"Yes!" I shouted, pumping my fist Tiger Woods-style as I read the e-mail. The managing director of a new Atlanta-based incubator had replied to our executive summary submission for our start-up, PRessCafe.com, an online hub for emerging technology companies and the media. His message: "I'm interested in meeting to discuss your business. How about Thursday at 2 p.m.?" Many aspiring entrepreneurs never make it this far-a face-to-face meeting with a "live" investor. And we did it!
Being 27 years old, married with two young daughters, and having drained our savings and maxed out our credit cards to pay the bills, this was especially welcome news for my wife and me. We began daydreaming about the future: Where would we live? How big would our house be? What cars would we drive? What private school could we send our kids to?
But when it was time for me to present, along with our COO, I froze. The investor began the meeting with this: "Tell me, in two sentences or less, why your company must exist." This threw me off in relation to the "canned" pitch I had prepared. I blanked. To break the silence, I started to recite, verbatim, the first paragraph of our executive summary (which, of course, he had already read), and it became clear I wasn't answering the question to his satisfaction. With each follow-up question, I felt more and more intimidated-and frustrated. I could sense our COO's feeling of helplessness as she watched me stammer through the presentation. At the end of the hour, the investor concluded that while we had a seedling of a business, we had a ton of work to do to succeed in attracting outside capital.
I felt dejected and embarrassed, dreading the thought of telling my wife. How would I break the news to her? How would she respond? At the same time, I was concerned about my partners. Would they lose faith in the business.and me? How could I regain their confidence? That evening was one of my darkest. Three months later, however, through our passion to succeed, we were able to convince that same investor to give us a second chance. And we nailed the presentation, having incorporated many of the suggestions he'd given us at that first meeting. This person has since joined our advisory board and has been our leading advocate in opening additional investor doors for us in the Atlanta area.
But second chances are rare. Often, when you bomb with one investor, word spreads quickly to the others. So how do you make the most of your investor presentation opportunities? We've interviewed three top Silicon Valley venture capitalists who can help you stay away from the following seven "deadly sins.".
The Seven Deadly Sins
1. Missing the "a-ha!" "The thing that really kills an entrepreneur's case is not nailing down their story-not getting to the 'a-ha!' very quickly in the presentation," says J. Neil Weintraut, a general partner at San Francisco venture capital firm 21st Century Internet Venture Partners. "Instead of [explaining] that you have a Java-enabled spreadsheet, for example, tell me upfront why [your business] changes people's lives. We're looking for something that will knock consumers' socks off."
2. Having an unclear market focus. "Some [entrepreneurs] come in and say they're going after a trillion-dollar market," says Weintraut. "Glad to hear the market is that big, but how does it connect with your business? What's the market [segment] you're going after?"
Here's a solution: Break your target market into highly specific segments. For example, let's say your company targets the small-business market. There are 25 million small businesses in the United States, and the SBA defines them as companies with fewer than 500 employees. However, a one-person start-up has vastly different needs than a 100-employee company. Therefore, you would break your market into segments, like one to four employees, five to nine employees and so forth. Then you would focus on the one or two segments that will benefit most from your product or service.
Find out more about raising money in The Truth About Venture Capital.
3. Being fluffy. "You often hear people say 'We have a great management team.' But don't declare that! Just give me the facts and let me come to my own conclusion," says Weintraut. Be specific about your credentials and those of your team members. In what specific ways did you help your former company be more successful? Did you help boost sales by 25 percent, for example? Advises Weintraut, "Say something like 'I was the VP of business development who contributed to the success of company X in this way.' "
4. Having poor team dynamics. "You bring your team but don't let them say anything. What does that tell you? What kind of team is this?" poses Rich Shapero, managing partner at Woodside, California, VC firm CrossPoint Venture Partners. "These are good signals. Is this entrepreneur a good leader? Can he really motivate people? We care not only about the individual who started the company or is running it but also about the other people and the chemistry between them."
Andreas Stavropoulos, a director at Redwood City, California, VC firm Draper Fisher Jurvetson, agrees. "The team dynamic is very important," he says. "People get so focused on trying to deliver the message just the right way, they don't realize that through their interactions, they're stepping on their partners' toes or cutting them off. That can be even more important than what they're actually saying."
5. Being under-prepared. "What we see in a fair number of situations is that the entrepreneur doesn't have the [presentation] staged-they don't know what they're going to do," says Shapero. "So they come in and start talking casually about the business, and I'm always mystified because I think, 'Good God! This was a tough appointment for you to get. I'm assuming you have planned what you're going to do. What I'm seeing is that you don't have a clue!' That's pretty scary."
So how do you ensure you're prepared? Stavropoulos suggests building a presentation of no more than 10 to 20 PowerPoint slides, organized around the main points of your business model. But you should also be flexible enough to deviate from your intended structure to accommodate investor questions. "We like our questions answered directly-at the point when [we ask] the question," says Stavropoulos. "People who say 'Well, let me just get through my presentation' put the presentation itself, more than the content, above the substance."
6. Having unrealistic expectations. Don't expect to walk out of your first presentation with a check. "That's where a lot of entrepreneurs get confused," says Shapero. "You're not going to convince the investor in [the first presentation] to invest. Instead, your objective is to give investors a high-level overview that is compelling enough to capture their interest [and allow you] to go to the next level of detail."
7. Lacking common sense. Shapero must have seen it all. He's even had entrepreneurs bring their kids to the presentation. Another tip: "Turn cell phones off! Don't wait for it to ring to realize it's on," he says. Of course, you would know better.
An excellent resource to help you craft your "elevator speech," a two- to three-sentence pitch intended to quickly grab an investor's attention, is Geoffrey Moore's book Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers.