Venture capitalists often listen to many bad pitches before hearing a winner. Entrepreneurs wooing potential investors can get an edge by following certain presentation guidelines.
Heightened selectivity by angel investors and venture capitalists has amplified the start-up financing challenge that capital-starved entrepreneurs are facing today. Raising capital is one of the hardest jobs for an entrepreneur in any economy. Yet in a recession, it takes even more convincing to get people to part with their money.
If you’re an entrepreneur looking for money (is there any other kind of entrepreneur?), a poor pitch to investors can make or break your attempt to obtain start-up capital.
To help entrepreneurs prepare themselves when they present to a potential investor, global venture capital firm Canaan Partners recently created the Entrepreneur Pitchbook, a concise guide to the perfect pitch. The 29-page workbook covers everything from the typical time allowed for an introductory meeting to the ideal number of slides in a presentation.
To begin, be prepared by practicing the pitch in advance. Nail down the timing, flow and clarity of your presentation. Typically, an introductory meeting is about 1 hour (including Q&A), so keep in mind that your presentation should be concise and focused. For a typical one-hour pitch presentation, renowned venture capitalist Guy Kawasaki suggests the 10/20/30 rule: 10 PowerPoint slides lasting 20 minutes in a font no smaller than 30 points. (This rule, Kawasaki says, is applicable for any presentation to reach agreement: for example, raising capital, making a sale, forming a partnership, etc.) The Global Entrepreneurship Institute provides a comprehensive list of guidelines for creating PowerPoint slides for investors.
“The success of your pitch depends on the clear and defendable presentation of an opportunity (big problem + big market), your plan for addressing it (your solution) and identifying the team that is uniquely positioned to do so,” Canaan explains.
Canaan’s advice for that first meeting:
- Introduction — Define the company, business and product/service in one sentence. Clearly introduce your basic idea and value proposition so everyone present knows what your company does and the market you are targeting.
- Team — Identify a core group of talent that can execute on the next set of milestones. Invoke confidence that your team believes in the company and can move forward. In other words, clearly answer the question, “Why you?”
- Opportunity — Establish the need for your solution and the size of the market. State the problem and describe the pain of the customer. Convince the room that solving the problem is worth the effort. Identify the current and future market size.
- Solution — Demonstrate how you will solve the problem and validate your differentiation. Explain your offering (technology/intellectual property) and your unique competitive advantage.
- Competition — Explain whom you compete with and summarize the few key reasons why customers will prefer your solution to others. Include a competitive quadrant matrix.
- Business Model — Explain how you will generate revenue, show what you’ve accomplished to date, and make future forecasts. Convey that you understand the realistic economics and evolution of a growing, dynamic company.
- The Ask — Outline what you need from the investor to make your business a success and what you are looking for in an investor partner. “The amount you’re raising shouldn’t be arbitrary,” Canaan says. “Tell your story in numbers. Investors want to see that you’re hitting milestones and that you are asking for the right amount of money to get the company to a meaningful next step.”
If after this first pitch the investors determine that the merits of your product or service outweigh the potential challenges, the entrepreneur will be invited to make a final presentation to the global partnership. In the meantime, the entrepreneur reaches the due-diligence phase, during which he should conduct his own assessment of the marketplace and the effectiveness of both his solution and his team. At this point, the real work begins.
Below is the full slideshow version of the Canaan guide. To better view the slideshow, click the “full screen” icon at the bottom of the box or click the link that takes you to slideshare.net.
Entrepreneurs who need help honing their pitches should also check out FundingPost.com, the National Association of Seed Venture Funds, the Angel Capital Association or the National Venture Capital Association. These organizations can point you to conferences and educational seminars that would help get you on the right track.
The Entrepreneur Pitchbook
How to Avoid Making a Bad Pitch (subscription required)
by Ty McMahan
Venture Capital Dispatch (The Wall Street Journal), April 9, 2009
The 10/20/30 Rule of PowerPoint
by Guy Kawasaki
How to Change the World (Guy Kawasaki blog), Dec. 30, 2005
Creating Your PowerPoint Slides for Investors
The Global Entrepreneurship Institute, July 15, 2008
Tips for Pitching Investors
by Dawn Foster
Fast Wonder Blog, Sept. 10, 2008
The Venture Game: What Investors Want
by Sharon Kahn
Fortune Small Business (via CNNMoney), April 16, 2009
How to Win the Venture Capital Race
by Marc Kramer
MainStreet.com, April 1, 2009
Look Far and Wide for Venture Funding
by Marc Kramer
TheStreet.com, Feb. 6, 2009
HBS Elevator Pitch Builder
Harvard Business School