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An Experienced Approach to Venture Funding

Just Because You Completed Your Road Show Materials Does Not Mean You Are Ready For Prime Time

The development and completion of your start-up company’s road show materials, the deck of PowerPoint slides that are used to present your company to potential third party venture investors, is just one step toward engaging in the venture funding of your company.   Many entrepreneurs having completed this task believe that they are ready to present their start-up company and their business plan to potential venture funding investors (e.g., individual angels, angel groups, and venture capitalists).  This is often far from the truth.  Just because you have completed your road show materials, does not mean you are ready for “prime time”.  This article outlines some of the things that entrepreneurs need to address before they go on the road to present their start-up company and their business plan to their potential venture investors.

Does Your Road Show Materials Have the Appropriate Content?

Many entrepreneurs believe they know what venture investors want to see in an investor pitch, but have never developed a road show pitch for venture investors.  This can be fatal, as venture investors have very little tolerance for start-up company road show pitches that do not contain the appropriate content for these same venture investors to determine if your start-up company is of interest to them.  As a minimum requirement, a road show presentation provides a 12- to 15-page overview of the company’s business plan. These materials are to include an overview of the company, its technology, product, or service offering, as well as its management team, and the financial requirements and expected return on investment. The road show presentation materials must be a well-written and organized document that describes all the essential points that are of interest to the private equity community. Content to be included in the road show materials are as follows:

  • Company Overview
  • Background and Milestones
  • The Problem/Value Proposition
  • The Technology, Product, or Service Offering
  • Target Customers
  • Market Size
  • Market Strategy, Tactics, and Execution
  • Competition Summary
  • Financial Projections
  • Management Overview
  • Funds Requirements and Use of Funds
  • Exit Strategy

It should be noted that “investor-quality” road show materials are very difficult to develop and take many hours of work. Often, the road show materials are rewritten many times to get the message right for your targeted investors.

  Have You Practiced Your Pitch?

Entrepreneurs need to practice their pitch.  This is invaluable, as presenting your company to venture investors is never a smooth experience.  Typically, for a presentation in front of potential private equity investors, you will have approximately one hour of time. Therefore, you must allot your time wisely. It should be noted that during this same time period, the investors also would like time for a question and answer session. Therefore, as a rule of thumb, for this one hour period of time, you should allow approximately 20 minutes for “the pitch” and 40 minutes for questions and answers. Therefore, you should practice your road show pitch.  That is you need to know what your important key points are for each slide of your road show presentation.  As you most likely will not be given an uninterrupted 20 minute time slot to just pitch your company and its technology product or service offering.  More often than not, investors will interrupt you in the middle of a sentence or thought.  Therefore, by practicing your pitch and knowing the one to two key points you are trying to get across on each slide you will be able to quickly and succinctly regroup your thoughts and then highlight these important key points, even after investor interruptions.  By practicing your pitch, this will make your overall presentation go much smoother and ensure that you get your important key points across to your potential venture investors, even under difficult circumstances.

 Does Your Message Come Across to Your Investors?

As an entrepreneur, you know your start-up company and its technology, product or service offering better than anybody else.  At the same time, and more often than not, the investors have not read your executive summary and/or business plan and this is your first real chance to get your message across to your investors.  Therefore, you need to ensure that during the road show presentation, that your message, on each slide, comes across loud and clear.  Knowing that investors always are reading ahead of you and your verbal presentation, you should make sure that each slide clearly states “your intended conclusion” somewhere on the slide.  This typically can be a subtitle or a conclusion statement at end of the slide. By doing this, you ensure that your potential investors come to your intended conclusion and not to a non-related conclusion on their own.  This is a key to your success as you want the venture investors to clearly get the message you want them to hear on each slide of your road show materials. So remember, to carefully prepare your individual road show slides with your conclusion in mind and clearly state this conclusion on each individual slide.

 Are You Prepared for Questions?

Road show presentations are by definition an interactive venue between the start-up company, its team and the potential venture investors.  As previously stated, for a one hour road show presentation you can expect a minimum of 40 minutes of questions from your potential venture investors. Some questions will be easy. Some questions will be hard.  Some questions will come with an agenda and some questions will be solely intended to trip you up.  Therefore, you need to be prepared.  As the single person representing your start-up company, you need to be the expert on all aspects of your business. You should not defer questions to other team members or third party consultants.  If you are the CEO of the company, the buck stops with you, and the venture investors will expect you to answer all of their questions, quickly and succinctly.  So as an entrepreneur you can also expect some venture investors to appear a bit confrontational.  This may just be their demeanor. But, you need to address every question with clear and truthful answers. If you do not know an answer, it is better to say, “I don’t know and I will get back to you”, as venture investors are typically smart enough to see through answers that are untruthful or do not make sense.  So, as the sole person representing your start-up company during your road show presentation, you can expect many questions and you need to be prepared for all of them.

 Do Several Trial Runs to Prepare For Investors

Before you get in front of your venture investors, it is important to go through several trial runs of your road show presentation.  These initial dry runs can be internal presentations with your management team. This will typically be your first opportunity to get feedback on your road show materials and its content, your presentation style, and the overall effectiveness of your road show presentation.  In addition to an internal trial presentation, it is important to get third party input from either investors or other individuals with experience presenting to third party venture capital investors to provide you real time feedback on your presentation. Although not the real thing, this will provide you with more insight to effectiveness of your road show materials and the actual presentation itself. This will also allow you to identify any key issues with your road show presentation before you get in front of your real investors.  It will also provide you with a level of comfort that is only achieved by presenting your road show pitch to independent, third party individuals.

Developing your road show materials is only one part of preparing to present your company and its business plan to their party equity investors. To be sure your road show presentation is effective you must be sure that your road show materials contain the proper content, that you know your road show presentation materials inside and out, that the message of your presentation comes across, that you are prepared for questions, and that you have had several trial runs with various third parties.  All of this will help you prepare for your actual road show presentation, in front of actual venture investors, and at the same time increase your confidence with your actual road show pitch.  So, be sure that you properly prepare and you can ensure a more enjoyable investor road show presentation with their party equity investors.  Remember, you never get a second chance to make a first impression.

June 8, 2009 Posted by | Venture Capital | 1 Comment