Tag Archive for: venture capital

Making a Successful Investor Pitch

Fintech, predictive analytics, cloud, AI, blockchain and cryptocurreny are just a few of the hot markets getting the venture capital dollars in 2017.

Since we work with many start-up clients, the question of “how to put together a successful investor presentation” is always an important topic.  This post provides guidelines on how you can putting your best foot forward with a polished and persuasive investor presentation that will quickly grab and keep the attention of potential investors.

It is important to remember that venture capital investors are not usually a technical audience. To gain this audience’s attention you must first sell them on the potential revenue opportunity of the markets in which your company is serving. After you establish the attractiveness of the market, they need to clearly understand the value proposition of your company, the solution you bring to market and why you have a unique advantage over other companies in the space.

One common pitfall you want to avoid is coming across as a solution looking for a problem. The success of your business model is dependent on how well you can solve problems for a potential customer base. Investors rarely fund companies that provide “nice to have” products and/or services.

The following outline should be addressed if you want to deliver a successful investor presentation.  The ideal presentation should be about 30 minutes and allow time for Q&A to drill down on topic areas most interesting to the specific investors.  And remember, utilize graphics, infographics charts and even video when ever possible– today’s stories are told in few words supported by great visuals.

  1. Quantify the market pain – This is the most important slide and needs to capture the investor’s attention right out of the starting gate. State what problem your solution solves. How critical is the market problem? How will your solution address this problem?  Highlight market buzz words and trends.
  2. Set the industry landscape – Overall size of the target market, growth, and expected penetration. Include references to industry analyst reports or other 3rd party sources for credibility.
  3. Describe why competitive solutions are insufficient – Who are your competitors (large incumbents, other startups, substitute solutions)? What are their strengths and weaknesses?
  4. Provide an overview of your solution – What do you offer and how does your solution solve the market need you are addressing.
  5. Define a defendable competitive advantage – Explain your sustainable competitive advantage and how you differentiate yourself. What barriers to entry have you already overcome that will make it more difficult for other competitors to enter the market? Will you be able to patent your technology to defend territory?
  6. Explain your go to market strategy – How will you sell and market your solution? How do you make money? What are your sales and distribution channels? What markets will you target? Who is the buyer? What key problems are you solving for the target customer?
  7. Set financial expectations – What is your basic financial strategy in terms of revenue streams and margins? What is the plan (path) for making the business profitable? When will the business be self sustaining (cash flow positive)? Why are your revenues forecast to increase each year?
  8. State your funding requirements – How much has already been raised (invested) in the company? Who are the current investors, their ownership shares, and composition? How much funding are you seeking now? What valuation are you assuming for the company for this funding request? Discuss any future rounds of capital that the company expects to require. Have a detailed slide of how you arrived at the valuation available for the Q&A session.
  9. Explain how funds will be used – Provide the details on when and how funds will be used… including forecasts for when various expenditures will occur and how much?
  10. Propose an exit strategy – What is the planned exit strategy and when? If the plan is a sale then who are the likely buyers and why? What is the forecast valuation of the company at the exit point? What is the investors expected return on their investment?
  11. Highlight the past successes of management team – Who are they, what are their areas of expertise, and their past successes. Include your key managers, directors, and advisers. The strength of your management team is absolutely critical to your business success and your ability to raise investment capital.

With current VC interest in technology innovations,  it’s a great time to pursue funding.  Just make sure your first impression is a good one – with the number of companies vying for money, it may be the only opportunity you have.

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High-Tech Start-Up: How to Attract Investors & Prepare for the First VC Meeting

THINK LIKE A BANKER!

When preparing for meetings with VCs to hopefully gain funding your high-tech start-up, it is important to understand your audience.  VCs are investment bankers.  They all want to know:

  • What is the likelihood that they will get a return on their investment?
  • When will they get a return on their investment?
  • How much will that return on investment be?

VCs review hundreds and thousands of companies to make just a few investments each year.  Here are the 5 top criteria they evaluate to decide whether or not to invest.

  1. Competitive Differentiation.  All VCs want to know in the first few minutes of the meeting exactly what you do and what makes it both unique and compelling.  This is more than just an elevator pitch.  It must be framed with the competitive landscape in the select target market(s).  If you are unable to articulate this clearly and succinctly, they will tune out and start checking their watches.
  2. Team.  Once the VCs believe that your offering is compelling, their second question is whether the company can execute.  Ideally, they look for a complete senior management team who have worked together before and have been successful in a start-up before.  It’s the very reason that it’s so hard to get funded for the first time.  Though you may not meet all these criteria, you must convince them that you have assembled a team that can make this happen.
  3. Traction.  VCs expect that you will have much more than a demo or proof of concept.  Whether your offering is B2B or B2C, they want to see a significant number of existing customers or users.  They expect your company to be generating and growing revenue over time.   Without traction it is nearly impossible to get funded.  Significant traction immediately reduces their risk, makes them more likely to invest and improves your terms.
  4. Market Opportunity.    VCs love money, so the bigger the opportunity, seemingly the better.  Not always the case.  Many focus on niche plays rather than broad plays so they can minimize risk.  In contrast, CEOs know that it’s just as much work to run a company whether the opportunity is small or big, so they tend to think big.  If you do have a broad play offering, capture a target market or market a subset of the offering to illustrate ROI.  For example, WebEx was built as a revolutionary communication platform, but monetized it by selling a conferencing service.
  5.  Time and Money.  VCs want to see that friends and family believe in you and your company and have provided an initial seed round.  They want to know exactly why you are raising a specific amount of money for the “A” round and how exactly that money will be spent.  When will that initial round run out?   What will you do then?  When will the company become profitable?  What is the exit strategy?  When will we get our money back?

There will be more preparation for your first meeting.  You will need to submit an executive summary and perhaps a slide deck that will include the above and more.  You should be prepared to demonstrate your offering at the meeting.  Submit the materials in advance, and make sure that in the meeting that you are hard hitting on the 5 items that matter most to investors!

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Building Blocks for a Successful Investor Presentation

2010 has been an exciting year for technology innovators as we have seen venture capital investments flow back into the market. As a result many of our clients find themselves in the process of courting investors to fund their new ventures.  Thus the topic of “how to put together a successful investor presentation” has been top of mind.  Today’s blog provides guidelines for putting your best foot forward with a polished and persuasive presentation that will help quickly grab the attention of potential investors.

Before you start your presentation it is important to consider the motivations of the audience you are addressing and align your messaging appropriately. Venture capitalists invest in companies that they believe have the best chance of producing a return on investment, so the sole purpose of your introductory presentation is to convince them that an attractive market opportunity exists and that your company is well positioned to capture a large percentage of that market share.

It is important to remember that investors are not first and foremost a technical audience. To grab this audience’s attention you must first sell them on the potential revenue opportunity in the market/s in which your company is serving. After you establish the attractiveness of the market, they need to clearly understand the value proposition of your company, the solution you bring to market and why you have an advantage over other companies in the space.  What they don’t need at this stage is a technology drill down with complicated charts or confusing industry jargon.

Most important, you must not come across as a solution looking for a problem. Your business needs to be solving problems for its customers. Investors rarely fund companies that provide “nice to have” products and/or services. Potential investors must be convinced that the demand your solution is real, in that the target market cannot grow without your product/solution.

The following is a suggested outline to help you structure a successful investor presentation. The ideal presentation should be about 30 minutes and allow for Q&A to drill down on topic areas most interesting to the specific investor/s.

  1. Market Need and Business Model – This is the most important slide and needs to capture the investor’s attention right out of the starting gate. State what problem your solution solves and how you make money from it. How critical is the market problem and what is the impact of your solution?  Highlight market buzz words and trends.
  2. Industry and Market Overview – Overall size of the target market, growth, and expected penetration. Include references to industry analyst reports or other 3rd party sources for credibility.
  3. Product and/or Service Offering – What do you offer, how do they solve the customer’s problem, what validation do you have of their acceptance by potential customers and their effectiveness?
  4. The Management Team – Who are they, what are their areas of expertise, and their past successes. Include your key managers, directors, and advisers. The strength of your management team is absolutely critical to your business success and your ability to raise investment capital.
  5. Strategic Partners – Partners bring credibility (especially big name partners) so be sure to include any company that has bought into your vision tor will help you establish a competitive advantage.
  6. Competition – Who are they and what kind (large incumbents, other startups, substitute solutions)? What are their strengths and weaknesses? What are the barriers of entry in general to new competitors in your market?
  7. Competitive Advantage – Explain your sustainable competitive advantage and how you differentiate yourself. What barriers to entry have you already overcome that will make it more difficult for other competitors to enter the market? Will you be able to patent your technology to defend territory?
  8. Marketing Strategy – How will you sell and market your solution? How do you make money? What are your sales and distribution channels? What markets will you target? Who is the buyer?  What key problems are you solving for the target customer?
  9. Financial Expectations – What is your basic financial strategy in terms of revenue streams and margins? What is the plan (path) for making the business profitable? When will the business be self sustaining (cash flow positive)? Why are your revenues forecast to increase each year?
  10. Funding Request – How much has already been raised (invested) in the company? Who are the current investors, their ownership shares, and composition? How much funding are you seeking now? What valuation are you assuming for the company for this funding request? Discuss any future rounds of capital that the company expects to require. Have a detailed slide of how you arrived at the valuation available for the Q&A session.
  11. Use of Funds – How will you use the funds (be detailed), when do you forecast the various expenditures to occur, and how much?
  12. Exit Strategy – What is the planned exit strategy and when? If the plan is a sale then who are the likely buyers and why? What is the forecast valuation of the company at the exit point? What is the investors expected return on their investment?

With renewed interest in technology innovation by investors, it’s a great time to pursue funding – just make sure your first meeting/presentation is a good one – with the number of companies vying for money, it may be the only opportunity you have.

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