From the March 1998 issue of Entrepreneur

Though they started their company just eight years ago while still enrolled at Temple University in Philadelphia, Future Graph Inc. founders Bob Blitshtein and Steve Boymel are now software industry veterans. The company started life with a single software product, titled f(g) Scholar, to help students with math and science. Today, Southampton, Pennsylvania-based Future Graph is an emerging publisher and developer of math and science educational software aggressively sold in retail stores.

On the path from obscurity in a college dorm to entrepreneurial success, the pair became experts in another discipline, as well: raising money. According to Blitshtein, since the founding of Future Graph, he and partner Boymel have raised approximately $2 million in more than a dozen separate financings, ranging from grants to loans to equity investments by high-net-worth angels and venture capital firms alike. The partners credit much of their money-raising success to their winning presentation. "There's no doubt about it," says Blitshtein. "We've made our presentation to investors hundreds of times over the years."

A leading authority on investor presentations is Jeffery Adduci, president of the Regional Investment Bankers Association (RIBA) in Charleston, South Carolina. RIBA is a trade association that, among other activities, hosts five investment banking presentations each year for companies seeking an investment banker, selling an IPO or developing market support. During his tenure with the group, Adduci has run 50 investing conferences and, as a result, has heard some 1,600 presentations by companies trying to raise money.

"By far, the companies that are the most successful at raising money are those in which management is effective at presenting themselves," says Adduci. Here are his observations on areas where entrepreneurs frequently go wrong in pitching to investors, plus comments from Blitshtein about how that advice helped him succeed at raising capital for Future Graph.

  • Suspicious numbers. Many times, entrepreneurs present profit histories that, upon further--and perhaps more conservative--examination, might actually show a loss. Others present growth curves that look like a hockey stick. "When outrageous numbers show up on the overheads," says Adduci, "investors leave the room."

Blitshtein says a company's projected financial performance is perhaps the most challenging aspect of presenting to investors. "With so many exciting opportunities in the marketplace," he says, "you've got to walk a very fine line between numbers that are exciting enough to attract investors and those that will turn them off because they're simply unrealistic."

Early on, when Blitshtein and Boymel presented numbers showing projected revenues of $2.5 million--a fivefold increase at the time--Blitshtein says the response from most investors was something akin to "big whoop." "Investors said it wasn't just that the company had to make a lot of money to be interesting," he recalls. "It was that if the company wasn't positioned for significant market penetration, it would probably fail."

Blitshtein advises presenting a compelling scenario--but only if you can point to concrete events that will get you there.

  • Droning on about technology. "Entrepreneurs who are scientists or engineers are prone to making this error," says Adduci. "And once you lose an investor's attention, it can be hard to get it back." Yes, the technical aspects of your company's product or service are important--inasmuch as they deliver competitive advantages, open new markets or change the balance of power in an existing market--but to investors, technology is not important in and of itself.

"Initially, this was a problem," recalls Blitshtein. "People's eyes glazed over; [they even] fell asleep." He says the problem was solved when, painful as it was, the partners de-emphasized the technical aspects of their products and focused on how the investors' capital would make money for them.

Adduci's advice: Spend no more than three to five minutes discussing technology. "Any more time spent on science is less time devoted to selling the deal," he warns.

  • Lack of audio/visual support. Making a presentation with no visual support is difficult for all but the most gifted of speakers. "Without a visual outline, if investors get distracted for even a moment, they may lose the context of the speaker's remarks," says Adduci.

The most effective presentations are accompanied by 10 to 15 slides, overhead projections or handouts that punctuate your remarks and give the listener a constant source of context. Don't get too obsessed with visual aids, however. Blitshtein says that while slides or handouts provide the basic outline for an investor presentation, entrepreneurs must be prepared to deviate from the script when necessary. "Investors want a chief executive who is fast on his or her feet and not tied to a piece of paper. You've got to show you can dance."

Finally, Aducci warns against long, flowery corporate videos. "It's a mistake to let a corporate video run for more than five minutes," he says. "After that amount of time, it starts to give investors the impression that management is trying to hide something [or has nothing important to say.]"

  • Poor timing. "Entrepreneurs frequently say too much or don't say enough. Either extreme is deadly," says Adduci. When the presentation is too long, it puts investors to sleep, indicates the entrepreneur is unsophisticated about the rules of engagement and is uncertain about what information is important. When the presentation is too short, the entrepreneur appears to be unwilling to share information. Blitshtein says that after much trial and error, he and Boymel found the optimal length of time to get across the history and potential of Future Graph is 30 minutes.
  • Weak live demonstrations. Live demonstrations are almost always a failure, particularly for technology products. Blitshtein says he demonstrates his product upon request, but it's not part of his normal half-hour pitch to investors. "The most successful presentations we've had," he notes, "did not involve demonstrations of our software."

Adduci says he's seen deals expire on the spot due to live demonstrations that flop. At one conference, an entrepreneur attempted a live Internet demonstration. But when the software his company developed couldn't connect to cyberspace, it no longer looked like such a good investment. The potential drawbacks of corporate videos notwithstanding, Adduci says that for product demonstrations, which can be extremely effective sales tools, use a video for a perfect pitch every time.

  • Poor response to questions. "Many entrepreneurs goof on the inevitable question-and-answer part of the program," says Adduci. The most damaging is when the entrepreneur gives the impression that he or she is smarter than the person asking the question and compounds that error by throwing too much technical jargon into the answer.

Poor listening skills often cause entrepreneurs to blow the Q&A, says Blitshtein. "It's dissatisfying to an investor when he or she asks a question and the answer isn't even relevant," he says. "In fact, it's as close to the kiss of death as there is. By not listening to an investor's question carefully, you reduce your chances of success."

  • Inappropriate follow-up. When raising capital, particularly from individual investors, the old rule is that yes comes fast, and no takes forever. Still, many investors test the mettle of the business owner by seeing how long it takes him or her to follow up. If it's not forthcoming, even for reasons of perceived courtesy, many investors get turned off. On the other side of the coin, calling every day doesn't work, either.

"Again, it comes down to listening," says Blitshtein. He says it takes some experience, but when you follow up, you need to be able to determine when investors are putting you off and when they are simply too busy to talk to you. "When someone tells me they can't talk, I ask when I can call them back. The way they respond tells me almost immediately whether they are interested in our deal."

Adduci recommends following up within a few days of the presentation but no more than three times. Then wait. "If you haven't gotten an answer in two weeks, kiss that investor goodbye. But do it nicely, so you can get the names of at least three more investors before you move on."

  • Burned bridges. Raising money often takes a long time. Adduci has seen companies return to his conferences over the course of two years. Sometimes the things that initially turn investors off--an underdeveloped product, no sales, incomplete management team--correct themselves during the fund-raising process.

"Contacts made early on may at some point become fertile ground for raising capital," says Adduci, "unless, of course, the entrepreneur hasn't kept in touch or, worse yet, was less than gracious when the investor said `no thanks' the first time."


David R. Evanson, a writer and consultant, is a principal of Financial Communications Associates in Ardmore, Pennsylvania. Art Beroff, a principal of Beroff Associates in Howard Beach, New York, helps companies raise capital and go public.

Contact Sources

Future Graph, (215) 396-0720, http://www.futuregraph.com

Regional Investment Bankers Association, 171 Church St., #260, Charleston, SC 29401, (803) 577-2000