Attractive Pitch

The first pitch to investors is in many ways the company’s first date. It is the investors first experience with you and your company.  The end goal is to receive a second date. Yet, with many top notch pitches coming through it takes more than just a solid proof of concept and innovative idea to gain interest. Read more

What do Angel Investors Want?

What do Angel Investors Want?  

Rockies Venture Club Angel Investors Unplugged

Click Image for Angel Investors Unplugged Event Information

Every Angel Investor and every VC is different, so you need to do your homework to find out what kind of investments they like, what phase of business they invest in, how big their rounds are, etc.  Once you’ve done your homework on the specifics, here are a few general things I’ve observed that help when working with angels and VCs.

1)      Be Prepared.  The old Boy Scout Motto applies to pitching to investors more than ever.  Many companies are so eager to pitch that they fail to do the homework needed to have a really GREAT pitch.  If investors like your pitch, they’ll want to see your market research, your proforma, your due diligence package and more.  If you’ve got all your ducks in a row, you’re more likely keep the momentum going and to get invested in than if you have to go away for a month after the pitch to get your materials together for due diligence.

2)      Remember that you’re not selling your product, you’re selling an investment in your company.  That means that the product should typically be less than 50% of the pitch.

3)      Finish by talking about your exit strategy.  80% of pitches leave out the exit strategy, so the investor has no idea how you are going to be able to return their money to them. Let them know when you plan to exit, how, with whom and at what kind of multiples.

4)      Practice, practice, practice.   It’s easy to tell the entrepreneurs who have gone through their deck once or twice and those who have really practiced and honed the pitch.  Watch Steve Jobs presentations on YouTube to watch a well-rehearsed presentation.

5)      Tailor your pitch to your audience.  One of the best pitches I’ve seen was given twice in one week.  The first pitch was to a hardcore group of investors and the founder focused on the financials and the huge exit potential.  Two days later he pitched to a group of Impact Investing Angels and focused on the social impact of this investment.  He closed the deal in just a few weeks.

6)      Describe a Clear Path from Point A to Point B.  You would be surprised how a clear strategy makes all the difference in a successful pitch.  Companies that have a detailed strategic plan can describe clearly how they will get from being a startup to having a successful exit and all the steps in-between.  We all know that no strategic plan is followed to the letter, but companies with a plan are able to present a plausible case for success while those without a clear plan have nothing but hope.

7)      Finally, the most important part of your pitch has nothing to do with the pitch itself.  Remember that investors want to invest in PEOPLE, not an idea.  So take some time before you pitch to get to know the investors.  Ask questions about them and what kind of investments they prefer.

 

Characteristics

Companies selected by Rockies Venture Club share these common characteristics:

1)      Team: the team is experienced, connected and has demonstrated an ability to execute and work effectively together.  RVC focuses primarily on the team because we know that no company executes it plan as stated in the pitch and we look for the leadership, wisdom and experience to pivot and adjust to opportunities and threats that present themselves.

2)      Disruptive or Innovative Product: We are looking for companies with a product or service that is unique and presents a clear value proposition for its customers.  There should be sufficient barriers to entry either through trade secrets, patents or significant market adoption in order to gain and maintain their market.

3)      Large or growing market: RVC companies are growing typically at the rate of 100% every year.  They need to be in a sufficiently large or dynamic market that this rate of growth can continue for several years and provide promise of future growth for potential acquirers.

4)      Traction:  Since the fund does not invest in ideas alone, the company will need to be able to demonstrate traction.  They need to have overcome major obstacles that clearly demonstrates their ability to execute.  Furthermore, they should have positive momentum that we can see throughout the process of working with them.

5)      Profit Potential: Companies need to have a high profit margin and understand the costs of multi-tier distribution and all of the fully loaded costs.  After all is said and done, for a company to really grow we want to see a solid bottom line.

6)      Scalable: The products and markets need to be able to grow quickly and to have rapidly increasing margins as the company grows.  This excludes most service businesses and many businesses that address the SMB market and require a high-touch sale.

7)      Exit: The Rockies Venture Club focuses on companies that understand the importance of the exit and the role it plays in returning capital to investors.  We want to see an exit scenario with multiple bidding acquisition prospects, with high multiples of EBITDA or sales, and with a relatively short timeline, typically between three and five years.

 

Register for Angel Investors Unplugged

For more information on Angel Investing (either as an Angel or an Entrepreneur) consider attending the Angel Investors Unplugged event, Tuesday January 14th 5:00-7:30PM at the CSU Denver Event Atrium 475 17th Street, Denver, CO   We will have a panel of experienced Angel Investors sharing how they think about the deals they invest in, plus we’ll have four pitches from companies looking for Angel investors through Rockies Venture Club Angel Groups.

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Venture Capital For Dummies

Peter Adams is the Executive Director of Rockies Venture Club and Co-Author of Venture Capital for Dummies, John Wiley & Sons, August 2013.  Available at Amazon.com, Barnes and Noble and your local bookstore.

Tech Startups: Apply your software skills to the venture capital pitch

I meet a lot of really smart tech founders who have all the skills to create great software that adds huge value for their clients.  The problem is that these tech founders who know all about how to design software from beginning to end, that all ties together in a coherent whole and connects everything from inputs to outputs, seem to forget everything they know when it comes to giving their venture capitalPitch for Venture Capital pitch.  Here are a few tips for taking those skills and repurposing them to putting together a great pitch.

1)      User Interface – A great pitch should have a great User Interface.  Your brand shows in the way that you compose your message and the slides that convey it.  Many tech founders use awkward blocks of text and don’t convey information well.  The user experience is one of the most important parts of the pitch.

2)      Simplicity– The pitch should be easy to understand.  I’ve seen complex bioscience companies who know that they are pitching the company and not their peptides or whatever.  Explain only enough to show that there’s a market, but don’t take us through all the nuts and bolts.  Your pitch should be like well written software that looks simple, even if it’s complex behind the scenes.

3)      Tell a Story– connect each part of your pitch together so it flows logically and covers all the bases, but also ties together into a story that hangs together like a good software program.

4)      Validate your data – you know how to do this when you’re populating your databases, why don’t you do that when you’re putting your pitch together too?  Do some market research and work up a proforma with defensible, well researched numbers.

5)      Learn the rules – software development is part art and part rule based.  If you can’t get the rules right, your software won’t run.  Venture Capital has its own set of rules.  Learn how to play the game and research best practices and understand how VCs work.  Learn the rules and follow them to increase your chances of getting funded.

6)     Not just an MVP – If you want to get funded, it’s important to get all your ducks in a row to gain trust with investors.  Especially when syndicating with Angel Investor groups like Rockies Venture Club it is important to be able to create excitement and gain momentum.  You won’t be able to do this if you have to go back to the drawing board for a month or more to work up your due diligence package and basic research.

7)      Test – test – test  – You know about the importance of testing and Quality Control for your programs.  A huge percentage of your development time is focused on making sure everything works right.  Take that same attitude towards your pitch and practice on everyone you know and keep refining the pitch and above all, don’t just try to wing it.

In summary, you’ve spent years developing the craft of becoming a developer.  People respect you because of your knowledge and expertise.  Realize that seeking venture capital is not just a sideline, but is something that will take up at least half your time or more until your round is closed.  And once that’s done, you’re probably ready to start on raising your next round.  Understanding the rules of venture capital is not just a nice-to-have skill  – it’s something you’re going to use for the rest of your career, so take the time to learn and do it right.

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Peter Adams is the Executive Director of Rockies Venture Club and Co-Author of Venture Capital for Dummies, John Wiley & Sons, August 2013.  Available at Amazon.com, Barnes and Noble and your local bookstore.

Investor Pitch Deck Series #6 – Customer ROI Slide

Dear reader,

This is the sixth of many blogposts in a series that I’m calling the Investor Pitch Deck Series. I am creating a post about each investor pitch slide, why it is important, the common errors, and how to communicate that you have what it takes to achieve your goals for this company.

Posts in this series

(note, this is NOT a suggested order for sides in your deck)

 

 

 


The mantra for this series is, “Above all, make sense.”


 

The Customer ROI Slide

The customer ROI slide is a new take on the old business model slide. By the end of this slide, your audience will feel confident that your user will use your product, and your payer will pay for it.

 

User: The person or business who uses your product.

Payer: The person or business who pays for your product.

 

With traditional consumer goods, the user and the payer are the same person. However, with many business models, the user and the payer are totally different entities and you have to acknowledge both for your investor to really GET your business.

Think about your toothpaste at home on your bathroom sinktop. It’s a simple product. It’s pretty basic. Do you buy the same kind every time you run out. Do you switch between brands? Why? Your investors will need to know why potential users will switch from whatever they are currently using (or not using) and start using your product. This value to the new user is called the User’s ROI or Return On Investment. Users are not investing capital; they are investing the energy required to make a change in their habits. Identify the User’s ROI and your venture capital or angel investors will feel much more comfortable with your product.

Now about the Payer’s ROI. It’s graduation season so I’ll use a college analogy about parents who send their kids to college. Parents are paying for the education, but not directly using it. Of course there is a benefit for Mom and Dad. By paying for college, their kid is more likely to get a degree thereby lowering the odds that they will move back into Mom and Dad’s basement bedroom. How do the parents choose which school to send their child to? The Payer’s ROI often a complicated answer when they are not also the User. The Payer wants a good deal financially, but they also want a perceived value for their dollar that has nothing to do with direct use of the product.

Other examples of payers who are not users:

  • Insurance Companies
  • Companies that pay for advertisements
  • Companies that purchase the data collected from free software
  • Governments who provide free public services
Your goal with this slide is to uncover who your users are, who your payers are, and why these entities are willing to use and/or pay for your product.

Cringe Factors

Cringe Factor #1 – You have a few paying customers and they aren’t increasing in number over time.

Why this makes us cringe:  Status quo, apathy, and disuse are the reasons that products die.

How to do it right:  Your investors want to be reassured that you are a realist. A realist knows that a new product, no matter how sexy, inexpensive, functional, or perfect, will not become instantly adopted by the world. There are plenty of products out there that consumers are happy to use for free, but will abandon when a financial transaction is required. If you are in revenue, you must show your potential investors a trend of increasing paying customers over time. If you cannot show this positive trend then you must have a good reason for a lack of increasing adoption. Alternatively,  you can devise a way that you can monetize your product without the user having to pay.

 

Cringe Factor #2 – You aren’t clear about WHY people will pay for your product.

Why this makes us cringe: Investors are afraid that no one will be willing to pay for your product.

How to do it right: Make the Payer ROI very clear in your pitch. If your product is faster to install and cheaper to run than the current solution, then you have a great argument. Visually show your audience that a payer can currently expect to pay $2000 a pop for the current solution and would only have to pay $800 for yours. Further, you can install yours in minutes instead of days.  We want specifics with the Payer ROI description. Beat us over the head with your Payer ROI.  Don’t leave it to the imagination.

 

Cringe Factor #3 – You aren’t clear about WHO pays for your product.

Why this makes us cringe: Many products are free to users these days. (Thanks, Google!) So, who are you planning to get your revenue from. It’s not always obvious.

How to do it right:  Even if you are selling a product directly to users, be explicit about who pays for your product. You can go one step farther and discuss your price point. It’s a lot easier for investors to picture a successful transaction when they understand whether the cost of the product is reasonable.

 

Example Customer ROI Slide

 

One of the simplest ways to show customer ROI is to create a graph of potential savings that a customer might experience if they were to switch to your product.

If your user is not going to pay for your product, you will need to describe a non-financial ROI. It’s not enough to have a better product. People need a very compelling reason to change their habits.

 

 

 

Article by Nicole Gravagna, PhD, Director of Operations for the Rockies Venture Club as part of a series on the elements of an investor pitch deck. The next in the series is ….


Investor Pitch Deck Series #4 – The Summary Slide

Dear reader,

This is the fourth of many blogposts in a series that I’m calling the Investor Pitch Deck Series. I am creating a post about each investor pitch slide, why it is important, the common errors, and how to communicate that you have what it takes to achieve your goals for this company. This is the fourth in the series and it’s about your final pitch deck slide. The Final slide, Fourth post, and it’s March. Get it?

Posts in this series

(note, this is NOT a suggested order for sides in your deck)

 


The mantra for this series is, “Above all, make sense.”


 

The Summary Slide

This is the slide you put last in your deck. Your final slide. The MOST important real-estate of your whole deck because it’s the first thing that your audience will see after you have completed your amazing pitch. Your audience just spent 5, 10, maybe even 20 minutes watching your mannerisms, hearing your voice, feeling your message, probably all for the first time. They are in a bit of a daze. Even if they zoned out during your pitch, when you beseech the audience for feedback, they tend to tune back in. With the single word, “questions?” lost audience members snap back to life.

Heads snap up, hearts feel guilty because they missed the last three slides. They might whisper to each other, “How much is he raising?” “Any patents?” “Did they say they were local?”

Your job is to answer those questions and keep them engaged during Q&A. I’ve seen two great ways to do this.

  1. You can create a summary slide with all the highlights of your deal including the ask, your patents, contact info, team info, major partnerships, or whatever makes your deal amazing.
  2. Or you can play a slideshow of your deal highlights that will play on behind you as you answer questions.

TrekPak, for their pitch at the Angel Capital Summit 2013, compiled their customer satisfaction into a beautiful slideshow. Each slide was a tweet from a real customer paired with a high resolution photo (provided by the customer) of the TrekPak hardware storage product in use. This simple slideshow acted as a 20-foot tall poignant declaration of success. The audience instantly understood that the company is selling their product. Customers are using the product and are happy enough to take pictures and tweet about it. That’s traction, my friends.

Cringe Factors

Cringe Factor #1 –  Your slide just says “Questions?”

Why this makes us cringe: This is a huge waste of a slide. You have a chance to grab the audience by the horns and engage with them in some valuable Q&A and you are trying to inspire them with the word “Questions?”. Yawn!

How to do it right: Inspire, engage, at the very least – inform. Choose something that you didn’t have time to convey in the pitch proper and really hit the audience over the head with it graphically. TrekPak knew that the two founders look young and it was important to convey their company’s traction. Another company might choose to focus on the powerful partnerships they’ve made, or to reiterate the strength of the team, or the pizazz of the marketing strategy.

Cringe Factor #2 – You’ve put only your contact information on your slide.

Why this makes us cringe: It’s better than the word “Questions”, but not much. Use your real estate!

How to do it right: If you want to keep it simple, create a static slide broken into 4 or 6 squares. Put the highlight information about your deal on that slide. Imagine the audience members lifting their phones in synchrony to take a picture of your final slide. This is the slide they can refer back to when they talk about your deal with other investors or their spouse later in the day. Your highlights are different than those of the company pitching before you so I can’t tell you exactly what goes on this slide. Intellectual property protection, sales to date, FDA approval, team years or experience, a photo of your product, the ask, other details about your deal, potential 5 yr ROI (be careful), your Fortune 500 mentor, time to break even. Spend an hour with your team to determine which are the most exciting parts of your company.

Cringe Factor #3 – You dash off the stage when no one attacks you with questions

Why this makes us cringe: You are missing whole minutes of opportunity to connect with the very people who can give you the resources your company desperately needs.

How to do it right: It’s the rare audience member that is squirming in their seat to ask a question. Audience members are listening, dozing off, complacent, and protected by the anonymity of being an audience member. They might be curious, but it takes a little time to form a question and raise a hand. Give them a minute. Count to ten in your head slowly. If they still haven’t come up with something, then have a question ready. Say, “I bet you are all wondering about our marketing plan. Here’s why we think it’s a strong plan.” I don’t care how blank their faces are. Keep sharing details about your company and your deal. Know your time limit for Q&A before you get on the stage – then use it all.

I searched the world wide internets and could not find a single example of an information-rich final slide. Having one seems like a BIG way you can stand out from all the other pitches at your next entrepreneur pitch event. Use the real estate!

I made this silly joke final slide to illustrate my point. My fake team is awesome, David Ducovney, Alicia Silverstone, Bill Clinton, and Bill Gates. What could do wrong? Haliburton has promised to acquire us in a few years and in the mean time, investors get free trips to Oahu for board meetings. Investors, you better make sure your stock contains voting rights so you need to be in those meetings!

 

 Article by Nicole Gravagna, PhD, Director of Operations for the Rockies Venture Club as part of a series on the elements of an investor pitch deck. The next in the series is The Problem Slide.