How to Present to Investors
When my co-founders and I started our first company, we didn't know anyone. So when we tried to raise money, it was hard to get first meetings at venture firms. But what was even harder was that, even after getting in the room, many investors barely seemed to pay attention. We were rejected up and down Sand Hill Road. Then we figured out what we were doing wrong, changed our approach, and got 3 term sheets within a couple of weeks.
Our mistake was to assume that if you get a 60-minute meeting, you get 60-minutes worth of attention. You don’t. In fact, the typical attention span in an hour-long meeting goes something like this:
A successful entrepreneur will change the shape of this curve. She will use the first 5 minutes to earn the investor’s attention for the next 15 minutes, which in turn will interest the investor enough to listen for another 30 minutes.
We think of it as being similar to a James Bond movie. Everyone who watches Bond loves the opening sequence, before the titles come on. There’s suspense, action, and unbelievable stunts – in essence, those first 5 minutes bring home why you love Bond, and that keeps you going through the next 2 hours of nonsensical plot twists.
In the same way, you need to convey the main reasons why an investor should love your business in the first 5 minutes. We found the best way to do that is to open with 3 slides:
1.What’s changed? Explain what’s the discontinuous shift, break-through, or innovation that opens the window to create a substantial new company.
2.What you do: A one-sentence explanation of what your company provides to capitalize on that big change. It still surprises me how often we can get 20 minutes into a meeting without a clear picture of exactly what a company does.
3.Fast facts: Lay out the key metrics for your business: when were you founded? How many employees? What stage of development / market traction? What are you looking to raise? This helps the investor put the rest of the presentation in context.
At this point, the first 5 minutes are almost up and there’s just time to run through an agenda slide, which covers all the usual ground (e.g., product, market size, team, etc).
From here, many entrepreneurs roll right on to tell the story in greater detail. But your 5 minutes are up, and we suggest you pause and check in with your listeners. Most likely, they have seen businesses in the past which they think are similar. Maybe they have some biases based on prior experience in a similar market. It’s best to flush those out early so you can address them as you go through your presentation. So after laying out the agenda, we like to ask the investors whether there are any particular areas of concern or questions we should be sure to address.
There are many ways to then present the full story of the business. Different people like to do it in different ways, and you should go with whatever feels comfortable for you. However you choose to do it, there are some pitfalls to avoid in each area:
- Pain: Be very clear about the problem you are solving. For consumer concepts, talk about user needs; for enterprise ideas, show a detailed understanding of your customer’s pain. If you cannot convince an investor there’s something broke, they will not be interested in a solution.
- Solution: It’s not possible every time (e.g. for infrastructure software), but whenever you can, a demo is worth a thousand words. Failing that, screenshots and the workflow to bring the solution alive.
- Market size: If it’s a new market, the best way to tackle this is to explain how many users or customers there are for the product/service, how this number grows over time, and how much each of these users/customers is worth (this last part is a chance to cover pricing/revenue model). If it’s a replacement market, for example where software is automating an existing service, then explain how big the existing market is today and how much you expect your solution to shrink it, through lower prices. One thing not to do is to put up huge numbers from some market study without any details behind them.
- Competition: Better to identify all the competitors than have the investors discover them afterwards. That way, you can proactively explain how you are different.
- Team: By this point, if the investor is interested, they will want to know about the team, so it’s worth spending a couple of minutes on the founders’ backgrounds, highlighting any special talents or experiences that make them well-suited to building the business.
- Financials: It’s easy to lose yourself in the numbers. We suggest keeping it simple and just showing on a timeline how you would spend the money (e.g., headcount) to achieve specific milestones (e.g., launching the service).
Finally, plan to get through the entire presentation in 20 minutes, so that there’s lots of time for discussion afterwards. The best meetings feel more like conversations than presentations. It’s true you need to brief the investor up front on what you are doing. But the quicker you can get through that to a two-way dialogue, the more meaningful the exchange will be for both sides.