Tip #101: A final bonus

Tip 101: A final bonus. Credit for this one goes to Peter Adams at Rockies Ventures Club.  Does your last slide have one of these variations?

Why? You can tell us verbally that you are pleased to be here and it’s Q&A time.

The last slide of your pitch will stay on the screen for perhaps 15 minutes. Put some useful content on there! Nothing too distracting, and nothing you haven’t already covered, but something!

One effective approach is simply to put up your “investment thesis” – the key 4-6 bullet points highlighting why we should invest.

One final bonus like this might just get that last vote to move to diligence. But be careful: having a typo on the screen for 15 minutes probably isn't the vote you want.


Tip #99: Startup clichés

Tip 99: Startup terminology clichés. We understand that you are a fan of startup terminology.

We’ve bootstrapped to create our disruptive MVP using agile development, extended our roadmap by leveraging a rockstar team of thought leaders using lean startup methodology to shift the paradigm, and now our visionary evangelists are helping us scale into becoming a unicorn.

But after a few words your desire to prove you know the startup lingo becomes off-putting. Many investors aren’t familiar with this jargon – so here is another unnecessary barrier to understanding that you can eliminate.

After a few sentences, it becomes anything from annoying to amusing – neither of which are good news for you. You’re not the only guilty pitcher (there’s a March Madness bracket of obnoxious startup vocabulary) but please tone it down.

To extend this a bit further, some terminology has a very specific meaning, and few things give us more pleasure than pointing out to startup-word-junkies. Every business calls itself “disruptive.” They almost definitely are not, in either generically disruptive (you will slightly change how a small number of people behave) or the technical Christensen sense). The last is a pretty big thing to be, and (like aiming at IPO or becoming a trillion-dollar company) not obviously enhancing your credibility.

All revenue is not “MRR” (especially if it goes up and down each month!).

Your team is “world class” and yet you’re pitching to angels in South Carolina not New York, London, San Francisco?

Tip #98: Press

Tip 98: Press. Probably 50% of decks have some attempt to prove this company is going to be successful because it had positive press.

In some cases, this can definitely be an attraction. If you’re a consumer / retail company, being Oprah definitely helps us believe you have some potential.

But note that, like testimonials, press articles and public exposure have negative implications that you might not be thinking about.

1)      We know that local press sources are not great judges of the potential of companies. Local reporters often want to “cheerlead” for local success stories, and aren’t actually investors, so we don’t put much weight on their views

2)      We know that media often just recycles your press releases. Some do it word for word; others try to turn your press release into a real story; but either way, we know what’s going on here – and it isn’t dynamic viral marketing from an engaged customer following!

3)      You were featured in the Charleston Post & Courier’s “greatest startups in Charleston”? Congratulations. Your Silicon Valley competitor is featured in TechCrunch, CB Insights, and the Wall St Journal. Not so great.

4)      You have nationwide exposure, but you only have 15 paying customers and $50k of revenue? Hmm, this business is not going to grow well.

5)      Did I mention that 50% of pitches talk about their press? Hardly a compelling differentiator.

6)      And lastly, since your TechCrunch article, all your competitors and potential competitors know about you. That “first mover advantage” you stressed as your key differentiator isn’t looking as powerful now, is it?

So beware again that press coverage is not 100% impressive to potential investors.

Tip #97: Testimonials

Tip 97: Testimonials. Pitchers love to show off testimonials. Investors often think they’re pointless. Sometimes they actually hurt a presentation.

Testimonials are long and text heavy – they take up a lot of slide space and pitching time – and are a golden opportunity to read aloud what is on the screen. As you know by now, this is all bad.

Testimonials are often anonymous. “Makes my job easier, recovers money and it costs ---nothing?? What’s not to love?” With no attribution at all, these are worth absolutely nothing.

Even with “Brian J., Phoenix” we have no way to know if this is a real testimonial, and even if it’s real why should I care what Brian says?

If you’re resorting to testimonials, the implication is you don’t have more compelling forms of traction – like paying customers. You can show 10 glowing quotes: but why aren’t they 10 paying customers? What is wrong with your business model or sales strategy that is prevent people that clearly love your product from buying it?

Tip 97: Make testimonials convincing, or take them out.

Tip #96: You can pay me

Tip 96: You can pay me. The flip-side to the previous tip are the investment opportunities we get where “this round of fundraising will allow the team to work on the business full time.”

This is another double-edge approach. Yes, we may be impressed that you have been building this business in your spare time. But we might not like the implication that dollars we invest here will simply go to paying you a salary.

We appreciate that (especially first-time) entrepreneurs have limited resources and necessarily afford to commit full time to a business that won’t make money this year. We admire your dedication. But on the other hand saying you are raising money to pay yourself more doesn’t feel like a great investment opportunity.

We want to see investment going to building a business – developing product, hiring sales teams, building marketing engines, creating sustainable value – not just paying your mortgage. It might well be essentially the same thing, but your phrasing is important.

Tip #95: Massive pay cut

Tip 95: I took a pay cut. Every few pitches we hear the entrepreneur tell us that:

 
 

I’m not sure what message people think this conveys to potential funders, but note some potential implications from a pitcher saying this.

·        Audience: You used to earn a lot of money. Then why haven’t you funded this entirely on your own and why are raising money from us? Something doesn’t add up here.

·        Audience: You think working on a startup – doing something you love to build a business from which you could make a lot of money – is such a sacrifice? Being an entrepreneur means taking risks. Perhaps you’re not cut out to be an entrepreneur, or perhaps you’re not doing this from a love of your business?

·        Audience: So you have lots of resources to fall back on. Are you really going to be doing everything you can to make this business successful if you can simply go back out and resume your six-figure middle management role?

·        Audience: So you used to earn six figures. That probably means you have the mortgage, spending requirements, and discretionary spending habits that go with that. What happens now you’re earning nothing in a startup? How long before you are double dipping a six-figure salary and equity upside based on our investment? 

I suspect you need to think harder about the negative implications you’re conveying when you tell us how much you “gave up” to become an entrepreneur.

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!

Philosophy #4: Keep it Simple

There is a lot to learn about a business in a 30 minute pitch session. Hundreds of potential subjects to address, areas to consider, thoughts to encourage (or avoid), questions to answer. How can you hope to cover everything a potential investor “needs” to know?

You can’t. But fortunately you don't need to. All you have to do at each stage in the investment process is get to the next stage of the process. Provide just enough to make that happen.

How? Always keep things as simple as possible.

Generalist investors can’t “learn” your industry and its problems in two minutes, understand all 15 of your innovative product design features in one minute, or digest your five previous management positions in thirty seconds.

The best we can do is learn you have found a big and genuine problem, you have a solution, and you can build a company worth $25 million in five years by providing that solution. That's enough for us to move you into due diligence.

Investors can’t be expected to evaluate these key foundations while we are trying to understand your jargon, read 10,000 words of text on your slides, and ask you questions all at the same time. You have to make what you are doing easy enough for anyone to understand – immediately.

Philosophy #4: in everything you present to investors, keep it simple.

Philosophy #3: Maintain Credibility

There are lots of discussions about why people invest in early stage companies. Fear of missing out? Emotional gut reaction? Sensible diversified portfolio? For fun?

All of those discussions are interesting, but perhaps more important is why people don’t invest: because they don’t believe you can do what you’re proposing. Somewhere along the pitching process you have lost credibility.

People evaluating your early-stage business have very little material to evaluate. We don't have five years of historical financials, years of customer behavior data, or often much scientific data proving that your product even works. Minor things can therefore take on disproportionate importance.

Has this individual been 100% truthful and clear? Did they charge a $6 Starbucks to the startup or did they have a $2 filter coffee on their personal card? Are they shady, eccentric, scatterbrained, organized, thoughtful, considered?

Some of these first impressions might be entirely unfair, but they happen. Your defense is to present a credible picture in everything you do when fundraising – and, in fact, any time, because we will learn what you are like when you are not just in “pitching” mode.

Underlying philosophy #3: maintain credibility throughout your fundraising process.

Philosophy #2: Do Your Homework

No authors write well without knowing their audience; no salespeople sell well without knowing their customers; no companies pitch well without knowing their potential funders. You can only know your funders by doing your homework.

What is the right kind of investor for my business? Where are those investors? Do I fit VentureSouth’s investment criteria, or Wells Fargo’s funding criteria, or SCORE’s advising criteria?

What kind of return are they seeking, and when, and who am I competing against for their attention? How can I differentiate myself from the other companies raising money?

What kind of deal should I offer? How do I prove my traction effectively? How painful is this process going to be? What can go wrong?

You need to have good answers to these questions before you even approach a funding source. Connecting then learning is not the way to go. “Hi, I’m not sure if I’m a good fit but I was wondering if you would fund my company” is a certain way to get to "you're not a good fit."

But that’s why you’re reading these posts, right? And why you’ve already read this page.

Philosophy #1: Pitching is a Process

We start out with five “philosophies” of angel investment pitching – meta-guidance that underlies many of the future tips.

1)      Pitching is a process.

The “pitch” is one part of raising capital. It isn’t the first or last step. The entire “pitching process” is deliberately a series of hurdles and challenges to test different business characteristics and presenter qualities – understandability, sell-ability, fundability, credibility, resilience. You need to understand the whole process in order to be successful in any given part.

This diagram summarizes the steps of our investment process. Pitching is important, but note how few companies actually make it to the pitch: the chances are the pitch has failed even before you reach the "Pitch Deck" (stage 5). You need to be a high quality candidate at every stage of the process in order to get funded - starting with the opening email!

 
 

Perfecting Your Pitch - Introduction

Every few weeks, we run an educational workshop to share the insights we have gained from seeing many hundreds of companies pitch to angel investors. The most recent, in Greenville last month, was a packed house of entrepreneurs looking for advice.

These events are popular. We’re going to try to bring this workshop to all the locations with a VentureSouth angel membership group, but it is hard to do that while running angel groups. We also pack a lot of material into 90 minutes – as you will see if you attend. (Subscribe to our newsletter to hear details of future events.)

So we have decided to add this repository of tips and suggestions. This post kicks off a regular feature where we share a quick idea on how to improve your pitch, or how to avoid a pothole along the way.

Some of these suggestions are specific to angel groups, but most apply to any form of capital raising. Our goal is at least one a week until all our candidate companies have the "perfect pitch."

Why are we qualified to do this? We're not really. We are not a general “pitch practice” company, sales training consultancy, or public speaking trainer. But over the course of the nearly 2,000 business plans we have reviewed and nearly 200 companies we have seen pitch to our groups, we have learned what works in our groups – and what doesn't.

We hope you find them useful, and welcome your feedback, debate, criticism, and suggestions for improvement.