Bootstrapper.com - Confessions of Serial Entrepreneurs

So i’ve had the luxury of getting to know most of the top serial entrepreneurs in NYC and have asked most of them how they are raising money for their last venture. Here’s what I’ve learned … this is in no particular order but its 13 things i’ve seen being used lately…

1) Never put your own money in past a prototype (and generally get the prototyped paid for by someone else) 

2) Use convertible debt that converts at a discount to the Series A round (discount, between 5-30%, depending on how long between when that debt was issued to when Series A closes) 

3) Sometimes allow for additional warrants or for the investor to double investment at original valuation at time of Series A 

4) Never assign a valuation until a Series A (not worth the mess) 

5) if you’re investing your own cash, have your wife or uncle do it through another entity in the form of debt (no reason to put your money in as common stock when you can get preferred) 

6) When you raise a series A, say you are raising a $5MM Series A at a $15MM valuation and allow for any investors for under $1MM to come in as convertible debt (this avoids the issue of raising angel money at one valuation and trying to raise a Series A at another simultaneously) . likely this valuation is too high but give some room for investors to negotiate it down. 

7) Never state your valuation in raising money in your presentations. First get interest from investors before talking valuation. Get the investor hooked on the company before any negotiations and you’ll have a much friendlier negotiation. 

Incorporate as a Delaware C-Corp (unless you are an insurance company, then use Bermuda- otherwise no exceptions) 

9) Create vesting in your initial shareholder agreement so your investor doesn’t try to change it later. However, give yourself a good vesting schedule based on a mixture of time and milestones and instead of 3-5 year vesting, use 18-24 months. It’s a lot easier to demand vesting when there is none then demand changing vesting terms. 

10) Always have an option pool. Between 10-20% (size of option pool is open to debate) 

11) Always create full business plans. It shows you can do it though no one will really read it and it’ll be good to have for yourself. Make sure includes: Exec Summary, Profile (elevator pitch + team), 1 pager, PPT Deck (5-20 slides), Milestones, Use of Funds. Preferably have: Full Bplan & Full marketing Plan & Product Rollout plan and financial model. Use this in stages. First send the profile then 1 pager, then use the Deck in person then the Exec Summary  then Milestones & Use of Funds. Then send financial model and other plans at once if you get that far. Also, be practical on your projections, never use the word conservative and when you discuss your financials, state the risks and assumptions and potential issues, don’t let the investor do it, do their due diligence for them. 

12) Have a meeting with a potential acquirer and get some level of interest, and if possible an offer to acquire you as is (even if its 50 cents a double cheese burger). This shows that there is serious interest and that you have thought towards the exit (the only thing your investor cares about). It gets people excited when they hear you already have an offer for the company (don’t reveal the offer or who it is from until much later). 

13) More management team, less advisors. Too many advisors makes you look like you’re window dressing. Unless your advisors are investing cash (then list them as investors not advisers) then don’t list many. 1-2 Spot on advisers is perfect. 

So I thought i would share notes on my keynote talk from the BootStrapper Venture Summit.

I spoke about the contradiction in the name of our summit, BootStrapper Venture Summit. Upon first glance, one might think that Bootstrapping and Venture Finance are polar opposites. However, they are not mutually exclusive. The most important question to ask yourself when it comes to how to finance your venture is “Do you ever plan on raising outside capital?”

The answer to that question should determine how you go about raising money. If you never plan on raising any outside money, then it makes sense to Bootstrap. However, if you think you may need to raise outside capital at any point (an IPO does not count) then there is a distinct point in the history of your company, where you should not be self-funding your venture. Now, before i say this - i need to state that it does not matter if you self-funded it with $50 and a handshake or $5,000,000, the point in the lifecycle of the company is the same and your first round of investors will likely value you the same way.

The day you launch your product into the market and generate your first $1 of revenue, should be the last day that you put your own money in the company. The reasoning is simple: Every dollar you put into your company goes in as Common Stock vs. Preferred Stock for your investors. Furthermore, the odds are (especially in NYC) that you will get the same Series A valuation regardless of whether you put that extra $250,000 in your company. Yes, many (most) investors will disagree with me but I’d venture a guess to say that if you look at the actual term sheets and compare them side by side for companies whose founders put in more $ after the product launched vs. stopped self-funding, they would look very much the same.

Of course, there are exceptions, sometimes you can’t raise outside capital and you have to invest yourself (i will do a follow up post in the future about how to invest cash in your own business after your launch) and sometimes you need to put a few more dollars in to prove your model. However, for all practical purposes, the day you launch is the day you should be trying to raise outside capital and stop putting your own money in. Your money is simply not worth as much as other peoples’ money.

Is this logical? NO. Is it the truth? Ask your happy go lucky local VC.

So one of the people that applied to the BootStrapper Venture Summit told me a story about how he raised capital … so i’ll repost it for everyone …

It is imporrtant to recognize that I always defined an angel as looking for investor-partners, not just investors. In addition to a good business idea is the acceptance as who I am as co-founder, including the appreciation of how much we could produce by bootstrapping. I found my first angel investor by placing breakfast invitations under the hotel doors of all the attendees to a later-stage investor event. Two people came to my speciality coffee room, one became my first investor and the other sponsored another angel forum. I went to this angel forum which is where I met my 2nd angel investor.

Everyone along the way has been thanked, and thanked, and thanked as many times as possible. This requires no extra money other than time.

Next form of bootstrapping is going to as many events as possible and flying in-and-out in the most inconvenient times possible, but never staying the extra day since you can easily spend an extra $500 to $750 on the extra day. Going to events includes participating as a panelist, pitching or just working the audience.

Another form of bootstrapping is to comment and respond to as many professional fund raising news stories and blogs as possible.

A final form of bootstrapping is to maintain an ongoing list of potential investors and to update them everytime a major milestone is achieved. This is a subset of the information provided to existing investors, whom by the way will usually invest more than once if they are treated as a partner- not just an investor.

Each of these requires persistence and professionalism. There are numerous tricks-of-the-trade that can be learned, but have to be embraced and accepted as part of the ongoing process to be successful at raising capital and growing a company.

Brian Javeline
President & CEO
www.MyOnlineToolbox.com
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So a big killer to a lot of deals is dilution. Dilution is simply how much equity you are willing to give up. I recently moderated a panel where one prominent VC remarked “don’t worry about dilution, if you’re building a good company, you’ll still get rich”. While there is merit to this, it is also bullshit. I know lots of entrepreneurs that took lots of money and bad terms and lost control and got screwed and ended up with no control over their own destiny. Make sure you have a great lawyer and review the options. However, ask yourself a more important question: What other options do you have? It’s a shitty economy now, if you can get money faster, take it, don’t worry about dilution and build your company. Raising money is a bitch. It is not fun. It is a waste of time. Get money and get out if you can.

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.

Angel investors are a unique breed when trying to obtain financing for your venture. They listen to your presentation, challenge every loophole and bottleneck in your strategy, are due diligence experts in their respective fields, negotiators of investment terms and mostly importantly (to you) the ones who sign on the dotted line to fund your company. Before presenting to these individuals, you must be honest with yourself and realize upfront that you’re mostly likely not ready.

Like most entrepreneurs, its probable you only have previous experience presenting to (and being in front of) your family and friends. Whether you want to believe it or not, they are somewhat biased toward your venture, whether good or bad, and they’re probably not even close to seasoned veterans in the space you’re looking to enter. On the other hand, angel investors are experts in the vertical you’re looking to penetrate. They encompass specific competencies which add value to the overall pool of angels you’re presenting in front of and they’re an unbiased third party. What you also must realize is although angels may be hard to crack (and rip you up one side and down the other), in the end it boils down to the fact that they enjoy helping promising entrepreneurs who possess a great vision for their industry. The angels you stand in front of were once just like you- ambitious, forward thinking, but lacking the resources. They’re successful men and women who’ve been there, who now enjoy giving back to those with unique and disruptive ideas by opening up their rolodex and resources (ideas, funding, etc).

My point in writing this is to let you, the early-stage (angel round) entrepreneur, know exactly what investors expect. I would estimate at least 80% of early-stage company management teams do not know what an angel investor seeks during this process to become an active participant and financier in their company. Within two minutes of an early-stage CEO first opening their mouth I can tell whether they’re ready to tell me what I need to know. If so, I listen. If they bore me and do not cater to what I am looking for, they’ve already lost me in those first two minutes and I am now thinking about the other ten deals I am juggling during my day job. Thus, the point in writing this book is to help you become a successful and confident presenter.

You will have roughly ten minutes to pitch your idea with a follow-on ten minute period to answer questions. Throughout this book I will provide specific suggestions on how to efficiently and effectively organize your presentation so that your delivery is within the top 10% of all presenters. In addition, I will detail and explain some of the more common mistakes early-stage management teams make. I intend for these suggestions to be enlightening but also encouraging so that you’ll soon have the tools necessary to not only be prepared, but overly prepared, and more importantly- confident.  By following my suggestions, I can estimate that you’ll be within the top 10% of all presenters. Obviously I cannot guarantee investment by angels in your venture if you follow these guidelines (because that’s all they are- guidelines). However, at the very least you’ll have increased the likelihood that many of the angels listening to your presentation will be significantly more engaged and attentive.

This is the goal: peak the interest of the group first and foremost. Be a salesperson, a darn good one who can clearly articulate every aspect of your business. If you can do that, you’re half way home to getting funding already. What I detail going forward in this book will help you with the other half.