You've developed your idea into a working prototype. Your co-founders and you are experienced and confident. Your angel investor has helped to open some doors giving you a couple of impressive early customer partners. You can't help but thinking ahead to actually starting to earn a salary and hire employees.
Now you've secured audience to present to a venture capital fund. All your dreams are now riding on you and your team's ability to get funding. You know that venture capital funding is preferable to the alternatives. In fact, you believe that funding from the right venture capitalist greatly enhances your prospects of success.
So you go open your pitch presentation in PowerPoint.
Forty five slides already. And you still don't even have the financial projections or revised marketing plan in yet. As you start to pull up the financial model and demand analysis spreadsheets one of the other co-founders comes in with the marketing section. "I've got it down to 20 pages, but I think we need to put a handful back in. The VCs will want to see our customer-lifetime-value model so they know we know what we're doing".
You know there's only going to be an hour to pitch. Despite your co-founder's insistence that a "good pitch" will be granted extended time, you have your reservations. You can't afford to blow this. You pull one of the half dozen 150 page "how to" books off of the shelf and start flipping through page after page of specific advice on just how to pitch each and every category of venture...
Presenting to a venture capitalist is easy, but nearly all entrepreneurs screw it up.
- 10 Slides: the size of the presentation.
- 20 Minutes: how long it should take to present.
- 30 Point Font: use really big fonts.
Not even will almost no entrepreneurs will follow those easy rules, but most will not even come close to heeding Kawasaki's advice.
Most presentations venture capitalists suffer through are crap. And often they are fifty plus carefully crafted PowerPoint slides packed with excruciatingly detailed, tiny font text descriptions of crap. Kawasaki says "sixty slides [of] 'patent pending,' 'first mover advantage,' 'all we have to do is get 1% of the people in China to buy our product' crap. Throw in some "Web 2.0", "Social Networking" or "Web 3.d" references, and his complaint is just as fresh today.
Some things which entrepreneurs forget, don't know or don't want to believe:
- Your idea is not unique. The venture capitalists have heard it before, probably a lot.
- If you can't get your presentation down to 10 slides with big fonts, then your idea probably is unfocused, too complicated, or sucks. Your audience already understands quite a bit about your proposed venture (or you're pitching to the wrong venture capitalists). Your job is to let them know why you're special.
- Be realistic. Passion and zeal will not convince venture capitalists if the fundamentals aren't there. Neither will dozens upon dozens of hyper-complex PowerPoint slides and a lot of detailed jargon.
What you put on those precious 10 pages is equally as important. Venture capitalists want to know that you understand what problem your idea will solve, that you can pull off the technology, that you understand the market, and that your team is credible. Your presentation should contain, in order:
- Problem. What pain, need or looming challenge are you addressing?
- Solution. How will you solve the problem? This is often the hardest slide for Silicon Valley entrepreneurs to reduce to one page. Keep it simple, you are an entrepreneur, not a college professor.
- Business Model. Many entrepreneurs make this the second page of the previous Solution slide. This is how your venture will operate and increase the venture capitalist's investment. Remember, investors are not altruists funding an exploratory science project. They are seeking to earn a return on their investment. A steep return. How will your business operate to that end?
- Underlying Technology, Process or Platform. For Silicon Valley entrepreneurs this is the opportunity to brag about your genius. Still most entrepreneurs will screw it up as badly as they did slide 2. The point is not to make your audience understand the technology -- the venture capitalists will hire consultants to verify the legitimacy of tech they don't grasp if they don't already have an in-house expert. The point is to convince your audience that you understand the technology.
- Marketing and Sales Plan. Both marketing and sales plans must be summarized on a single slide. As with tech, the idea is not to detail your ad budget or sales force org chart, but to convince the venture capitalists that you understand the relevance, priority and operation of selling and marketing your solution.
- Competition. If this page is simple for you because the answer is "we have no competitors", then don't bother showing up to the pitch. There is always competition, period. No venture can be kept secret very long, and all good ideas will attract competitive entrants. Think ahead enough moves to envision just who will become a competitor as you succeed.
- Team. The management team is really, at the end of the day, what the venture capitalists are investing in. The venture capitalists are not putting money into your company with the idea that they'll run you and your co-founders out first chance they get. If they are forced to do that later it will because your company is an almost certain failure in their portfolio. You are getting this money because your investors are convinced that you and your partners can execute on these plans.
- Milestones and Forecasts. At this point in the pitch you're past the hard part because a perceptive entrepreneur will know if she's lost her audience by now. The venture capitalists will not be particularly interested in the execution plans if they've already ruled out investing. This section should be major milestone commitments which show your audience that you mean business, and that you plan on putting their dollars to work. Hard to work. Projections should be forecasts based upon those milestones.
- Current status and Timeline. Status is where you are now in relation to your plan. It's a good idea to include what you've already accomplished, but don't dwell on the subject. Likely, you wouldn't be presenting if you hadn't accomplished some milestones already, so keep completed milestones simple. Timeline is really just how long to complete what you described in the previous slide. If you must make a Gantt chart use Visio or something simple to draw a big, fat, easy to read chart. Do not use MS Project. Venture capitalists know these are only estimates.
- Summary. Call for Investment. Summarize the previous nine slides in a couple of easy to remember points. Let the venture capitalists know why they've given you the past 20 minutes -- because you require their money to move forward. Let them know why you need them. Unless you're the 1-in-10,000,000, telling venture capitalists that you don't need them will backfire. Why do you think Benchmark passed on Google? Because most guys who saunter in and tell you they don't need your money aren't going to deliver Google.
Notice there are no separate financial model or projection pages. Your pitch to venture capitalists is not a business school case presentation. It is not an investment bank M&A analysis. It is not an exercise in demonstrating fancy valuation techniques in Excel. Venture capitalists know two things if anything. They know how to value ventures like yours and they know that startup financial models are made up of guesses, wishes, and hyper-exaggerations. I'm planning on a future article which describes more thoroughly how an entrepreneur can value her own venture, both from her and the investor's perspective. But this is a tool only to help negotiate better. Venture capitalists largely already know what their range of valuation is long before you get to the negotiation stage. And, they are the ones with the money.
What do we do with the other 40 minutes? You were allotted an hour to pitch, and only took 20 minutes. Well, let's apply some real-world analysis and figure out what happens with those extra forty minutes from your 11:00am-noon appointment:
- 10:30am -- Arrive for 11:00am appointment with idea you'll "set up" early (projector, laptop, etc.).
- 10:30am - 11:00am -- Sit and wait in reception area.
- 11:00am -- Shown into board room.
- 11:15am -- Get started presenting after your sponsor introduces you and other fund partners/directors show up.
- 11:35am -- Complete presentation. Hopefully field questions.
- 11:45am -- Questions complete, hopefully talk with one (maybe two) of the partners/directors a bit more. (Don't expect an answer though, the partners have to meet later to determine if/when/how much to invest).
- 11:50am -- Graciously cede your remaining time (thus allowing your audience a chance to take care of personal business and life's needs before the next group of entrepreneurs comes in with their 50 slide, 10pt font deck).
Even if you don't get funded, it won't be because you had too few slides or presented too briefly and concisely. The venture capitalists to whom you presented will remember your pitch as stand out amongst the crap of the day. They may not buy your idea, believe in your market or technology or have the current portfolio fit opportunity. But, they will remember you and your team as credible managers and entrepreneurs.
This alone may get you in the door with your next idea.