T-M-I from T-I-M

What's your objective in an investor presentation?

You've started your business.  Perhaps you've built your product and maybe even have a few customers.  It's time to hit the investor circuit and give your investor presentation.

You've made it through the screening process and in your mind the objective is clear:  raise money. Agreed, but to raise money successfully (particularly from angels) it's critical to identify what your objective is for your presentation.  

When I work with entrepreneurs I tell them their objective should be that an investor sitting in the audience should think to themselves "This is interesting enough to go to due diligence". 

The nice thing about identifying that objective is that you now have a guide of sorts to what the content should be in your presentation.  You know the investors are only going to remember a few things so if you want them to go to due diligence make sure they get that:

1. There's a big problem
2. You have a unique solution
3. You are a team that can do it

This proves to be the cornerstone of a killer pitch because it allows you to throw out a lot of what doesn't belong (for example almost every technology stack or medical trial results slide ever created!).

If you stay objective oriented in your communication it's far more likely you will stay execution oriented in the financing process.

Prepping Start-ups for Angel Investor Presentations

It's the time of the month again where I help a few companies that are getting ready to present to the Band of Angels.  I give them about 60 minutes of my time for free (a great value) to help them perhaps re-consider their pitch.

It takes me about 30 minutes of that time to get to the bottom of what the company does without fail.  The next 30 minutes are focused on the story.  After doing this every month for the last 7 years I thought I would share the top  issues that seem to come up every time.

1. 15 slides do not equal 10 minutes.  My job is to get them to see that they can do it in 6-8.  Trust me it can be done.
2. But this person told me to it this way, not your way.  A common occurrence and a fact of life being a presentation consultant.  The entrepreneur is always welcome to ignore my way but my way has been developed over 7 years specifically for the group.
3. For financials you only need that?  Yes, I say, 3-5 years of revenue is plenty for a slide.  Anything more and you end up talking about financials and not the business.  And the one thing we know for certain about financials is every number is wrong.
4. But we do so much more...  One of the hardest things to get is that you only really do 1 or 2 things REALLY differently.  The marginal benefit you bring beyond that is exponentially lower and usually not developed anyway!
5. I've got a great demo or we'll have two presenters.  These go together because I rarely see a demo or presentation hand off work well in a 10 minute pitch.  Leave the demo for Q&A or due diligence.

These are just a few of the ones that commonly come up.  And it makes me happy each month to help address them.

Knowing when to try again

I talk with a lot of entrepreneurs who are fighting the good fight for their current dream.  Often I'll ask the CEO whether he or she has set a date that they will fold their tents up and try again.  It's not often that I get an answer.

I understand that they hold what they do with great sanctity, it's their baby!  I also understand that great entrepreneurs are resilient, not myopic.  Failure is part of the risk taking game. 

When I started my own consulting business about 5 years ago, it was REALLY hard to throw in the towel on it.  I never really figured out a sustainable growth oriented business model for the valuable service I provide helping entrepreneurs build content for investor presentations.

Every day I kept the business my sole focus it got harder to throw in the towel.  Eventually I did and took a full time job at Homestead Technologies which I love.  Ironically, since then, I've gotten some nice business opportunities to do what I do best, consult with entrepreneurs helping them stay focused and understandable.

I guess what I've learned most from throwing in the towel is that I can (and probably will) try it again.  But it wasn't easy to learn that lesson!

Power Points: Fundraising Timeline

Every month, through my company I'm fortunate to work with a few companies that are going to present at the Band of Angels in addition to other clients I work with.  There are lots of differences between angels and vc's one of the most notable is that in 30 days, the company can be certain that they will move at least to the second row in the mind of the investors because a new set of companies will be coming through.

As such, I advise start-up executive teams to set a goal to get an answer within 30 days of their presentation.  It's a lot easier to get a decision from an angel for a variety of reasons including but not limited to:

1. It's the nature of being an angel investor.  They provide quicker access to money because their due diligence is not as thorough as a larger investor.
2. The size of their investments tend to be such that they like to have a number of investments in a different companies and are always looking for a potential new one.
3. I've found that angel investors are far more direct in terms of their intention to invest.  Even if they are not, if they are maybe after having seen a presentation and a follow up due diligence meeting, more often than not they are a no.

I realize as a consultant helping out these entrepreneurs it's easy for me to focus on the "yes/no" as a goal because a no is a bummer.  But for me, nothing is more of a bummer than the seemingly never ending vortex of the maybe from an investor.

A few keys to focus on if you are financing your company:

1. Let the investors tell you what their key issues are.  I think it's very effective to let them give you the 3 issues of importance to them.  When you've addressed them to their satisfaction it's a lot easier to ask for a decision.
2. If they go beyond #1, they are more likely than not a no.  They are looking for a reason not to invest and wasting both of your time.
3. Find the one or two thought leaders of the angel investor group and convince them, they'll convince everyone else.  Angel investors tend to watch each other's backs.  Find the leader among them and focus on convincing them, they'll help you out from there.

The 30 day timeline is a suggested one and can be adjusted based somewhat on your situation.  The most important thing is your mindset:  close!  Otherwise you will quickly find that you are spending 75% of your time ineffectively fundraising for a company whose performance is suffering because of you're distracted.

If you are interested in learning more, please visit my website.

Women Underestimating Their Net Worth by Lizette Wilson

Lizette Wilson recently wrote an interesting piece in the  in the SF Business Times(8.4K) about the way women behave in terms of valuing their business, services, salary, etc.  Before you even as, no it was not interesting just because I am quoted in it.  See, that's why it's interesting to ME, ha!

I was thrilled to see Eileen Gittins, CEO of Blurb get right to it with regards to this:

"The amount of capital you seek is a function of what you're trying to accomplish. You can't be an effective CEO if you don't measure results. And measurement is mathematics. You have to be comfortable with that."

I can promise you that she is.  In the 4+ years since I started Taylor Inc. and have been helping entrepreneurs pitch their company as well as raise money for them, the ratio of men to women CEO's has not changed.  It's mostly dudes.

Admitting that without judgment can be very powerful for a CEO who is a woman.  Alternatively, I suppose you could go into and try and change it or even go around it because of that.  I'm pretty sure, however, that by doing so you've reduced the odds of company survival precipitously. 

I'm not suggesting that a woman should try and be one of the boys (believe me we have plenty of us right now...).  Rather, understand what motivates men and then use that energy to your benefit.  And trust me, we're not that hard to figure out.

Power Points: Title Slide--Personal Story

As part of my business working with entrepreneurs, it's that time again.  I'm in the middle of preparing 3 more start-ups for their presentations to the Band of Angels.  This month, I had another wonderful experience discussing the title slide and opening words of one of the pitches.

I'm a big fan of opening a presentation to angel groups with something personal if you are comfortable AND it is relevant.  In this case, one of the companies has developed a wonderful solution for speech to speech translation.  Essentially, it's a headset that you speak into and it translates from your language into the language of the listener (using algorithms, etc.).

They've chosen hospitals as one of their first markets (wisely).  So the device can go English to Spanish and Spanish back to English.  As long as it can one way with the language x to y, it can go back y to x. 

As I chatted with the CEO (who speaks 6 or 7 languages, is quite humorous, interesting to speak with and has a strong track record), I probed into why he started the company.  After moving through his professional background, we started to craft the opening.

Then, he almost threw in, that he moved over the US when he was 13....to Cleveland,..and he only spoke Farsi....not real prevalent in Cleveland.  I looked at him, smiled and said (quite boldly, I'm sure) that I know that's why he started the company.  If he felt comfortable, I advised him to lead with it.

Language is a passion for him, to a certain extent I'm sure in a Darwinian fashion.  But it's quite compelling when he frames his professional background to date, which includes a speech to text translation company that was sold for a lot of money.

I also had a CEO whose company had developed a blood test to detect Alzheimer's.  He told me that when he was a kid, he was in his room on a snowy night and couldn't sleep.  He looked out his window, across the street, and noticed movement by and beneath a light at one of the houses.

He told his parents, who went out and found out that it was an old man who had wandered off, gotten lost and suffered from Alzheimer's.  It lit his passion for what he now is trying to bring forth.

It isn't ALWAYS the case that the story is that poignant.  However, in almost every case there is a personal reason someone starts a company.  (Particularly if they've done it before, because it's so challenging.)

Hans Severeins, one of the founders of the Band of Angels, who passed away a few years ago, said something that stuck with me the first time I met him.  He said:  "Tim we all must be insane.  Insanity is doing the same thing and expecting a different result."

Fair enough, and when it gets personal, insanity becomes a frame of reference.  When I'm in angel investing meetings, a brief, well crafted, relevant personal story is a wonderful way to break the ice and connect with the audience.  Quickly, they get to know you.

And in the end, angels don't invest in technology, discovery, innovation, etc. they invest in you.  A story like this goes a long way to build the foundation of a good relationship.

Power Points: Why you're different

It's that time of the month again! As part of my business, I'm working with another group of entrepreneurs going to present in front of the Band of Angels.  One of the trickier parts of the presentation tends to be describing why the company is different.

It's a common point in the presentation where the presenter goes sideways because it is fertile ground to become technical, scientific or otherwise detail-oriented.  I won't deny that there are often technical or scientific differences that are notable regarding the product or solution provided.  However, very few people in the audience are actually going to get it.  (And, candidly, even if you're in front of a VC, unless you're queued, my suggestion is to avoid the technical stuff until later....)

Granted, this will be a "consulting" type suggestion but I've found it works. 

1. What makes you different: First, identify two attributes that make your solution more compelling.  It's important to note that I do not suggest using price as one of the two attributes.  In my opinion, if you compete on price, the deep pockets can defeat  you with predatory pricing (even at a loss) unitl you die on the vine.
   
   I've found things like: ease of use or ease of implementation or length of time to solve, etc. to be useful. 
   
   A more direct way to consider this is often to consider the following.  Assume that you walk into one of your current or soon to be clients and the purchaser has three proposals on their desk.  One from you, one from the incumbent (identify them) and one from a competitor (identify them)...why do they choose you?
   
   Often the discussion directs towards the REAL benefits of your solution and approach and away from temporary "have to do's" like pricing decisions to get into the market.
   
2. "Consulting" box:  Once identified, put the two attributes on a four quadrant scale and put yourself on the upper right hand quadrant (like easy to implement AND intuitive to use for new users).
   
   You can put two or three (max) other competitors mapped out in the other quadrant.
   
3. Our customers agree:  Next to that, I like to have a text box that shows that your customer agrees.  It's obviously very powerful if you've got a customer that you can show bought because of your difference (in particular if they are at the presentation!!!). 
   
   Basically, you want to walk the investor into the fact that you are different and people care and have acted on that.

This approach tends to stay tight and helps to dispel many of the questions about whether the venture makes sense to begin with.  If you state that you're different and no one cares, it's a bit hard to make the claim that it does make sense.  Early customer momentum or validation is golden at this point.

I understand that one day you'll read my input suggesting this way and the very next day you'll have someone tell you how little they like it (thus the perplexing world of presentation consulting).  For me, form in this case is far less important as substance.  Know why you're different and be able to prove it.

If you've done a good job describing how life is before and after your solution and follow it up with how you're different (with proof), you're off to an awfully strong presentation start.

Power Points: Life Before and After your product, software, device etc.

My main business is to help entrepreneurs build content for investor presentations and I absolutely love doing it.  As part of my work, I get together with just about every company that comes through the Band of Angels (in my experience, the best in the business), I love working the group and the companies that come through.

Last night, I was working with a consumer product company that has a product that is all-natural, low calorie that has satiety (I don't even know if that's exactly the way to say it, but in short, satiety means that the food makes you feel full because of the ingredients.)  They have good sales momentum already at a few notable grocery chains.  They also seem to have a grasp of how to grow through building a brand around their successfully developed combo (low cal, all natural, satiety).

Their ppt was loaded with info about why the product was great, detail results of the small launch (although it was not the most compelling info, at least they had it).  They had all kinds of detailed competitive stuff as well.

I was overwhelmed.

Like just about every other start-up I work with, one of the first key steps towards clarity was to talk about life before and after.  When we started, like most every other start-up I talk to, they dove into how they would beat the competition, how they have the experience to build the company and how, frankly, it's hard to talk about competition, because there's nothing else out there like this.

Gently, but firmly, I re-directed them.  I asked them to tell me a story about someone who walks through the store and arrives at the shelf where there product is.  Tell me, for example:

• What other products do they look at as they browse?
• Are they in a hurry or are they on a grocery store trip where they are stocking up?  (their product is a meal drink kind of thing...)
• Who told them about it?
• If your product wasn't there, which one would they choose?
• And, once they have your product, assuming it works, would they recommend it to a friend?  buy again on the run or on a list?

The discussion turns, quite swiftly, to why they are different using words that are accessible.  They re-connect, perhaps with why the company made so sense in the first place (rather than defaulting to a speedy, lengthy list of benefits compared point by point to the competition).

It makes them think about whose lives they are affecting and how.

It works with all types of different companies:

• Medical device:  This one is a great one because often times the device addresses a condition that is treated in an expensive, ineffective and sometimes risky way.  And it's great when that's the case because if people will pay a lot for something that doesn't work and might be risky, it's an awful good sign there's a market need. 
  
  Consider a future where someone affords a safe and effective procedure with the new device.
• EDA Software in Semi-conductors:  This one is simple because it's really easy to lay out the pieces of the semi-conductor process and have the entrepreneur describe what happens (and believe me it's not rocket science).  They will often describe a costly, clunky, lengthy, error prone process that seems to be only understood by expensive phd's on site or really expensive external vendors.
  
  Consider a future where the company can place anyone in front of a computer and get immediate, accurate feedback when there is a problem.

I believe (I actually know, but that sounds a little....boastful I guess....but I do know) that nothing is rocket science (even rocket science, and I've worked with a startup using that type of tech before).  As such, it doesn't matter what type of start-up you bring me (and I see 3 different industries every month), in most cases, in less than an hour, I can figure out the life before and after in a one to three sentence message.

That to me, is the most exciting and rewarding part of it.  Because when the entrepreneur feels the shift because of the statement, they realize that people will, at least, get it.  People not getting it is...a drag.

Power Points: Valuation

Valuation is one of the most emotionally charged, divisive aspects of the financing process.  When clients present, I frequently counsel them to leave valuation out of their presentation.  If they are asked a question about valuation, I counsel them to say:

I sincerely appreciate your interest in our company and am thrilled that you are excited about it so much that your only question is valuation.  As for valuation, first and foremost, I'm looking for investors to add value beyond money, that's why I'm here today (and that better be true by the way).

Our valuation is $xx and we are flexible and I would be happy to discuss this in more detail during due diligence.

The important thing is that you don't lock horns over valuation during a presentation.  If you do, it's a no win situation.  And, if you do, I've found more often than not that your valuation is too high.

The fact is vaulation is a made up number.  But here's a number that's not:  100% of nothing is nothing.

What I mean is when you are talking about % points of valuation being a deal killer, you are missing the forest through the trees.  The tricky thing I understand is that often in the financing process, the entrepreneur is getting exposure that generates exictement in the company....

...which usually inflates, illogically, the valuation of the company in the CEO's head....

...which usually creates, unfortunately, division and dispute between a start-up and potential investors.....

...which often results, predictably, in a CEO holding 100% of the equity in a company that's worth nothing because he or she couldn't get it financed.

My advice to you on valuation is to consider what the investor brings.  And think about what you really want.  I understand that it's tough to consider giving up control or more of your baby, but you want your baby to become an adult right?

Often, when I get down to it, the CEO is interested in starting another company, it's in their blood.  So, I say, if the match is right, don't sweat valuation too much.  The fact is if the deal stinks for anybody, the deal stinks for everybody.  I've found that over time the market, beleive it or not, is fairly efficient in correcting for that.

Learn more about my business by visiting my website.

Power Points: Advisory Boards

You can find out more about my business at my website.  Frequently when working with clients I ask them about their advisory board.  More often than not they don't have one.  If they do, they are, more often than not, poorly utilized.

Here are a few suggestions that I give to them about advisory boards:

• Understand what you need:  Any start-up can be broken down into 5 or 6 categories of key skill set or experience needs.  Things like:
  
  1. Building and selling a company or IPO
  2. A set of customers
  3. Some customer oriented skill (i.e., selling into enterprises or governments)
  4. Some technology or medical innovation
  5. A current competitive environment

...among other things.  My suggestion to CEO's is to evaluate your organization and see where you have holes and then fill it with your advisory board.  More often than not #1 and access to #2 are the keys that aren't covered.  Consider the advisory board an extension of your company, they do.

• Ask people to join:  At a minimum people are flattered to be asked to join a board.  More often than not, they do.  Most of my contacts who are on boards are on multiple boards.  And, by the way, there are a TON of my contacts who would be terrific board members who are not.
• Compensate them:  Ithink a fair price is between 0.5% and 2.5% of the company.  I think the percentage chosen should be based on the value they can and do bring and their participation on the board.
• Involve them:  This one is the strangest of all for me.  I've met several companies that have a board, with seemingly good people on it who NEVER meet.  I just worked with a company as part of my Band of Angels relationship that has its first customer on its board.
  
  The fact is, it's in your customer's best interest that you survive.  It's also nice to put them on and them give them a big price break instead of equity because of the potential conflict of interest.
• Customer Advisory Board:  Finally, this one doesn't quite fit anywhere.  I think that a start-up benefits tremendously from creating a customer advisory board.  Let them pull you to the specs and even signal you on the price rather than shooting relatively blind on both.

I sit on one advisory board for Three Rings Design.  Daniel used me perfectly.  He engaged me early on for advice and I intro'd him to an early strategic partner in Germany.  After the first year or so, he went on (very successful!!) auto-pilot.  He communicates to me and the board periodically, but for me at this point he got what he wanted and needed out of me.

I'm not at all suggesting that I'm a huge reason Three Rings is succeeding as much as they are.  They are succeeding because Daniel is a superb CEO and he's got a great team.  He also knows how to get the most out of relationships when necessary.  And I'm happy to be fully vested in the package that he gave me!