wants a clearly articulated USP and the lead time of that product/service versus competitor entry into the marketplace- ie how long is it before competitors acquire the competencies, assets, strategic partnerships, etc to produce the product themselves and scale it? Once you’ve entered the marketplace and others (normally incumbents) identify it as an attractive opportunity, they will immediately begin R&D to eventually try and unseat you- thus greater competition is created as companies continually vie for the same loyal consumer base. Furthermore, Angels also want to see not only the USP, but what you’re going to do once the USP is lost as the competition’s R&D will eventually catch up with your firm, normally three years down the road (although it’s variable based on the maturity of the industry/segment/niche). Being able to articulate a forward thinking plan and vision goes a long way with Angels because it shows a willingness and flexibility to evolve the business. Some entrepreneurs unfortunately think of the venture they started as “their baby,” which they want to nurse, nurture and not listen to others opinions. This is a fatal mistake as constructive criticism on how the model must evolve to become or stay competitive is invaluable.  I’ve seen it time and time again. Bottom line, as I always say- I need to understand “how and why the grass is greener on the other side…… and beyond then as well.”

Another area most entrepreneurs overlook in this segment is articulating how the venture benefits not only the specific target consumer, but also the greater public in general. For instance, many times I’ve witnessed presentations where a presenter only focuses on how Joe Smith is benefited by taking XYZ drug. Well that’s fine and dandy to the Angels, however, they also want to know about the effects this drug could have (both positive and negative) on the healthcare industry, other pharmaceutical companies, Joe’s family or even our culture in general. A great example is Viagra- this pill changed our culture and the public’s perception of “hush hush” problems/ medicines through mainstream advertising as Pfizer brought the problem to hard print, tv, radio, etc. Yes of course, you should spend 85% of your time in this final minute talking about how your product/service benefits your target market, but don’t forget about the 15% of time that should hypothetically explore the more macro-level implications of your product/service.

Below are some well known buzz terms used by Angels (and often sought out in presentations) which always should be thrown sporadically into the mix. This will certainly peak an Angels ear because you’ll be speaking their “lingo.” They include:

• The Current State – What is the problem your target market has? Do they want to solve it, avoid it or is there simply an unserved or underserved niche that you want to fulfill?
• Seriousness of the State – What are the implications for your target market if the product/service isn’t adapted in the marketplace?
• The Desired Future State – If it was up to you, where would the consumer be in 2, 5, 10 years as a result of adaptation of your product/service in the marketplace? Articulate the problem that was corrected, mitigated, avoided or created so that an opportunity to produce follow-on product offerings is developed (as seen with skincare lines).

During this time period, less the 15% of entrepreneurs will articulate this section correctly. This is your opportunity to present the “gist” of your venture to the Angels and why the marketplace cannot live without your product/service. Where individuals fail in this instance is in clearly articulating how their product/service relates to and influences each of the different buzz terms.

Another major mistake by entrepreneurs involves talking to the Angels (at length) about the general benefits of the product and how it’s better then the incumbents current offering. For instance (hypothetically), your new product/service is a build-on technology to a search engine. Instead of stressing the benefits of that build-on technology to the consumer, most entrepreneurs just focus on how their product is better versus the incumbent(s). This is a grave mistake as Angels see your presentation through a dual lens- both as the consumer and also as an investor (ie what’s in it for them). Make sure to appeal to both of those lenses.

Third Minute – Fifth Minute:

In this part of your presentation you get down into the nitty gritty of the product/service and the solution it brings to the table. Here you must detail how the new invention/platform is significantly better then what currently exists on the market- ie key features, benefits, etc. The further you can distinguish yourself from what’s in the market, the better, because your product/ service must blow the competition out of the water or you’ll be presenting to deaf ears. By blown out of the water, I mean that as an Angel myself I want to see a product that’s EXPONENTIALLY 3x – 5x better then what’s on the market. Read that again, that’s not simply a multiple of three to five, that’s an exponential growth figure. Here is where you should also talk about the intellectual property (IP) of your venture- whether it’s in patents, strategic partnerships, unique competencies of the management team or some other hard to replicate/barrier to entry for competitors. Angels care about risk mitigation and unless your product performs exponentially above what’s out on the market now and is solidly protected (as nobody can have a complete picture of what’s about to be released or in early R&D stages) you’re not going to get funded.

Thus, it’s also a good idea to address how to combat products/services which may be in development by other competitors but aren’t out on the market yet. It’s key to address not only what’s out on the market now but also what could be in 6 months, 1 year and 3 years. The S-Curve of innovation in most industries dictates that your product/service offering will change dramatically within three years due to hypercompetitive marketplace conditions- which is something Angels want to hear you speak about. You ask why would they want to hear me beat up myself and my idea? Because it’s essentially a constructive critique of yourself and your venture, which exemplifies your forward thinking outlook, and Angels perceive this as a risk mitigation quality/talent. Even if you just mention this point and you don’t have a set plan in place, it’s a point which 95% of all presenters I’ve seen will overlook.

But if you are ready (and I firmly suggest that you are) to articulate the future you see for your target industry, its players and how your company will evolve- by all means go for it in a short and concise manner- build an easy to ready diagram or highly impactful demonstration. Both will be very much appreciated by the Angels in attendance and can only further your credibility and the vision you’re trying to relay to the Angels- but make sure it’s macro-level and not bogged down with details. Short and concise, short and concise!!

Next you should explain to the Angels how your product/service will be commercialized- ie installed, integrated, merged and how customer service is involved. Customer service in my mind MUST be touched upon. I come from background at Nordstrom, where the customer is always king and in my mind it’s the way to go- put the customer first and foremost with a back-end solution to solve all their needs as seamlessly and non-bureaucratically as possible.  As we know from Dell, this can be a make or break element of your model- especially once it begins to scale. This leads to the next point- circle back to the IP once again now (reinforcer) and detail your plans for the scalability of the venture. Do this only AFTER you’ve talked about the customer service outlay because Angels will be impressed with this approach I can guarantee it. Customer service is an often overlooked art in my mind and a great lead-in into reinforcing your IP and then detailing how to scale the model.

BUT BEWARE………. as stated in Part 2/4… it’s imperative that you remember throughout this section that possibly only two or three members out of the entire Angel Group will have specific and deeply entrenched competencies in your target industry. Therefore, avoid as much of the technical “mumbo jumbo” as possible in this section- if you speak above their heads in any regard, once again you loose and you’ll be talking to deaf ears for the duration of your presentation. Remember it’s all about engaging the Angels- technical wording doesn’t interest an Angel at this point and honestly you don’t have the time to get into an in-depth outlay with all the bells and whistles- do that later during the Q&A session as it’s bound to come up. Use the follow-on Q&A to your advantage and intentionally omit overly technical elements as they will be prodded into further I can guarantee. In addition, the Q&A session is much less time intense (especially if you’ve kept the Angels attention by engaging them) so you’ll be able to loosen up and take a breather when answering questions since you’re not on an exact time schedule.

When ending at five minutes the last point to touch upon is an expounded (both macro and micro) version of the value your product/service brings to the consumer. It’s monumentally important to proceed more in-depth into this here- building upon what you spoke about in your “gist” in the previous minutes. On a macro-scale (it’s up to you to tailor on a micro-scale based on your industry Mr./Ms.Entrepreneur) hammer home the vital importance of getting your product out on the market both in terms of what it will do and what it will solve. If the implications of your product/service are overwhelmingly positive for the consumer and it has a disruptive possibility, ie changing the future of an industry (desired future state) then right now you’re half way home warrior because the first five minutes just few by.

Right now, you the entrepreneur are half way through your presentation. If you’ve battled this far and won- you’ve done a tremendous job, keep it up solider, don’t get cocky and continue to excel through the rest of the presentation. If you’ve gotten this far without blank stares then you’ve done your job and you have the Angels hooked for the rest of the presentation (including Q&A). If you are getting those blank stares and people begin to shuffle around or gaze elsewhere besides directly at you- unfortunately it’s most likely over for you buddy as the investors will now turn to giving words of advice at the end of your presentation instead of wanting to invest.

Less then 15% of you will get to this point successfully- it’s a hard road make no mistake about it- and that’s why preparation is so vitally important- getting Angel funding could literally change your life. Most entrepreneurs will do quite well up until they have to circle back and articulate the customer value proposition in more detail. This is where most entrepreneurs infamously slip up and the reason 85% of presenters loose the war within five minutes.

Make no mistake entrepreneurs- an Angel presentation is a war: You as the entrepreneur will be challenged from the second you open your mouth. Not only because what you say throughout your presentation will be critiqued from every angle during the follow-up Q&A session (constructive criticism meant to expose bottlenecks, loopholes, etc), but also because it’s immensely difficult to present a short, concise and easy to understand business model articulating the macro (and also the important micro) parts of your venture within 10 minutes (which fly by quite fast- trust me).

Anyone who honestly believes presenting in front of Angels is easy has a screw or two loose because it’s an enormous challenge to clearly articulate (in only 10 minutes) something you’re so steeped in and committed to mentally, emotionally, financially, etc. It’s very hard to take a step back from being totally steeped in your venture from all angles (such as: mission, niche, scalability, competitive advantages, etc) and put yourself in the shoes of those who will be watching you.

This is another part of the war- being humble, dedicated and confident enough in your venture (and what you’re going to say) to be able to literally have an outer body experience. As an entrepreneur who wants to be in the top 10% of all presentations I’ve seen you must literally go through your presentation (fully) in your head at least 15 times as if you’re watching yourself present to you and other Angels in a large mahogany board room. You need to step back, envision yourself presenting, and critique yourself first. From there, you present to other associates in your venture, friends, family, etc. You should run through your presentation at least 20 times (in addition to the 15 in your head) before getting in front of an Angel Group. It may sound crazy/repetitive/pointless but this accomplishes many things:  

- You begin to visualize how you want to present your venture (tone, posture, slide deck, additional facts/visuals/stats to incorporate or take out, etc)

-  You learn what to say and what not to say through constructive feedback and criticism

- The more you present in preparation for your 10 minutes of fame, the more honed you presentation becomes

- The more you hone your presentation, the more confident you become

- The more confident you become, the more engaging your presentation will be because conviction in a purpose (in this case- getting financing for your venture) is shown subconsciously through your mannerisms whether your realize it or not

Hopefully now you begin to see the steamroll effect that begins to happen (As a side note, if you would like additional information/coaching on this preparation stage (or anything else written in my blog) please don’t hesitate to email me. I’m an entrepreneur myself, thus I’m always willing to help other fellow entrepreneurs- I wouldn’t be where I am without others who’ve invested in me by taking their own personal time to teach me principles such as these). Now back the topic at hand……

Running through your presentation, preparing to deal with follow-up Q&A, etc isn’t the end of the war, it continues: Remember, although there will be an Angel or two who do have specific competencies in the market you’re targeting, the other 20 or so members most likely won’t. Thus, you must tirelessly prepare to go from 1 MPH (articulating the market opportunity and value proposition) to 50 MPH (features, benefits, IP, competitive advantage(s)) to 100 MPH (a clearly articulated SWOT and exit strategy) within 10 minutes.  Learning how to do this not only takes insight and being completely steeped in your venture, but it takes time, patience, reflection, honesty with yourself and (most importantly) the collective acknowledgement/acceptance of the critiques/feedback given to you by family, friends and associates. 

So I was called a neurotic Jewish Grandma today. (Thank you Jay … now some may take this as an insult but not I, I think its a complement (this is coming from someone whose biggest complement is to call someone Crazy). Jay said the following to me today “Please stop acting like an old Jewish Grandmother.” Separately, he said to “Stay Focused.” Well, I will venture to say that every entrepreneur has a little bit of neurotic jewish grandma inside of them. When have you met an entrepreneur that is what the outside world would call sane? On the flip (investor) side, I don’t think I’ve ever met anyone that was sane either. The ADD gene runs in both families it seems. So Hip Hip (and hope not to brake em) Hooray to every Jewish Grandma like me out there! PS. When is someone going to listen to me and build StartupShrink.com 

Those of you that know me, know that I don’t pretend to make any sense. I still don’t get myself. The last few months have been surreal, my network keeps growing and i’m fairly well known in the startup community and I really didn’t do so much to get there.

My seed capital group is growing, Sun is sponsoring it and we are launching the Happy Hour Series with The Hatchery & Tri-State Ventures. I’m also looking into throwing a large fancy startup forum sometime in the next few months, exact opposite of my campy informal activities so we’ll see.

I’m working with Frumster & Shoes! Application on facebook to help grow, monetize and finance them.

AdSolutia is generating $2,000 a day in revenue but breaking even and causing stress because leads suck and our technology has issues, one of my clients is screwing me etc…so in general its unpleasant. My demos are almost ready so I can start pitching it around and hopefully can raise money. I think I have a decent shot at it, a lot of people are interested. Our AI is pretty sweet. I also just bought an email marketing company with 400k in revenue and a pile of data. Hopefully we can generate some cash off of it in January. That would be pretty sweet.

I’m informally advising probably a dozen startups in random ways and HotUpping is still in development, we have TakesAllTypes in dev and should launch in January and a few other random things working their way out - Davis’ app may go somewhere if he gets his act together and relaunching bootstrapper and a pile of startup related sites in the next few months that i think could be fun.

I was thinking of working on financing for startups as a business but i just don’t see enough interesting startups that i dont think i can make money from it. Also the whole broker/dealer thing, which i can probably solve. I Still want to get the call center deal done, that would be awesome, been 4-5 months already, that deal would open so many doors if i can take control of a 1500 seat call center company. I can grow the crap out of it.

1) have experience on your team in the space you are in
2) research
3) go slow, don’t rush
4) make sure you have enough cash to feed your family
5) ask for advice
5) seek professional help (ass in a therapist)
6) seek professional help with your business plan
7)
There is no lucky 7 - because don’t count on luck
9) have confidence
10) don’t give up but know when to toss in the towel
11) spellcheck…learn to us it

Yes and no. Usually yes. However there are levels of ADD. There is ADD people that can’t function and others that can. Some take meds, others drugs, others booze, broads or baseball… everyone needs an outlet…what you need to watch out for is a serial entreprneur that is burnt out - that is usually someone who has usually successful and burnt his own house down so to speak. He then typically will try to start a million things at once (i’ve been guilty of this) and will fail at all of them because he won’t have the balls left in him to operate, he’ll just do a lot of things half ass - now they may all be good ideas and great work - but he’s just not ready for the commitment.

A serial entrepreneur that just recently had a blowup at his own expense is like someone who just broke up with his wife, not because he cheated but because he spends his life at the office and his would have PREFERRED that he was cheating, at least he’d be home sometimes. The dozens of half ass startups are like the bimbos you date for quick flings after a breakup…nothing that will last, a little pleasure and then you cry.

So what to do?

Stay away for a bit, let them cool down, usually takes about a year. The guy has fucking post-traumatic stress disorder, he was just shot in battle because he didn’t look before crossing the street. Give him a break and sometime and don’t write him off. He’ll be back and probably be more successful then you. He just needs time.

When you’re a serial entrepreneur there’s always a question that every possible investor asks “Why don’t you fund it yourself?” I’ve been asked it myself and so have lots of my friends.

Simple question right? Not so simple answer…

Here’s why: Serial Entrepreneurs Dilemma.

There are 2 parts to serial entrepreneurs dilemma.

The first is our tendency to spread ourselves too thin. One success usually mean we invest in 5 more great ideas before cashing out of the first and thus end up in a cash crunch. I know a lot of people that started quality valuable companies but not exit-able companies and thus the founders are worth $5MM, $10MM, $50MM but are basically broke. It’s a funny thing but there’s a good chance that your neighbor that founded a company you hear about all the time and that the papers say is worth X zillions of $ but isn’t public has a lot less money then you in the bank. So when your billionaire neighbor doesnt offer to pick up the check understand - he may need a loan. But one day he’ll cash out and hopefully remember that you picked up the check when you pitch him to invest in your great idea.

The other problem with serial entrepreneurs dilemma I addressed in my last post. We are a rare breed of trustworthy quick thinking people. Our enthusiasm gets the better of us and we tend to get screwed even if other people make a lot of money. We also don’t like to admit that we got fucked getting other people rich. Sure we made money but a $50MM company doesn’t mean we made $50MM. Odds are we made money, saved some, put some in more startups and are trying to double down (not out of greed but out of love for the startup life)

Between the two reasons, we tend to have a lot of paper money and a lot of people owe us favors but not have a ton of cash - though we’re always willing to invest what we can.

So now to answer the initial question “If you are so successful, why don’t you invest your own money” … a lot of times we don’t have a liquid $5MM to invest. Sure we usually can seed fund it but beyond that better to bring on other people’s money then stress yourself out.

Of course there are exceptions. Some people have huge payday’s their companies go public or get bought by Yahoo. Those people are lucky and the exception - they get serious cash out. Most even successful companies don’t sell for huge multiples and most serial entrepreneurs are good guys and like to give cash back to their employees when they cash out (out of their own pockets basically) so for every Peter Thiel, there are a million successful but not quie as successful entrepreneurs that by reading their resume you’d think they have tens of millions of dollars but really did well but not quite THAT well.

There is a unique breed of entrepreneurs that are brilliant idea guys, a lot of them know how to execute pretty well too. They tend to have one fatal flaw - they are the worst HR managers in the world - for themselves (they usually have good noses for other people’s situations) but when it comes to choosing partners or executives we can be pretty shitty. We tend to pick people that have good credentials or “check out” without doing any real background research. We smell the idea and not the person and romanticize ourselves into beleiving they are perfect. Serial entrepreneurs are also the type to start companies on a whim. I’ve done it, just said fuck it, do it and invested X dollars into building a new company. A very high % of these fail but its our curse. We love the smell of a good idea. Serial entrepreneurs tend to make a lot of money for other people, partners, investors, clients etc…but tend to get fucked ourselves…we somehow end up missing things and people take advantage of us. I’ve had a partner fuck me so hard it almost took me from being worth $30,000,000 to bankrupt almost every night. I admit I am a bad judge of business partner character!

Now there’s a way to counter this: work with other entrepreneurs that have also suffered from a stab in the back, take longer to analyze an idea, hire people to investigate partners ($1000 can buy you a fucking amazing background check) and work with people that offer you good advice free or that you talk to and are friends with (not some guy you just met at a party or online - gasp!) and built rapport and thus have a reason to trust. I like working with people that have without asking them offered me a favor in the past. It’s a real simple philosophy I have learned after being burned many many times. Very few people are nice and offer to help without asking and actually offer good help, those are good people, work with them.