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© 2004 Keiretsu Forum.
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How Software Entrepreneurs can be Successful Presenters to Investors
[An open letter to all software entrepreneurs presenting to Angel Investors]
Dear Software Entrepreneur. (1)
I would like to introduce myself to you. I am an angel investor.
You may not have met the likes of me. I play several different roles. I am a listener to your presentations, a challenger of your strategy, an investigator conducting due diligence, a negotiator over investment terms, and finally a check writer to fund your growth. Until now, your check writers have been friends and family. I am neither.
I write this open letter because sometime in the near future, we will meet for the first time when you present to Angel Investors. I will be one of many pairs of eyes looking at you. I know what you want from me to be an investor in your company. Often times, however, it is evident that you do not know what I need from you. Thus, I want to help you be a successful presenter.
You will probably have 10 minutes to ‘give your pitch’, plus another 10 minutes to answer questions. I would like this time to be fruitful for us both, so I have provided you with very specific suggestions of how to most effectively organize and deliver your presentation. Furthermore, I have described the most commonly made mistakes. I hope you will find my suggestions helpful and encouraging since my desire is to give you the tools to be well prepared and confident.
If you follow these guidelines, I estimate that you will be in the top 5% of all presenters. While this does not guarantee an investment in your venture, it does significantly increase the likelihood that many of my colleagues will indicate our strong interest. That is your goal for our first meeting and I wish you great success in achieving that goal.
Edward P. Harley
Angel Investor
epharley@pacbell.net
Your Presentation
Some general, presentation-at-large, dos and don’ts.
- Do challenge yourself to deliver an ‘easy-to-understand’ story. Could I, your listener, replay to another person the very basics of your venture and how your target customers will benefit from using your product?
- Do infuse passion throughout your delivery. Engage me with your story.
- Do focus on the benefits to customers of acquiring/using your product. Does it simplify? Make-money? Save money? Open new markets?
- Do differentiate your business in some way from the competition market channel, service, technical features, etc.
- Don’t give me unclear, irrelevant, or unnecessary information. It is extremely important to your success that you winnow the full amount of information into the particular subset that is required for this presentation. If you are concerned about leaving out ‘necessary’ information prepare a more detailed slide for the Q&A period in case it comes up.
- Don’t try to impress me with a lot of jargon.
Min 0:0 Min 0:30 Connect with me (0 slides)
I’ll begin evaluating you before your first word. I am looking at your dress/appearance and posture as a measure of your confidence. During your opening 30 seconds, you should focus on trying to connect with me. Tell me a short story about how you germinated this idea or, give me your ‘elevator pitch’ that one or two sentence summary of your venture that leaves me wanting more information. Be creative in trying to engage me.
I strongly recommend during this opening that you turn-off the PowerPoint projection. Just talk to me. Look directly at me; I will look directly at you. This is how we connect. Remember, in my mind, more than _ of my measure of this presentation is about you -- the excitement and enthusiasm of your voice coupled with the energy and animation of your face and body to show the conviction of your message.
Perhaps 50% of you make this connection successfully. Sometimes your general communication skills are so inadequate that they distract me from making a connection.
Min 0:30 to Min 2:30 The Customer Situation (1-2 slides)
Having connected with me, I now recommend that you tell me, in the next two-minutes, the current state of your target customer, the seriousness of that current state, the desired future state of that customer, and the benefits to the customer in reaching the future state. This ‘chain-of-reasoning’ about the customer’s situation is particularly critical to me, your investor. You really need to make sure I ‘get it’.
To be more specific:
- Current State - describe the problem your customer has, or the problem they want to avoid, or their lack of opportunity.
- Seriousness of Current State - describe the seriousness of your customer’s current state by explaining their consequences of not changing.
- Desired Future State - describe a desired ‘future state’ for your customer that is more pleasurable (problem solved), more certain (problem avoided) or more fertile (new opportunity potential).
- Benefits to the Customer tell the benefits (both performance and psychological) that the customer will receive from being in that future state. Because in many instances your venture involves selling to organizations, you need to explain both the general benefits to the overall organization and the specific benefits to various people within the organization.
Less than 30% of you will present the customer’s situation successfully. Frequently, you fail to adequately describe the current state or desired future state, or you describe the product benefits rather than benefits the customer will receive by using your product.
Min 2:30 Min 4:30 The Product/Solution (1-2 slides)
In these two-minutes I suggest that you tell me about your product your solution your new whatever. My expectation is that I will hear about a solution that is significantly better for the customer than all their existing choices--- by ‘significantly better’, I mean 10X better. Admittedly that is a very high bar, but that is my standard.
You must describe the current state of the product’s key features and the benefits of those features (as distinguished from the benefits of the customer using the product). You should also give me a product roadmap of anticipated enhancements. Understandably, your will use diagrams to support this information, because most often a demo is impractical, although a short demo is worth a great deal. Indeed, you may have to show a computer screen shot to get your point across. You also may choose to provide a handout or point me to website. Any of that is encouraged, however, during your presentation keep the information simple and at a high level. Tell just enough and not more.
Next you should explain the installation effort, the integration issues, and how will the customer receive ongoing support. Then, tell me about your solution’s scalability. With scalability I am interested in two dimensions: your ability to serve the needs of one very large customer and your ability to serve the needs of many smaller customers. Finally, you should briefly explain any core technology, any patents or other defensible Intellectual Property (IP), or any other technical barriers to entry for a potential competitor.
Over 70% of you will present your solution successfully. The key mistake you make is that you tell too much, confusing me with unimportant detail and technical jargon.
Min 4:30 Min 5:00 The Value Proposition for the Customer (1 slide)
Neil Rackham, in his book Spin Selling (2), describes the value equation for a customer as:
Customer Value =(Seriousness of Current State + Benefits of the Desired Future State) Cost of the Solution.
If the first two factors (Seriousness + Benefits) ‘weigh’ more than the Cost of the Solution, then the customer has a positive value equation. The magnitude of that positive value directly influences the customer’s willingness to pay for and to make the effort to make the change. The greater the magnitude, then the greater is the customer’s desire to ‘just make the purchase’, rather than doing a rigorous evaluation during the sales process.
In this 30 seconds, you should persuade me that those two conditions (Seriousness + Benefits) add up to considerably more that the cost of your solution. A customer quote or testimonial video has a great deal of impact at this moment.
Less than 10% of you will present the value proposition for the customer successfully. Most often you ignore this topic completely.
*****
At this point you are 1/2 way through your presentation. If you have successfully connected we me by clearly describing the customer’s situation, your solution, and the value proposition of the customer, then I am hooked and I will listen to the rest of your presentation as an investor. If not, then for me as an investor, it is probably over. For sure I will still actively listen to the rest of your presentation, but I will listen with the mindset of a curious person rather than with the mindset of a potential investor.
Notes
1.) I was inspired to write this open letter to software entrepreneurs by the 1995 book titled Writing Winning Business Proposals by Richard C. Freed, Shervin Freed, Joe Ramano, [McGraw Hill 1995] which was written as an open letter to business consultants.
2.) Spin Selling by Neil Rackham [McGraw Hill 1995]
Copyright 2004 Edward P. Harley All Rights Reserved
I thank the Keiretsu Forum membership-at-large, which I am a member. I have gleaned many of the letter’s thoughts from our one-on-one conversations and group discussions. I specifically thank members John King, Phil Chernin, and Ken Taylor, for their insightful editorial comments and wordsmithing.
Next issue Ed Harley will continue with minutes 5 to 10 of the presentation. Ed welcomes any comments or suggestions on this open letter. His email is epharley@pacbell.net.
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