Bootstrapper.com - Confessions of Serial Entrepreneurs

In this fourth chapter I continue to breakdown your angel presentation into sections, each part being equally important to the overall presentation. As stated in the last chapter- 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!).

Guess what? Those first five minutes that just flew by were great, but the war is just ¼ over my fellow entreprenuer- there’s still five minutes of presentation left in front of you followed by a ten minute follow-on Q&A session. Therefore, you must remain focused as ever when transitioning into this part of the presentation. The first five minutes 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 two minutes necessitates a complete gear shift and are vitally important to whether an investment is on the horizon is far off into the sunset.

Fifth Minute – Seventh Minute:

During these next two minutes 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 you simply don’t have the time. Furthermore, you will be drilled during the Q&A on points you may have missed.

Choose just a few key points to touch upon (but only macro-level) which reinforce three 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 two minute phase, take a deep breath and realize you need to present a completely different case for investing in your venture then during the first five minutes. During the first five minutes 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 two minutes 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 so by emphasizing, leveraging and hammering home the key points you’ve chosen and relate/integrate them into the three points outlined above.

The best way to transition into this part of your presentation 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 addressable market and the discretionary dollars they possess (keep in mind the macro-level impact of your product/idea as referenced in Part 3/4 “taking XYZ drug”)

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

My recommendation on how to present these three key points is acutally opposite of what most angels, consultants or investors will tell you to do. The majority of presentations I see are given from an initial macro-level and eventually boiled down to the end consumer (a “top-down” approach). I disagree with this way of presenting your venture. As the founder and expected domain expert of your venture, you build a tremendous amount of credibility by articulating 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. They expect you to exemplify an understanding that ramping up a venture is a hard fought battle which is 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 a base clientele 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 any start-up, the “bottoms-up” approach is much more of an appropriate (and immpressive) presentation technique.

Next, let’s cover how you should present your “bottoms-up” approach to the angels who are hopefully now listening quite intently. As previously stated, your multi-million dollar vision is a byproduct of consumer tastes, interests and viewpoints; 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

The bottom line is 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 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 seek to invest in ventures with at least a total available market >$500MM. Why? Because the size of an available market is a huge risk mitigator for your venture and the investor. The more consumers that are 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 why 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 twenty others have already thought of it, but didn’t have the time, resources or know-how to implement and/or 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 venture capital 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 vertical. 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 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 invariably arrive and it will be fierce, so be prepared soldier. This is why strategic planning, and especially its implementation and 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 now drawing (DO NOT PRE-DRAW) a diagram of how your venture stacks up against the competition. The main mistake entrepreneurs make here is spending too much time discussing competitors. 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 you realizing (and willing to admit) that the venture has downfall(s). This 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 money, 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.

Let me state this again: 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 three 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 (why 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. As I’ve stated previously, if there are questions (which there undoubtedly will be) they’ll come in the Q&A section. If you’re miraculously 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 ways in which you’re going to get there- ie through a sales force on hourly/salary/commission or other distribution/sales channel strategies. Be clear and 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 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 return on their investment. Do not 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 actually know 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 failure and would develop a rock solid company next time out.

Some investors are fond of having an entrepreneur speak about their background when the presentation first starts. The theory behind this is that it helps to garner attention. 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 do focus on but you anyway.

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 organization. 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 investment purposes.

Most angels are weary of the team you project (especially first time entrepreneurs) and will focus on vetting each member out during the Q&A and also after the presentation (usually through connections in their network) 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 is vetted 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. Trust me, it doesn’t take long to figure out whether they’re truly involved or not. Do not give a lineup of “heavy hitters” who you think will simply impress investors. Names don’t impress investors- a solid, credibile and dedicated entrepreneur does. However, a truly intimately involved hallmark name certainly is impressive and would be seen as a huge risk mitigator for investors- 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 many entrepreneurs feel the need to “puff up” their management team and advisors. Word to the wise: DO NOT under any circumstance make such a grave mistake. 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 am 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 three page excel spread sheet- investors want a 5×5 matrix at most), the investment required, deal structure, exit strategy and most importantly- overall recap and a strong close on your audience. Yes, your presentation will mostly likely run over by roughly thirty to forty-five 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 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. 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 is quality and not quantity which matters most to the angels. A three page excel spreadsheet impresses nobody. Thus, well thought out evidence-based assumptions condensed into a 5×5 square are quite impressive to an investor. In this square you need to have either three or five year projections on revenue, gross margin, earnings and cash flow- nothing more. In addition, it would be useful to have a note regarding when the venture achieves break-even. Overall, your financials simply need to make sense in these thirty seconds (again AVOID THE HOCKEY STICK), especially considering projections beyond one year are little more then hypothetical. 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 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 the 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 an exit in four to five years (there may also be a Bridge Round somewhere in there).

During this part of the presentation heed my advice: 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 running through the minds of the angels will be: what is the fair value of your current early-stage venture based on the projections you’ve provided, the market and other important barometers and comparables? To ensure you’re valuation is of “fair value” angels look for this number 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 number 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 section by alluding to your exit strategy and the time frame an 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 writing a check. Instead, have a valuation you can justify with solid fact-based evidence while standing tall against the firestorm you’ll face on this front during the Q&A session.

Lastly, you must recap and close your audience. Its been one heck of a fight so far soldier. Do not lose focus simply because you’re so close to the end. The best salesmen in the world make the sale in the last few minutes and close like a shark- not actually during their presentation. Therefore, this is the time when you proudly state why the story you’ve detailed over the past ten minutes 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. Do your research upfront and close with a specific reason or two why this exact group MUST invest (I cannot stress the importance of this)- 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. Your confidence will be apparent and it will resonate well with the audience of potential investors.

Sadly, it has been my experience that very few entrepreneurs present this section successfully. To be honest I can think of only three out of hundreds who have grabbed this opportunity and used it to their advantage. Presenters usually take the lackadaisical approach of reiterating information they’ve already stated within the past 10 minutes of the presentation. This is an opportunity to close your audience one last time with new invigorating arguments and information. Leave a lasting impression. DO NOT be the closing dud that most presenters turn out to be..

Here is it soldier… the home stretch…. but guess what? You’re only half way done. Your ten minutes is up but there’s still ten minutes 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 interested 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 and believe in these words of advice: 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 am confident you’ll gain a much more in-depth understanding of your venture and its marketplace if nothing else.

As stated in the first section, 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.

Best wishes.

In this third chapter, 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 entrepreneur aka “the solider,” an opportunity to begin pacing yourself in preparation for, and also during, the presentation aka “the war.” Please use Part 2/4 as an outline for initially moving forward and use a stop watch to time yourself at each of the intervals. It is a great habit to begin using a stop watch because I can almost guarantee 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 will do just that.

First off, as refereneced in the previous section, 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 is a method behind this madness. The reason you should not 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 it before putting up your first slide. This anciallry information on a slide is a waste of precious space, 10% of your slide deck to be exact. Furthermore, if this information is put up ahead of time, such as before you begin your presentation, it will distract the group of angels, which is obviously counterproductive. Thus, it’s best to have this information as the cover page on your packet so your first slide dives right into the substantive material and engages the angel group immediately.

In the last section I alluded to the fact that your presentation starts the minute your mouth opens. This is only partially the case solider as angels actually begin evaluating you BEFORE your first words. Angels start 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 they believe you view yourself, your company and your investors. At the end of the day they’re searching for how much confidence you have, which speaks volumes.

Remember, angels are successful and seasoned professionals. They know do 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 do not show up to an interview in a t-shirt and jeans without shaving for two weeks. This is 50x more important then a simple interview, thus, make sure your appearance is 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 up as possible throughout the presentation (keep the lower back muscles flexed) and make sure all hair is groomed neatly and properly. Men can have a perfectly groomed beard/goatee. 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 your presentation the angel group wants you to connect with them. As stated in the first chapter- it is absolutely critical to make a connection with as many angels as possible within the first two minutes. 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 five 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 will lose the group, which is why it is extremely important to prepare heavily upfront (see Part 2/4 for further explanation).

Note: During this first minute, before the “bulk” of the presentation starts, DO NOT pass out any documentation/handouts or have your slide deck up on a screen. 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.” Most entrepreneurs do not realize the first minute dictates the tone for the rest of the presentation. If the angels are not already engaged before the “bulk” begins, they simply will not pay attention. There is a simple answer to 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 yourself throughout the presentation (implying you’re defensive).

First Minute – Third Minute:

Since you were able to connect with and thoroughly engage the group of angels in front of you, it’s now 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. Value is defined as how the product/service benefits the consumer both physically and mentally. Your product/service value-add is most important to the angels. They want to know if it is cheaper, easier to use, a more advanced and/or proprietary technology, etc. If you cannot clearly articulate the value-add or unique selling proposition (USP) of the venture (versus other competitors) then the odds of receiving angel funding are minimal at best.

Any seasoned angel group seeks to be engaged by a clearly articulated USP. Angels not only want to learn about the USP, but also seek to hear what you’re going to do once the USP is lost as the competition’s R&D will eventually catch up with (and possibly surpass) your firm. As a result, they are very interested in understanding the competitive marketplace lead time your unique product/service has versus the competition. Said another way- how long is it before competitors acquire the competencies, assets, strategic partnerships, etc to produce the product/service themselves and are able to scale? Once you’ve entered the marketplace and incumbents identify your product/service offering as an attractive opportunity, they will immediately begin R&D to eventually try and unseat you. Thus, greater competition is created and margins fall as companies continually vie for the same loyal consumer base through innovation.

An “unseating attempt” normally occurs three years down the road, although it is variable based on the maturity of the industry/segment/niche. Being able to articulate a forward thinking plan and vision gives you clout with angels because it exemplifies a willingness and flexibility to evolve the business model. Some entrepreneurs unfortunately think of the venture they founded as “their baby.” They want to nurse and nurture the venture as well as for all intensive purposes- refuse to 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 have seen this scenario time and time again. Bottom line, angels need to understand how and why the grass is greener on the other side- and beyond as well.

Another area most entrepreneurs overlook during 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 have witnessed presentations where the founder only focuses on how Joe Smith benefits by taking XYZ drug. That is a great start, however, the angels 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, and radio. You should spend 85% of your time in this final minute talking about how your product/service benefits your target market, but do not forget about the 15% of time dedicated to exploring 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 angel’s 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’re seeking to fulfill?
• Seriousness of the State – What are the implications for your target market if the product/service isn’t adopted in the marketplace?
• The Desired Future State – If it was up to you, where would the consumer be in two, five and ten years as a result of adopting your product/service in the marketplace? Articulate the problem that was corrected, mitigated, avoided or even created. In terms of creating a problem, this gives the venture an opportunity to develop follow-on product offerings. This strategy is normally seen with skincare lines.

Less then 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. In this section, early-stage management teams normally fail to clearly articulate how their product/service relates to and influences each of the above different buzz terms.

Another major mistake by entrepreneurs during this section of the presentation involves going on a tangent- talking to the angels at length about the general benefits of their product/service and how it’s better then the incumbents current offering. For instance, your new product/service is a build-on technology to a search engine. Instead of stressing the benefits of the build-on technology to the consumer, most entrepreneurs just focus on how their product is better offering 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 (what’s in it for them on the upside when then invest). 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 your product/service offering and the solution it brings to the marketplace. Here you must detail how the new invention/platform is a significantly better offering then what currently exists in the marketplace, such as key features and benefits. The further you can distinguish your offering from what’s currently in the marketplace, 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 an angel wants to see a product that’s EXPONENTIALLY 3x – 5x better then what’s currently on the market. Read again- not simply a multiple of three to five, that’s actually an exponential growth figure. Here is where you should also briefly detail 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 and/or barrier to entry for competitors. Angels focus on risk mitigation and unless your product/service performs exponentially above what’s out on the market, and is solidly protected (because nobody can have a complete picture of what’s about to be released or in early R&D stages) - your odds of being funded are quite slim.

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 currently released in the marketplace. It’s key to address not only what’s out on the market now, but also what could be in six months, one year and three 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. Angels want to hear you speak about this. You ask, “why would they want to hear me beat up myself and my idea?” They want to because it’s essentially a constructive critique of yourself and your venture, which exemplifies a forward thinking outlook. Angels appreciate this and perceive such a characteristic 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 overlook. Addressing what’s in development by your competitors upfront will invariably make your presentation stand out from the crowd.

If you can articulate the future you see for your target industry, its incumbents and how your company will evolve (and I firmly suggest that you be able to do so), make sure to articulate these details in a short and concise manner. Some suggestions include building 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 convey. However, heed my warning- make sure it’s macro-level and not bogged down with details. Short and concise, short and concise!!

Next, explain to the angels how your product/service will be commercialized- is it installed, integrated, merged and how is customer service involved? Customer service in my mind MUST be touched upon. It’s been my experience that businesses which integrate a core philosophy of the ‘customer is king” have an increased amount of brand equity, which translates into a greater likelihood for long term success. These businesses 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’ve learned from Dell, this can be a make or break element of your model, especially once it begins to scale. Now circle back and reinforce your IP by detailing your plans for its evolution in parallel with the scaling of the venture. Do this only AFTER you’ve talked about the customer service outlay because angels will be impressed with this approach. Customer service is an often overlooked art and a great lead into reinforcing your IP and then detailing how to scale the business model.

BUT BEWARE, as stated in Part 2/4, it’s imperative 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 lose, 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 give an in-depth outlay with all the bells and whistles. Do so later during the Q&A session. Use the follow-on Q&A to your advantage and intentionally omit overly technical elements as they will be prodded into further during this time. The Q&A session is much less formal if you’ve managed to keep the angels attention by engaging them, which should allow you to loosen up since you’re not on an exact time schedule.

When approaching 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 with a more in-depth explanantion into this specfic point- building upon 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) 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, such as 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 it’s a job well done 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 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 is 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 lose 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 your mouth opens. 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 ten minutes. The time will 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 ten minutes, something you’re so steeped in and committed to mentally, emotionally, financially, etc. It is 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 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, you must literally go through your full presentation in your head at least fifteen times. Imagine you are 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, begin presenting to other associates in your venture, friends, family, etc. You should run through your presentation at least twenty times, in addition to the fifteen in your head, before getting in front of an angel group. It may sound crazy, repetitive and pointless but this accomplishes many things:

- You begin to visualize how to present your venture in terms of tone, posture, slide deck setup, 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 ten minutes of fame, the more honed your presentation becomes

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

- The more confident you become, the more engaging your presentation. Conviction in a purpose, which in this case involves 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” which begins to occur.

Running through your presentation and preparing to deal with follow-up Q&A is not 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 are targeting, the other twenty or so members most likely will not. 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) to 100 MPH (a clearly articulated SWOT and exit strategy) within ten minutes.  Learning how to do this not only takes insight and being completely steeped in your venture, but also an immense amount of time, patience, reflection, honesty with yourself and (most importantly) the collective acknowledgement/acceptance of the critiques and feedback given by family, friends and associates.

Each angel who hears your presentation, whether having competencies in your targeted industry beforehand or not, at the very minimum, should be able to leave the presentation saying “I can relay the basics (macro) of this venture to another person, as well as the features and benefits of their product/service.” However, your hope and goal should be to have each angel leave your presentation saying “Wow, not only can I relay the basics (macro) to my friend about this venture, but also the small extremely important points (micro) that differentiate this venture from others in the space.”

Here are a couple of additional recommendations:

- Passion throughout your delivery is extremely important. Angels want to be engaged by the vision you have for your venture. The story and picture you paint is paramount first and foremost. Without passion your presentation is worthless, just like the other hundreds of deals the angels have passed on over the years.

- Focus on consumer benefits when using your product/service. What does it do? For instance- streamline difficult processes, create a new niche, build upon an existing technology, revolutionize an industry, etc.

- Differentiate from your competition and clearly articulate the competitive advantage/barrier to entry for your venture. For instance- features, benefits, ease of use, strategic partnerships, etc.

- It is perfectly fine to be nervous, you should be. This is an exciting time!! If you aren’t nervous then you’re not going to succeed in front of angels because you’re not emotionally involved enough in your venture. Angels know you’re nervous. They expect it, just relax and stay loose.

- Do not use slang, jargon or terms only experts in the space will know. Remember, not everyone in the room will be a seasoned veteran in your space. Imagine speaking to your 80 year old grandmother who’s completely clueless beforehand.

- The 10-10-30 Rule = Use 10 slides, talk for 10 minutes and use 30 pt font in your PowerPoint.

- Under no circumstance should you include ancillary information which does not add value to your presentation. You only have ten minutes to knock their socks off. Every single second counts. Four pieces of irrelevant information could easily cost you valuable minutes as you veer off onto an unplanned, irrelevant and ultimately destructive tangent. You must pack as much clearly articulated information into those ten minutes as concisely as possible. Thus, you cannot afford any unclear or irrelevant information.

Good luck solider, war is undoubtedly tough. But always remember- luck is an accumulation of hard work.

I hate PPT’s. PPT = Powerpoint.

I hate them so much. I find them irritating.

But they are important because they show a potential investor or strategic partner that you know how to make a presentation and sell yourself. That you can break your concept down to simple very concise sections and talk through them and essentially sell the dream.

Anyone can write but not everyone can pitch. A pitch puts the meat in front of people and then leads them to the questions you want them to ask. It should lead them into the story and seeing the dream.

It should not a huge bongle of numbers and dozens of technical slides. It’s the juice, not the fruit.

If you can pitch well, then you can articulate well which means you probably have a decent idea how to promote your widget.

More importantly its interesting and short and doesn’t require a huge amount of time to read and isn’t boring text. Pictures are cool, animations are okay as long as they aren’t too complex or tacky. No one cares how long you spent on your PPT as long as it sells the dream.

All documentation should support your PPT. It’s your shock troops,you’re marines.

Here’s why? You find an investor, what do you send him first?
A brief intro email + PPT

If he’s interested you follow up with a 1 pager breaking everything down in one place

That’s followed by a short executive summary and SIMPLE set of financial projections….

That’s followed by a good beating also known as due diligence…you lead the investor into it so by the time they do their due diligence and start asking the questions that would be in your plan - you’ve already sold them on the concept

If you are pre-revenue, what are you really selling?

Potential ROI? No.
Potential Revenue? No.
Your idea? Maybe
You? YES

The single most important thing trying to raise napkin money is you. What is your background, why will you be successful. Why are you the guy to take THIS idea to the promised land. Do you have relevant domain experience or a successful exit? If the answer is no, it will be pretty dam hard to raise capital….unless…

You have a demo or IP and are willing to replace yourself as CEO….

In general the TEAM is most important
Second is the idea, as part of the idea is the size of the potential market
Third is the IP
Fourth - how you found the investor

Those 4 things together will determine if you get capital. If you don’t have good answers, you probably won’t raise a cent…