a guide to investor presentations

A Guide to Investor Presentations

For Angels and Entrepreneurs

Tom Tierney Update: 5/20/2015

Tom Tierney lives in southern New Hampshire and is a member of Tech Coast Angels . See www.techcoastangels.com or http://en.wikipedia.org/wiki/Tech_coast_angels for more background information on the TCA.

http://www.techcoastangels.com/

2 “A Guide to Investor Presentations”

Introduction

This “Guide to Investor Presentations” offers an overview of the basic information that should be

communicated by companies to early stage investors (angel investors or venture capitalists) during an

investor presentation.

This guide attempts to not only give entrepreneurs an idea of what data should be presented but also

offers a look into the minds of investors as they process the presentation and what types of questions or

comments might be typically offered by investors.

My hope is that this guide not only helps entrepreneurs “tighten up” presentations to enhance their

fund raising chances but also offers new angel investors background on typical pitfalls in new company

investment.

This guide does not claim to be all encompassing: simply view it as another tool in your entrepreneurial

toolbox for constructing a presentation for investment or another educational resource, for new angel

investors.

This guide is the more detailed narrative for two slide decks on investor prentations you can find at:

"Investor Presentation on a Napkin" : (http://www.slideshare.net/tomando/investor-presentation-on-

a-napkin)

"7 P's of Investor Presentations" : (http://www.slideshare.net/tomando/techcoastangels-7-ps-of-

presentations)

Note that both presentations communicate the same basic information, they are just in different

presentation formats.

You can reach me via email at [email protected] for any comments or suggestions as to improving

this guide.

http://www.slideshare.net/tomando/investor-presentation-on-a-napkin



http://www.slideshare.net/tomando/techcoastangels-7-ps-of-presentations



mailto:[email protected]


Investor Presentation Outline

Investor presentations should minimally discuss what I call the “7-P’s” of a presentation: Pitch, People,

Pain, Product, Players, Projections and Proposition. These guidelines are simply intended to provide

the minimal informational content that should be covered in a typical investor presentation, the format

order is completely flexible based on your situation.

So,what are these 7-P’s ? Here’s a short description of each subject:

1. Pitch – an introduction of your company and product as an “elevator pitch” geared to present a

concise message about your company/product in the time frame of an average elevator ride.

2. People – presentation of your current team, their background and any past startup successes

(or failures).

3. Pain – what is the big pain for a customer that your product or service resolves for a current or

potential customer.

4. Product – a description and/or (ideally) demo, of your product.

5. Players – your competition (competitive products and companies).

6. Projections – current and future product roadmap, market, financial etc. projections.

7. Proposition – what’s the deal being offered to investors?

As noted, your eventual presentation may include these in order, in an order you feel is more appealing

or with additional components highlighted. The important takeaway: however you eventually create

your presentation, ensure you cover the basic information described here in a format that flows well to

your audience.

Each of these areas will be covered individually in detail, in the following sections of this guide.


1. The “Pitch”

Although you might not be pitching to a potential investor in an elevator, an “elevator pitch” is a great

way to format a short, concise pitch for your company, product or service. The concept is format a

pitch that can be delivered in the timeframe of a typical elevator ride.

You may well give your pitch in an elevator, on an airplane or maybe a reception at an investor

conference. This pitch should be continually evaluated and modified to make use of any feedback or

reoccurring questions: use all useful feedback to hone your message.

The end result of a pitch is to deliver a message about your company, product or product idea and

capture enough interest from a potential investor to get a follow on meeting to describe it in more

detail.

Your pitch should include the company and/or product name, the current stage of your company (idea,

development, revenue etc.), the pain your product solves, the size of the investment opportunity

(market) and why your team will potentially offer a spectacular return for investors.

Investor: “Who are they and why should I care?”

The target of your pitch (the investor) may not know anything about you, your product or the particular

market space of your solution. Further, the investor may not have the technical aptitude to distinguish

what may be a game changing solution by your company versus another “me too!” product by one of

your competitors.

As much as you are able: boil down your pitch to make it as simple as possible, something easily

understandable by someone who may not have detailed knowledge of your marketplace. Use analogies

where possible which may help give the investor a commonly known reference point.

You simply want to pique the investor’s curiousity, you want them wanting more and ideally asking you

when they can schedule time to hear about this in more detail.


The “Pitch” DOs …

Keep it Concise

Use Analogies to Simplify Message

Emphasize the Size of Opportunity

The “Pitch” DON’Ts …

Refrain from Using Jargon

Don’t Oversell


2. The “People”

The people involved in a startup are typically the most important piece of the “startup puzzle”, yielding

early clues for the likelihood of success to a potential investor.

Investors look at the experience of those involved and whether they have relevant work

accomplishments in the area of business the startup will address. Investors not only look at

accomplishments of the individuals but ask were they also involved in prior successful (or failed)

startups or enterprises?

Note that prior startup success and failure are equally important: lessons learned from failures may

directly help avoid problematic situations in the future.

Investors want to know that the people involved in this startup won’t be the problem or impediment to

the startup’s success. Whatever you can do quell any concerns about the startup teams experience,

attitude or ability to survive in a startup environment will go a long way to help with the investor’s

decision making process.

Investor: “Can this team deliver?”

The investor is simply trying to ascertain whether this startup team can do what they are stating: can

this team deliver?

Aside from educational and work history applicable to the startup, do you have any advisors or board

members helping that might convey the strength of your idea? Have team members been working part

time or full time on the startup? Has the team committed personal funds to the project? How

committed are you?

There are no absolutes in this decision making process for investors. It may well be that investors give

some latitude in team experience based on the investor’s excitement about the product idea. The

investor may feel that experience can be back filled once funding is achieved (i.e. help can be added).

Simply do all you can to promote the positive aspects of your startup team.

Should an investor decide to pursue your startup there will be a due diligence process that will include

verifying employment, checking references and quite possibly background checks on team members.

Always be open, honest and direct with answers to questions that may be raised. Investors aren’t


looking for perfection, they simply want to be comfortable that a startup will be a good steward of their

investment dollars.

The “People” DOs …

Educational and Prior Applicable

Work Experience

Emphasize Prior Startup Experience

Make Investor Comfortable With

Team’s Ability to Succeed

The “People” DON’Ts …

Don’t Push Empty Achievements

(Who’s Who lists etc.)

Hide Prior Failures


3. The “Pain”

The pain is the major problem your product or service solves for a potential customer.

Inform the investor about the target customer for your product and why your product resolves their

particular problem. If your solution provides a factor improvement for the customer in price,

performance or ease-of-use etc., then describe those metrics.

Do you have any potential future customer validation? If you have a product or prototype and have

customer feedback on how it resolves their particular business pain, share the details. If you don’t have

a prototype but have interviewed potential customers and have their feedback, share their comments

on your product.

Do you have an independent market research? Can you size the market, the size of the problem

(customers having this “pain”) and quantify the opportunity for investors as it exists today along with

data for future growth?

Try to provide any and all data available from current customers, or potential customers, to help

validate your product’s ability to resolve a customer pain.

Investor: “Is the problem truly painful for the customer?”

The investor is simply trying to figure out whether this problem is truly painful for potential customers:

will the customer pay for this product.

In addition, the investor is trying to determine whether this is a big problem: is the market opportunity

large enough to potentially enable a future high multiple return for their investment?


The “Pain” DOs …

Describe Customer Pain in Detail

Use Customer Data or Feedback

Use Third Party Research/Data

The “Pain” DON’Ts …

Promote Small Problems as Pain


4. The “Product”

Describe your product in detail, its differentiation and unique ability to solve the customer pain

described earlier.

The overview of the product should include how it fits into an average customer’s environment and how

they would use it. What features are unique to your product as opposed to other products currently in

use?

Does your product have unique intellectual property (patents, trade secrets) to not only protect the

product but offer barriers to customers switching to use competitive products: is there something

unique that will lock them in to your product?

If you have a complete or even prototype or mockup of the product, can you demonstrate it for the

investor? If the product is not complete, what is left to do?

Try to present the product information, if possible, in language that is easily understandable for

investors who may only have cursory knowledge of your product space. If you use industry “jargon”, at

least define it for those who are not familiar. There will always be follow on meetings during due

diligence to do the “deep dive”, into technical details.

Use analogies to other companies or products to help the investor understand how the product might fit

in a customer’s space and the opportunity for growth in the future.

Investor: “Is there a potentially great product here?”

The investor is simply trying to answer some questions:

1. Does this product solve the pain described earlier?

2. Is there a unique advantage to this product?

3. Given #1 and #2: will the customers buy it?

The investor is looking for something unique in the marketplace, that solves a big pain and offers a

future of large growth.


The “Product” DOs …

Product Overview as how

Customer Would Use It

Product Differentiation (Features,

Intellectual Property etc.)

Ideally, Demo: Product or

Prototype

The “Product” DON’Ts …

Don’t present Without Your

Potential Customer Use Case

Don’t Present Without Knowing

Your Competitive Advantages


5. The “Players”

Describe the competition, big and small, current and future.

You should be able to describe your solution’s competitive strengths and weaknesses against direct

competition or a competitive substitute (a “substitute” meaning there is a lack of a direct solution for a

customer pain, they are substituting that lack of exisiting product with a workaround).

What are your competitive advantages?

Can you easily benchmark your product versus competitive solutions or substitutes and describe any

price, performance or labor savings with its use? Are there any industry standard benchmarks or other

standards that you can use to further detail your competitive advantage?

Can you describe “switching costs”: is it expensive for a customer to change products or is the decision

made easily (like with “plug and play” products)?

Can you describe “barriers to entry”: do you have unique features, IP, business relationships or

contracts that make it difficult for competitive solutions to displace your product, nevermind enter the

market with your product?

Investor: “Who is your competition?”

The investor is trying to obtain enough information about your competitive environment to ascertain

why a customer would change from what they are doing today and use a startup’s product.

Investors are thinking: will this startup be able to fight off better known and better funded,

competitors? Is there unique value, to the customer, with this product in its competitive landscape?

The absolute worst thing you can say to an investor about your competition is: “We have no

competition.”

Everyone has competition, whether direct or a product substitute.


The “Players” DOs …

Describe Competitive Landscape

Offer Benchmarks Vrs. Competition

Describe Competitive Advantages:

Switching Costs and Barriers to

Entry

The “Players” DON’Ts …

Don’t Say You Have No

Competition


6. The “Projections”

What are the financial and general business projections for the company?

Yes, most investors see charts of revenue and earnings growth along with charts of the total market

growth and generally they have one common feature: always up, and to the right!

The important thing to convey during this portion of the presentation is the underlying assumptions for

your data. What is happening in market growth and your sales on the micro level that yield these

explosive macro level curves?

Take a stab at 3 and 5 year projections and build these numbers from the ground up based on pricing,

gross margin and your average sales cycle: can you build a case for a high growth business?

Is your business model direct sales or will you be selling indirectly, through a reseller? If direct: what is

going to take to fund, train and manage a direct sales force? If Indirect: how do you get a reseller to

feature your product versus all the others they may sell?

Can you give a timeline of business milestones like first product shipping and when breakeven will

occur? What are the potential problems or hurdles can you anticipate along the way?

Investor: “Show me the money!”

The investor simply wants to see the financial rationale for your business.

You may want to break this down into multiple slides and show the business model financially along

with breaking out the underlying financial dynamics to your sales plan.

You need to defend your price point based on the cost of goods sold (or “cost of creation” if something

like software) along with your gross margin and how that will be defendable long term versus your

competition.

There is one guarantee, as an old Prussian Field Marshall once said: “No operation extends with any

certainty beyond the first encounter with the main body of the enemy.”

Your plans will change, try to model as best you can with current data at hand and update as you learn.


The “Projections” DOs …

Show General Market and

Revenue-Specific Projections

Use Bottom-Up Models to Create

Projections

Be Reasonable About Assumptions

The “Projections” DON’Ts …

Don’t Pull Numbers from Thin Air

Don’t Be Afraid to Say What You

Don’t Know


7. The “Proposition”

What are the details of this investment opportunity? The details of an investment opportunity are

usually summarized in a term sheet.

Where do you value your company currently (valuation or valuation range), how much money are you

trying to raise and what percentage of your company are you offering for that investment?

You should describe the timeline of the company to date and an overview of investment to date. Did

the founders front money for the company? Were there friends and family that invested in the idea?

Has there been any more formal investment (angels or venture capitalists)?

What does the company’s fully diluted (contains all shares and warrants etc.) capitalization table (lists

ownership shares and outstanding shares in company, typically in spreadsheet form) look like?

What do you expect to be able to accomplish with this funding round (milestones achieved) and what

are any future expectations, for future fundraising rounds?

Can you describe the eventual exit for the investor: will it be M&A (Merger/Acquisition) or IPO (Initial

Public Offering) and what is the timeline expected for that event?

Investor: “What’s the deal?”

The investor is interested in the general deal terms: valuation, investment amount and % of company

being offered for that investment amount.

Should investors be interested, a diligence or “due diligence” process will occur where a more detailed

investigation of the team, product, market etc. will occur that may or may not later change deal terms.

A deal may present with preferred shares, as convertible debt (later converts to company shares) or

many other financial vehicles.

There are plenty of angel investing books, venture capitalist books, blogs, presentations as well as

lawyers who can run the whole gamit of strategies for fundraising. I’ll only say it is typical to offer

preferred shares to early stage investors (either directly or via convertible debt) and investors will

typically ask for some level of dilution protection along with some reprentation on the company’s

board, to represent the preferred share holders.


The “Proposition” DOs …

Be Fair with Valuation

Expect Bargaining due to Perceived

Risk

Be Prepared for Due Diligence

The “Proposition” DON’Ts …

Don’t Be Afraid to Walk Away from

Table

Don’t Ignore Valuable Feedback


Conclusion

You should end your investor presentation with a call for questions. Have back up slides available for

any extra information that you would like to convey, attempt to anticipate questions and ideally have

slides available to further enhance your answers.

If you don’t have a good answer to a question, simply state that, investors won’t fault you for not having

all the answers. However, make sure you can answer that question, the next time you get it!

Whether the end result of your presentation goes well or is a complete train wreck: use this as a

learning experience! Take away what you did right, what you did wrong and try to incorporate

worthwhile feedback from the audience into your presentation for future investors.

It took many successful companies, many attempts at presenting to investors, to finally secure a deal

and set them on the path to success.

Don’t be discouraged, use each of these opportunities as just that: an opportunity to learn, hone your

message and use as a stepping stone to your ultimate successful presentation.


“There are known knowns; there are things we know we

know. We also know there are known unknowns; that is

to say we know there are some things we do not know.

But there are also unknown unknowns – the ones we

don't know we don't know.”

-- Former U.S. Secretary of Defense, Donald Rumsfeld

When presenting to investors: be honest and attempt to present what you know,

and what you know you don’t know, and hope investors will get excited, decide

to invest and tag along to later battle the “unknown, unknowns” with you.

Because the “unknown, unknowns” are surely out there, for each and every

startup…


A Final Word: “Persistence” “Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan 'Press On' has solved and always will solve the problems of the human race.” -- Calvin Coolidge (1872 - 1933) 30th President of the United States

a guide to investor presentations

Economy & Finance