Thursday, November 09, 2006

The 6 Slides Your Presentation to Investors Must Have

I have talked about how when you are communicating to investors, you should focus on what's most important to them, not what you are most comfortable talking about. As entrepreneurs, we can be a self-absorbed bunch, and for many of us who are looking for capital, we don't have the slightest idea what investors are motivated by. Here's a start.

When preparing your presentation for investors, as a general guideline, divide the presentation into 6 parts of about equal length:
  1. The Mousetrap. Only about 1/6 of your presentation should be about your technology, service or product, and your story should be understandable to an 8th grader.
  2. The Team. Many investors buy management. If they don't love the idea, but there's a management team who can responsibly manage investor's money and make the project a success (and it doesn't hurt to have management with prior entrepreneurial success selling or IPOing a company on board) they will be more likely to invest. If you know you are lacking the management needed to make the business fly, be up front about it. You'll get further with investors, particularly VCs and Angel Groups.
  3. The Market. Explain the market for your product or service. Where does your product or service fit into the market? Why are consumers desperate for it? How big is the market (the bigger the better)? How much of the market can you carve out, what will your revenues look like for the next 10 years, or why will a major player in your industry be motivated to buy your Mousetrap in the future?
  4. The Margins. Investors are looking for BIG margins. Bigger margins mean more room to make mistakes. If margins are narrow, a mistake can sink the business. Describe unit costs and operating margins and profit margins.
  5. The Risks. Be honest, what's out there that can sink your company and how can investors’ cash help to mitigate risks. Talk about potential IP challenges, lengthy regulatory reviews, gaps in management, competition, manufacturing or supply issues. Every business has risks; investors want to know that you've done your homework.
  6. The Exit. Nearly every investor is motivated by three things: (i) How am I going to get out of this thing? (ii) When? (iii) How much can I likely make for the risk of being involved? While it’s not advisable for you to project the valuation at which your company will be sold for (or IPOd at), you can give investors examples of the success stories for similar companies, or let them draw a conclusion based on market size.
If you follow these guidelines, you'll be in good shape.

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