Tip #55: Who pays

Tip 55: Business model – who pays. Very frequently, a presenter or presentation will not reveal who will buy this product.

For example, an enterprise business model might be simply “B2B SaaS”. What we actually want to know is who, specifically, will buy this software.

The more granular, the better: “tech companies” loses to “tech companies with 100 or more employees based in the Carolinas” loses to “Blackbaud and PeopleMatter” loses to “Brian Jones, VP Operations at PeopleMatter.”

Specify the types of buyer and example companies. Specify how they make their purchasing decision: does the line manager or the C-Suite? Specify who actually pays the bill (the business line or HR), and who sends you the cash (central procurement processing or Brian Jones’ credit card). Specify when that happens (at contract signing, or at delivery of product; monthly automatic renewals or annual fees).

Also tell us how you know this.

All that granularity typically takes a lot of effort for you to understand. Being able to tell us very clearly “who pays” proves you’ve done your homework and your ambitious sales projections have some grounding in reality.

Tip #54: IP Accurately

Tip 54: Product – IP accuracy. Just as importantly, be unerringly precise about what you write and say about IP. Don’t even inadvertently mislead.

Be careful to specify accurately:

  • the type of patent (design vs utility)
  • the stage of your application (filed vs receiving comments vs awarded vs continuations)
  • the type of utility patent (provisional vs full)
  • the geographies (US vs others)
  • the overall strategy (a single patent vs a portfolio)

Don’t exaggerate: if you have just filed your first provisional patent, you don’t have a "patented product."

And be ultra careful about ownership. If the patent is licensed, don’t say “we have a patent”; say “we have an exclusive, global license on a technology patented by the University of Back Rubs.

If the patent is owned by the inventor personally, not by the company itself, tell us early – because it needs to be with the company for us to invest. You don’t want to be thinking about this for the first time during your pitch.

Tip #53: IP Briefly

Tip 53: Product – IP brevity. IP can be complicated and hard to present effectively. In general, we recommend including this orally as part of your product/solution slide, but if IP is absolutely integral to the value proposition it might merit its own slide.

However you approach it, keep in mind the usual recommendations about brevity and simplicity.

Don’t include complicated diagrams with hard to read annotations. Don’t include prose and legalese (definitely don't quote verbatim from your patent filings). Keep it brief.

Don’t include anything on trademarks. Trademarking some random phrases for $400 doesn’t make the company more attractive to investors. And you definitely don’t need a whole slide on your trademark applications.

We do not need the patent numbers on the visual version of the deck. (In the written version, the numbers with a hyperlink to the PTO materials shows good organization – and obviously provide the filings, correspondence, and awards in the diligence dropbox).

Tip #52: A taste of the secret sauce

Tip 52: Product - secret sauce. Angel groups don’t sign non-disclosure agreements to receive information – so don’t ask. If you do, you lose credibility from email #1.

(Very rarely, we will agree to sign an NDA during the diligence process if you’re sharing the recipe of the secret sauce – but this is extremely rare. I can only think of one example, where a single member of a diligence team signed an NDA to hear the identity of a major customer, which could not be revealed because it was a public company. I can't think of any for tech-coverage.)

This should not be a problem for you. If it is, we are not the right investor. If you won’t engage without an NDA, we are immediately told you have unrealistic thoughts about your technology and don’t understand how to protect it (you realize patents require you to put the secret sauce in the public domain, right?).

In general, don’t share the secret sauce's recipe. We probably aren’t going to be digging into your code (or whatever) anyway – but don’t be too secretive about it, and tell us what we need to know in order to advance you to the next stage of the process. The secret sauce isn’t worth anything if you can’t raise capital to sell it.

For the pitch itself, you need to strike a balance between being convincing and exciting, but without revealing too much, while avoiding being in the weeds and violating tip 50. Not easy, so practice a few different versions of the slide and pitch until you find something that strikes the right balance.

Tip #51: Product Jargon

Tip 51: Product - Jargon. You live the technicalities of your technology; we don’t, and we’re not going to learn them in a 30 minute pitching slot. If you don’t explain this business, even the most scientifically niche or technologically sophisticated, in everyday language, we won’t invest.

How can you do this? It is OK to simplify – as long as you don’t mislead. Try analogies or comparisons if the concepts themselves are too complicated - though usually the concepts aren't that difficult to articulate.

The problem comes with terminology. If you are using a word that is not in everyday use, eliminate it. If you are using industry-specific abbreviations, either spell them out or take them out.

You might think I'm looking at the scientists here. I am.

But I'm also looking at software guys - because most of us aren't software developers, so simply switch off when you get into the weeds. And I'm looking at anyone else who bringing their industry-specific vocabulary to a generalist audience and expecting them to be fluent in your argot.

Jargon must be gone.


Tip #50: Short Product Overview

Tip 50: Product overview. This is a big tip.

The single biggest mistake that presenters make during their pitch is devoting too much time to explaining their product.

Your “product overview” should be one slide out of 10, and should be at most 5 minutes of your allotted 15. Even that is probably too much.

Investors are, of course, interested in your product. But we are just as interested in your business model; how you are selling your product and how you make money; who else has a similar gadget; and (critically) how are we going to see a return on our investment.

Your product is like the participation grade for going to class. It’s an easy 10% of the grade – just show up! But at most it’s worth 10% of the grade – so there’s no point showing up when class isn’t meeting, because you can still only get 10% of an “A”

As an entrepreneur living and breathing your new product or service, it can be very difficult to step away. You can’t possibly hope to address all of the 257 amazing products features in five minutes – so don’t try. (And also remember that some of the amazing features are probably not that amazing outside of your head. A slick UX is not a differentiator.)

Instead, focus on the key characteristics of the product. And keep it to one slide.

Tip #48: Advisors

Tip 48: Advisors. Many presentations include a separate and long list of advisors. This is rarely worthwhile.

1) Often those advisors aren’t integral to the business – you could be successful without their guidance, or with the guidance of many alternatives. This is particularly true of “generalist” advisors (accountants, lawyers, consultants) – omit them.

2) Medical advisors’ names are often meaningless. Presenter: “We have Dr. Backrub Extraordinarius PhD MD as an advisor.” Audience: “Who he’s? So what?”

3) Advisors typically aren’t even contributing to the business. Audience: “And you expect us to believe that the US’s leading authority on back rubs is actively contributing to this startup in Laurens South Carolina?” More likely this is just filling up space with irrelevant information.

If there’s really a key advisor that is helping you, include their qualifications and prowess – and their actual contribution to the business. One toy company pitched with a former CEO of a huge toy company actively helping with sales connections and introductions – a huge plus. A medical device company showed a long list of medical advisors who were experts in the field, but made no case they were actually engaging – no help.

Tip #47: Mind the gaps

Tip 47: Team gaps. Most likely you won’t be raising angel capital with a complete team in place. As part of your team slide, you need to address where the gaps are and how you will fill them. Most pitches don’t bother.

For example, a CEO and CTO two-person team creates and company, builds the MVP, sells the first five customers, and creates a go-to-market plan that requires funding to hire an inside sales force to go sell. Great – perfect time to ask for angel investment.

But who that sales person is isn’t mentioned. How can we endorse your go-to-market plan without that key ingredient?

You may not have an individual hired, which is understandable. But in that case, tell us who the individual you’ve identified is – or at least what their background is. Don’t have someone in mind? Then we need to know what characteristics and qualifications your sales leader has, so that we can judge the probability of you finding someone from the local talent pool.

Not addressing these gaps head on leads to (best case) probing Q&A and (worst case) lost credibility: “these guys have no idea how to go sell this thing.”

Tip #46: No long resumes

Tip 46: Long resumes. The team slide is not the place to provide your resume in a long prose paragraph in small text. Delete that and start again.

Instead include only 2-3 key bullets summarizing your roles and experience, and emphasize their relevance to your ability to execute this plan.

This may seem obvious in the light of “Keep it Simple” and “delete unnecessary words”. Yet a substantial minority of team slides are pictures above blocks of prose. We can’t digest two dense paragraphs of biography, and so narratives lose their steam entirely.

Another chunk of team slides go too far the other way, with just pictures, names, and titles. This can work if you then provide compelling oral testimony about the team, but it’s higher risk. Why not just have some brief bullets to help us remember your team’s qualifications?

Tip #45: Team Slide Content

Tip 45: Team slide content. If you agree with the last tip, next consider the content for your team slide that best helps you move your narrative forward and clinch your argument. Only include what is relevant to achieving that.

We aren't swayed by your mid-level management role, your board position at the zoo, your GPA, or your kids. We do care whether you have the capability to deliver on your plan. Present what you need for proving that.

(For “full disclosure,” you may want to consider adding your other roles, but in smaller font at the bottom and don’t speak to them.)

Overall, team slides are hard – difficult to fit into your narrative without providing pointless or distracting information. The good (?) news is that we learn more about your ability to execute by listening to your pitch than by reading your team slide.

Tip #44: Team Slide

Tip 44: Team slide location. We stress that the quality of the management team is the primary factor determining whether or not we invest, integral to our due diligence process. However, we recommend your “team slide” does not come first in your pitch.

If you put it up front, it’s an “introductory facts” slide – a hello and potted bios. This can be interesting enough, but if it is not integral into your argument of why we should invest it’s a missed opportunity.

Put it in the middle of your deck, to use to “clinch your argument” – “we are the team that can deliver the plan we have presented because we’ve built three similar companies in the last ten years and sold them for $100 million…”



Perfecting Your Pitch - Tip Update

Our first 43 tips have been focused on the how and who of perfect pitches. This might seem excessive, but remember two things.

First, 86% of our incoming deal flow never even gets to pitch - making homework and preparation the most important tips we have.

Second, a large amount of the information you impart comes through non-verbal communication. It doesn’t really matter if it’s 50% or 90+%; it is a lot. That's why delivery and "presentation" came next.

That leaves "content" at 10-40% of 14%, which is why it's taken a while to get here. But of course the what (what should be included in the pitch and how you might think about tackling particular questions) is important. So here is the next cohort of tips. Put these in the context of our recommended allotted 10 slides.

Tip #43: The Appendix

Tip 43: The Appendix. 10-12 slides is enough to cover everything we need to know. One popular fudge around tip 1 is “stick that in an appendix”.

You can do this if you want, and indeed for the written version it might be a good approach. For the oral delivery, though, be warned that this scenario is all too common.

Questioner: “Can you give me more detail on your distribution channels?”

Presenter: flicking through five slides, then back one, um where is this slide, ah here we are.

Audience: trying to ignore a whole bunch of images flying by, then trying to read a new slide – which is probably weaker because it’s in the appendix…

Presenter: “As you can see on this slide, we have [a long but poorly fleshed out list of distribution channels that didn’t really fit my narrative and open up lots more questions around a subject that I didn’t really think was important enough to include in my 10 key slides].

Audience: trying to process the new data ignores the answer and now needs dragging back to the core message.

This is likely counterproductive. Better would simply be to answer the question orally and simply. Our two key distribution channels are [x] and [y].

Tip #42: "That's a great question"

Tip 42: “That’s a great question.”

The single most common response to a question asked by an angel investor in a group meeting is “That’s a great question.”

It isn’t a terrible way to start: a bit of flattery is nice and it gives you a second or two to marshal your thoughts to reply. Nonetheless, tip 42 is not saying it, for a couple of reasons.

First, it takes time, and every second counts. Second, why lie? (Chances are, it really wasn’t a great question.) Third, why was her question great and mine wasn’t?

But most importantly remember that most companies don’t get funded. Why say exactly the same thing as the last person that pitched?

If it really really is a great question, then say it and briefly explain why it’s such a great question. But most questions you will get aren’t going to be great, so you’re better off just answering the question and moving onto the next one.

For a similar take on avoiding "negative space" in Q&A, have a read of David Cohen.

Tip #41: Handle critical questions smoothly

Tip 41: Handling critical questions. VentureSouth isn’t shark tank, but you should expect skepticism and critical questions. Sometimes these questions are asked deliberately provocatively to see if you have a thin skin or diplomatic aplomb. If you are confident you are correct, say so (respectfully) – ideally with proving evidence.

Questioner: Email marketing is just not going to work on this. Whoever is advising you spend more on email marketing needs to be fired.

Presenter: Well, email marketing is not the only sales strategy, and we are planning to experiment with other methods that might be effective too. We’d welcome your input on those. However, our data so far from our initial customers suggests our email marketing is already working to build initial users – our last campaign showed a 10% open rate, a 2% conversion rate, and a 4x ROI. [Then selects next questioner.]

Good save.

Tip #40: Don't dodge

Tip 40: The dodge. Hopefully because of tip 36 this won’t happen, but if you get a question you really don’t know how to answer then SAY SO.

Waffling or dodging is the worst approach – credibility is eliminated immediately if you do that.

Saying just “I don’t know that” is better, though still not perhaps the best response.

Saying “I don’t know but I will find out by [this method]” is the best “save” you can hope for here. (And if you obviously write yourself a note to do it you can reinforce how well organized and diligent you are!)

Tip #39: Avoid the re-ask

Tip 39: Avoid the re-ask. You gave a concise and convincing answer to a question in Q&A. But then you asked the interrogator, “Does that answer your question?” Tip: don’t do that.

If your answer did address the question, asking and getting a “yes” simply wastes a couple more seconds (best case).

More likely (middle case), your question came to try to rescue an enjoyable ramble along a tangent that had eventually petered out – and asking merely forces the questioner to highlight to everyone that your answer was ineffective.

Worst case of all is that asking prompts the questioner to say something long-winded and irrelevant and burn up another minute of your pitching time. In my opinion, it’s better just to answer then move on. If the questioner really isn’t satisfied, they can ask a follow-up.

Perfecting Your Pitch - The Tips

So far we’ve outlined what we won’t fund and probably won’t fund, given you in-person “how to pitch” sessions, and outlined our five key philosophies for angel investment pitching – “Pitching is a Process”, “Do your Homework”, “Maintain Credibility”, “Keep it Simple”, and “Practice, Practice, Practice”.

So far, so obvious, right? Maybe, but strangely so rarely seen in companies seeking funding. Nonetheless, some companies do deliver on at least some of these principles – and almost all of the 3% of companies that we fund deliver on most of them.

So over 2017 we’ll be sharing some shorter tips on how to beat your competition by pitching more effectively.

Of course, there is no single “right way” to pitch. Some of our tips disagree with others (including some other early-stage investors) and very likely disagree with how you think you should present it. That’s fine: take what you find useful, ignore the rest, and give us your best shot. Proof comes when you get funded. Or not.

We’ve tried to arrange these tips thematically, starting with the format, high-level content, and delivery, and ending in specific tips on detailed content for each subject area and slide. Still, we jump around a bit: if you want a logical and coherent list, better come to a workshop or better still get the guide.

Philosophy #5: Practice, Practice, Practice

You would think this is obvious and everyone embarking on a fundraising process would be well prepared and practiced. But you would be wrong.

If the first time you’re delivering your slides to a live audience is at our funding cycle meeting, we guarantee you won’t get funded by us. If you confess “I’ve never had that question before” (particularly if it’s an elementary question), you’re toast. If you can’t deliver your pitch without your slide deck as a crutch, you won’t beat the next presenter – who can.

Practice, practice, practice!