7 Investor Presentation Pitfalls

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.

Learn More
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.

BrainFood

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.

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Sean Lyden is the CEO of Prestige Positioning (a service of The Professional Writing Firm Inc.), an Atlanta-based firm that "positions" clients as leading experts in their field-through ghost-written articles and books for publication. Clients include Morgan Stanley, IFG Securities, SunTrust Service Corp. and several professional advisory and management consulting firms nationwide.

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This article was originally published in the February 2001 print edition of Entrepreneur with the headline: 7 Investor Presentation Pitfalls.

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