SlideMagic Blog

The other day I could a project inquiry. The current deck looked like an infographic, it was very nicely done: soft pastel colors, retro fonts, nice icons. Still, the company had difficulty finding traction with investors: where is the meat, where are the numbers, this looks like an ad.

Many VCs come out of the world of engineering or banking which has a certain quantitative, macho communication style to it. Even if your product positioning is “cute”, your investor presentation should probably a bit more testosteron-loaded.

In my previous life as a management consultant, I have spent many years inside consumer goods companies. Believe me, their management presentations do not look like the ads they put on TV for their products.

I am not saying that you should kill the cute slide deck (the world would be a lot more boring if that happened on a large scale), I just wanted to emphasize that if you decide to go with this style to be aware of your audience and compensate in some other way.

Case studies in investor and sales presentations are most of the time hollow and fluffy quotes that were clearly the result of an email saying “Do you mind if I quote you saying that our solution is highly flexible and scalable?”.

Here are a few ways to make a case example real:

• Focus on one specific benefit, if you try to put your entire story in the mouth of your customer, you need 30 slides, not one
• Cut the fluff
• Be very specific, and very detailed, quantify if you can.
• Add an image of your client to make things more authentic.

Case studies can be more than a simple quote of text. If you want to show that your system can be installed within 6 weeks, why not show a bar chart of your last 10 customer installations, with the exact time it took to install the system?

Tell a real customer story.

Sometimes it can be useful to create a slide that is hard to understand. If your technology is really complicated and impossible to replicate, why not show it?

They easy way to show a complicated chart is to take a few pages of code, and shrink them down to font size 7. While this gives you a complicated chart, it does not convince your audience how clever your technology is.

The best way to show complexity is take a micro case example, show that it is complex, but explain it very clearly. A recent client had a very powerful real-time customer screening algorithm. To show the power of the technology, I visualized all the checks that are conducted within 0.1 s. The chart was highly readable and very clear. Still it was complex. And that was exactly the message we wanted to convey to potential investors.

It can be tempting to omit some details about your company in an investor presentation. Especially in the healthcare industry with its complicated data from clinical trials it is definitely possible to hide something from a potential investor until very far into the due diligence process.

A due diligence process that can takes weeks, sometimes months. You enter an exclusivity period, stop talking to other investors, continue to burn money until… the investor finds out. You lose the investment, probably not because the company all of a sudden looks completely bad, but because of you burned your integrity, your trust with a potential new Board member. And by that time your company could have run out of finances and have no other investors to talk to anymore.

Do not make an investor presentation that emphasizes your weaknesses with all the visual power in the world, on the other hand, be honest.

I sometimes get that reaction from a client. Very few slides, very simple graphics. Sometimes the most powerful stories can be pitched really sweet and short. No need to waste more words/time/slides. Consider yourself lucky.

If you are in the high tech sector you face the challenge of demonstrating your product in an investor or sales pitch meeting. If that meeting is short (an hour or less), my advice is not to show your product in a live demo, but use a series of carefully planned screen shots.

Murphy’s law says that whatever can go wrong, will go wrong. And it seems to apply especially to high tech demos. There are just so many variables that can go wrong: Internet connection, screens, the application itself.

If you are in the middle of a short pitch, any interruption will pop the momentum of your story. Ideally you want your pitch to be one focused burst of energy that gets the audience craving for more at the end. A hiccup because of WiFi password will definitely not get you there.

There is another problem with demos, not all application functionality is Interesting. Logging in, creating profiles, entering some data, all things you have to do, but they are not the piece of technology that will wow your investors or customers. And finally, a live computer screen is most of the time not readable when put on an overhead projector, most fonts are probably smaller than 12 points.

So, what to do instead. Prepare an interesting story, set it up beforehand in your application, take lots of screenshots and paste them in the right order in your presentation. Zoom in to those aspects of the screen that are interesting, crop out those window bars, ads, anything that you do not need. Circle what people,should be looking at. Put big bold explanation text boxes on the slides.

Most investor pitches I see claim year 5 revenues of $50m to $100m, so putting in just that piece of information is not going to convince investors, you just sound like everyone else. What you need to make believable is why you are going to hit that target. Showing an incredibly complicated Excel model (”look, we did our homework”) is not going to get you there either. So the top line number is not convincing, nor is the detailed model, what works? The napkin.

When a modeling economics, I usually go brought a cycle. Start with a very simple calculation that gets to a ballpark answer, and is easy to follow and verify. Then, go I to incredible detail in an Excel model, understanding why I do, or do not get close to my initial ballpark. After the rock solid model is finished and bug free, it is time to simplify down to the level, of that very first ballpark number.

Simplification is not simple. You need to pick which drivers of your business are the most important, you need to decide which factors to show, which ones to hide. Your challenge is to stay close to values that are linked to everyday reality, not accounting. Messages per user per month, price per message instead of $m depreciation.

With all this preparation, you are now able to let your potential investor write her own ballpark or napkin calculation of the company’s potential. You provide her with the basic framework, what are the 6 numbers you need to multiply in order to get to your $75m in year 5. She might not agree with all the numbers, but you gave her a framework to which to apply her own estimates. Getting the point estimate right is not important, agreeing on the order of magnitude, and the way how to get there, is.

A nice and short video with tips for pitching your startup to investors on #startupstories. The lessons from entrepreneurs are useful, but pay special attention to what the investors have to say, they are your audience.

I was asked to mention common pitfalls in IPO presentations the other day. Here are some of my thoughts in random order

• Using an internal strategy deck as the basis for your presentation, rather than starting from scratch. Internal presentations are targeted at insiders, IPO presentations are meant for people who do not suffer from the Curse of Knowledge.
• Talking management speak, full of buzzwords. Institutional investors are sifting through investor pitches and data all day long, they are trained to cut out the noise. If you provide a lot of noise and padding, they automatically think there is no real substance to talk about.
• Over-structuring, repeating, repeating again. In a short investor pitch tell a story, do not try to get investors to remember key facts by drilling it in their heads.
• A generic investment thesis. Very high-level bullet points that could apply to just about any company: growth, profitability, etc. Diluting the core of what is special about your company with many, many other positives that are valid, but not that important. Like in marketing: too many benefits, no benefits.
• Avoiding the elephant in the room. institutional investors probably are pretty well informed about your company, and the key questions they have (often shared with journalists and bloggers) are pretty clear. Your presentation should address those, maybe not explicitly (here are our weaknesses), but implicitly. These questions are the only thing that people are worried about.
• Avoid the long-term growth options. There are legal restrictions to what extent management can provide business forecasts in an IPO filing, but that does not mean that you cannot educate investors on how you can think about valuing your business. Give a framework on what value components could be there for the long-term.
• Focus only on the company, not on trends in broader society. Sometimes the key driver behind the success of a company is a fundamental shift on how people are operating, how things are changing in the world. Your IPO is an opportunity for an investor to invest in that trend. If that is the main driver, discuss it.
• Confusing financial data. A 30 minute pitch is not enough time to go over the financial data in full detail. Still, there is no reason why you should confuse things instead. Give a good overall picture of the components of your company. Show how the revenue model is working. Show how the cost structure works.
• Forget the front line. Management talks about a company in terms of top line revenue, overall market share, but the real action is in the front lines. Give customer case examples, they are often a much more powerful illustration of the attractiveness of a business than top line figures.
• Recording your presentation in front of a camera, without an audience. Unless you are a professional TV host, people find it difficult to look natural in front of a camera. Invite a small audience when you are video-ing your tape. If that is not possible, maybe tape some images of people on some chairs in the studio/conference room so you can imagine talking to the people who are listening/watching you later.

Facebook published its IPO video, you can watch it here. Some observations (in random order).

First of all, this video is so much more professional than the ones we saw before (Zynga, Groupon). Gone are the executives presenting their slides in slightly uncomfortable positions, and instead we see a streamlined performance of relaxed-looking people.

The videos work great to present the senior team, and to highlight case studies of selected clients (both huge corporations, and small businesses). Video is less good to present some of the extraordinary facts about Facebook. Making the point that Facebook is the American Idol final, times 2, but then every day for advertisers could be made stronger on a visual. But the video is loaded with these extraordinary statistics that could have been emphasized more, maybe at the expense of some of the product feature explanations (time line, news feed, etc.)

The video is also modest about putting Facebook in the development of the Internet. They could have claimed that Facebook is redefining the net, by putting a social layer on top of it. The video focusses most of the time on what Facebook is today. The investor wants to know what Facebook could be. The payment business for example, only comes out in minute 28 of the presentation. The legal council probably advised against speculating too much about the future of the company in an IPO presentation.

The financial section of the presentation is too short. Stats fly over the screen, and at no single point do you get a complete financial picture of Facebook. Growth, cost, margins. profits, cash flow. The designers of the video probably thought that the objective is to get people interested enough for them to seek out the detailed financial statements themselves.