If you click here, I have written an article which explains how you can build a finance function that bridges the language barrier.   The next blog series will drill down into the issues raised.  I will show you how to build a 21st century finance function that can look forward to support you in growing your busines, rather than looking backwards and tell you what has already happended.

Tell the audience what you’re going to say, say it; then tell them what you’ve said.

Basically, you just want to quickly run through your key selling points so that no-one can be under any doubt what you are selling.

On a related note, if you have time, read “The Pitchman”, which is the first story in the Malcolm Gladwell book “What The Dog Saw”.  Makes you appreciate the science behind informercials a little more.

In the next series of blogs, will start going through how to manage the financial side of yoru business once you’ve raised capital.

Next you need to convince investors you can get the job done, the “90% perspiration.  Just like a heist, you need a logical play by play strategy, a good payoff and the right people in the key positions.      Check out the clip and keep in mind when you prepare the slides below.

Slide 7:  Go to Market Strategy

This slide is the first part of your execution plan.  You should have already identified your target customers in the problem slide.  The go to market strategy identifies how you are going to get them (channels, promotion strategy) and when you are going to get them (a timeline for targeting different segments based on logical splits such as interest level /channel / geography etc).  If you already have a pipleine of customers / strategic partners mention them here.

Slide 8: Business Model

How do you make money? It is stating the obvious to say you sell something at a price above the costs, but start by stating the obvious anyway.  Explain your selling price, your unit variable costs and your overheads.  Use this information to start showing how your product is scalable.

Make sure you understand the key assumptions underlying your planned success and be prepared to defend them. What if you can’t sustain the price? What if it takes twice as long to make each sale? What if your costs don’t decline over time? Some investors will want to test the depth of your understanding of your business model. Be ready to articulate the sensitivity of your business to variations in your assumptions.

Slide 9 – Financials

If you make it through the investor presentation, odds are the first thing investors will request is a financial model.  The purpose of this slide is to give them a brief summary of what is coming.  Firstly, give them a summary of your targeted 5 year revenue and profit projections.  This should tie logically at a high level to your market size data (Slide 2), your go to market strategy (Slide 7) and your business model (Slide 8).  Secondly, identify the overall funding requirements for your strategy, and what you need immediately to hit your next milestone.   This should reference your go to market strategy in Slide 7.

If you are struggling to be able to articulate this, you are probably not ready to pitch.  The most important thing to convey on this slide is that you really understand the economics and evolution of a growing, dynamic company, and that your vision is grounded in an understanding of practical reality. Investors are not focused on the precision of your numbers; they’re focused on the coherence and integrity of your business plan.

Slide 10: Team

The key players in the company – ensure at a minimum you have sales, operations and finance covered.  Make this short, crisp and relevant. This is not the time to share everyone’s life story, or detail the resumes of all six members of the advisory board. The key objective is to give investors confidence that there is a credible core group of talent that believe in the company and can execute the next set of milestones. One of those milestones may be filling out the team, so address any gaps before investors have to ask about them.

Slide 5: Secret Sauce/Intellectual Property

Depending on your solution, you might need a separate slide to convince investors that no one else can easily duplicate or surpass your solution (assuming that’s actually true.) If you are in a business sector in which intellectual property is important, this is where you drill down into your secret sauce and proprietary technology. Boil this down to simple elements so that the man on the street can understand it.

Slide 6: Competitive Advantage

Okay, so how are you better than everyone else, including the status quo? Most entrepreneurs misunderstand the critical objective of this slide, which is not to simply bash the competition (as much fun as that may be.) Your key objective is to convince the investor that lots of people will buy your product or service, even though they have several alternatives (one of which may be to do nothing), for very good reasons.

The best way to convince an investor is to provide customers or prospects who will articulate why they bought or will buy your offering. Use this slide to summarize the three or four key reasons why customers prefer your solution to other solutions and to the status quo.  This is often done as a “check the box matrix”.  Just make sure your check-box criteria reflect the market’s requirements, not just your product’s features.

Check out the first segment of an interview with Warren Buffett, in which he uses the analogy of a “Moat around a Castle”  to describe Competitive Advantage:

Slide 2: Problem/Opportunity

You need to make it clear that there is a big, important problem that you are going to solve, or an opportunity you are going to exploit. Explain the market dynamics surrounding the opportunity—why does this situation exist and persist, and why is it only now that it can be addressed? Avoid stating the obvious though – you do not have to tell investors that there are a lot of cell phones out there or that teenagers like to socialize.  It also helps to identify the particular market segment you are targeting, and if possible quantify it. This shows that you really understand where your prospective customers are from the ground up, and will tie to the go to market strategy.

Slide 3: Solution

What specifically are you offering to whom? Avoid industry jargon. If you can demonstrate your solution (briefly) in a meeting, this is the place to do it. You may need to show how your solution fits in the value chain or ecosystem of your target market. Do you change the way certain business processes get executed, or do you just do them the same way, but faster, better and cheaper? Do you disrupt the current value chain, or do you fit into established channels? Who exactly is the buyer, and is that person different than the user?

Slide 4: Benefits/Value

State clearly and quantify to the extent possible the three or four key benefits you provide, and who specifically realizes these benefits. Do some constituents benefit more than others, or earlier than others? These dynamics should inform your go-to-market strategy, and your product/service roadmap, which you will discuss later.

One of my Singapore friends, Danny Tan, did a abrilliant job of explaining the value proposition of Foound when he launched at Demo:

The key objective is to flesh out the foundation you established at the beginning. At this point, no one should have any question about what it is that your company does, or plans to do. The only questions that should remain are the details of how you are going to do it. Another key objective you should have achieved by this point in your presentation is to make sure that if there are some compelling brand names associated with your company (customers, partners, investors, advisors), your audience knows about them.

My friend in Singapore, Varun Arora, did a great job of this when he was interviewed after his launch at Demo.   He nailed the Value Proposition question in 10 seconds (0:24 to 0:34)

Question:  Tell me a little bit about GoToCamera?

Answer:  We enable people to use the cheap USB webcams they already own (The Benefit), to watch over (The Need) their homes, kids, families, pets and small businesses (Customers).

Slide 1:  Company Overview:  An elevator pitch within an elevator pitch

Slides 2 – 4:  Value Proposition:  We have spotted a Problem / Opportunity (Slide 2) for a large but focused market segment, come up with a unique Solution (Slide 3) and here are the Benefits (Slide 4) we create for our customers.

Slides 5 – 6:  Competition:  Here is the Secret Sauce / Unique IP / Barriers to Entry (Slide 5) that will stop other guys stealing our customers, and here is how we stack up against the existing Competitors (Slide 6) in our market.

Slides 7 – 10:  Execution:  We have a well thought out Go To Market Strategy (Slide 7), a clear Business Model (Slide 8),  sensible Financials (Slide 9), and the right Team (Slide 10) to get the job done.

When you do an investor presentation, you can clearly mark these sections off slide by slide.  A verbal elevator pitch runs them all together into something more conversational.  Check out one of the best pitches ever done on Dragons Den, and see how many Sharon Wright checked off.

I like to put the story into 10 sections, with each section having the content that will eventually end up on 1 slide.  Check out this Guy Kawaski clip, that gives a little more detail on the 10 slide framework.

The exact order / subject of the 10 slides is not a rule, you can vary it.

Once you have the 10 sections, start condensing so that you can explain the entire story in 2,000 words maximum.  Why 2,000?  Well when giving a presentation, you speak at around 100 words per minute so you can deliver it in  20 minutes.  Ideally aim for as low as 1,000 words.

Once you have your 1,000 – 2,000 words, you condense even more.  Aim for 400 words.  So why 400?  Firstly, we speak on average at around 150 words per minute.  So, 400 words will take you 2 – 3 minutes, about the amount of time you have for an elevator pitch.  Secondly, 400 words is pretty much how many fit on one piece of A4,  and that then becomes your executive summary.

Once you have these documents you can follow the pitch / tease / present procedure I mentioned in the last blog.  The next blog will look at the overall structure of these 10 sections in more detail, then we’ll start breaking them down 1 by 1.

Lets assume you have properly identfied investors to target (not easy I know).  Follow this  “3 Step Program” :

Step 1 – Elevator Pitch: Give a killer 3 minute elevator pitch and get a business card.  Note that a comfortable speaking speed is around 150 words per minute, so allowing for niceties you need to get this down to 400 words max.

Step 2 – Teaser:  Follow this up with a maximum 2 page teaser which basically repeats your pitch and request a meeting.  Note you can generally get 400 words on one page so 2 pages gives you room for titles / pictures and just a little more information.

Step 3 – Presentation Deck:   At the meeting present your 10 Slide deck, in a maximum of 15 minutes.  Studies show that people zone out after 10 – 15 minutes, so this is your window of opportunity.  Speaking speed for presentations is around 100 words per minute, so here you have 1,000 – 1,500 words to play with.  Note that the slides in your deck should be cues / visuals – you need far fewer words written down.

At each step of this process, you can quickly disqualify leads if they are not interested and save yourself a lot of wasted time.  If you get past the third step, you will be able to actively engage with investors and supply whatever follow up information they require.

Note there is no mention of writing a business plan anywhere – quite simply investors don’t read them.   Raising capital is a sales process.   Try to imagine Steve Jobs taking you through the iphone technical manual.

The next series of blogs will go into more detail on developing the tools you need to start this process.

Inevitably, entrepreneurs will have a higher valuation of their business than an investor.  I suspect that this is the main driver for 3 out of 5 deals falling down at the negotiating table. When faced with a difference over valuation, most entrepreneurs will first haggle as if they are in a Turkish bazaar, before resorting to cold war brinksmanship in Ari Gold style.

This creates a hostile environment, and gives investors the opportunity to walk away.  Hardly the way you want to start a long term relationship. A better option is to understand how the investor is valuing your business, and start tweaking the assumptions. There are also plenty of methods of setting the valuation based on a future milestone. In most negotiations, there is a win-win solution hidden somewhere. If you want to get funded, it is up to you to find it.