SlideMagic Blog

In the first second you meet an investor, you want her to stop guessing what you are doing. Describe in a short sentence what you are about, then move on with the more detailed pitch. An investor who is guessing what you are about is not listening to you.

I pulled up the trending startups of last month on AngelList.

1. These slogans are targeted at investors, not (potential) customers
2. They do not contain buzzwords or fluff (at least 99% of them) and describe what you are doing (not one of these is enhancing the social browsing experience with sticky semantic and relevant content dissemination)
3. They can be very descriptive about what a company is about. Often direct comparisons to existing companies are used as a short cut.
4. Startups are not afraid to put these type of descriptions in the public domain. The benefit of interesting a large potential investor base far outweighs the thread of someone copying the idea (based on the slogan) overnight

Here are the first ones that come up:

• A high-quality, low-cost 3D printer that works out of the box
• Safe driver score
• Everyone’s second job
• Spy on competitor’s display ads
• Detailed social analytics for marketers, brands and agencies
• Meetup for mealtimes
• The Internet, peer-reviewed
• Video advertising platform for mobile apps
• Check in your daily accomplishments
• Evolving the user experience for web interaction
• An augmented reality gamification platform
• Simple social business CRM
• Mobile customer service ratings
• Daily deals matched with industry leading publishers through editorials
• Market place for artisan food
• Flipboard for documents
• Pinterest for places - spots you love from people you trust
• Yelp for health
• Beautifully simple dashboards
• Building the neighbor graph
• Cloud-based platform for visual and statistical text analysis

I see many startups pitching for VC or angel money early in their life. The investor presentation is often first piece of collateral that the company produces. The second one is a web presence and people ask me how it should look like.

A fund raising web site of a company that is not operating yet is completely different from one that provides a service and/or processes live transactions: it is a relatively static piece of fund raising content. The only visitors it is likely to get are investors you have met or heard about you checking out the company, or maybe potential users that have found out about you in the rumor mill. The web site should be designed with that audience in mind.

The content of an investor web site can be very minimal, look and feel should be highly professional. Let’s start with the look and feel.

• URL. Make sure that you have the URL to your company name and that your sites uses it (and that you use it for your emails). This is check 0 of an investor to see whether you are actually real or not. Gmail addresses and Google sites do not score you any points here.

• Template. The site needs to look like that of a serious company, not a MySpace social media profile. Just setting up a Wordpress blog in disguise (i.e., a blog template that is used as a static site) with a nice minimalist template should do (go to sites like Theme Forest to find one).

Venture capitalist Mark Suster has a blog with a large following, and is also active in producing video about venture funding and startups. A few days ago he hosted a live startup pitch for funding on his show. As I said before, I am a big fan of making (at least part of) the fund raising process more public. The 53 minute video is embedded below, I watched it and give some of my thoughts.

I have great respect for these entrepreneurs to be vulnerable and go with their pitch on video, and they were probably a lot more nervous than when sitting a conference room without a camera. I have made the comments below a bit sharper on purpose, in the hope that other people pitching for VC money can learn from them. In part I am helped by my Dutch/Israeli cultural environment where people use a slightly more direct style than in the US.

Look how Mark is forming an opinion about the business right in the first seconds. What is it that we talking about? Many investor presentation deck hold off the answer for too long.

The opening sentence full of buzz words gets cut short. Mark starts paraphrasing “Right, so you are a sort of eBay/Etsy widget for blogs”. It is indeed a better way of saying things, but hidden in this comment, Mark is already hinting at his major concern about the business. The presenters could have come out with a snappy/high-energy “OK, that you call it like that for now, but we have something amazing under the hood that makes us stand out in the middle of all these eCommerce giants, advertisers, and affiliate programs.”

Have a look at the DressRush investor presentation, an entire pitch deck written as a web site, in the public domain. Some of my observations.

I like publicly available investor pitches. It fits in the wave of increasing transparency in the startup funding market. (Check out Angel List). Startups can dramatically increase their access to potential investors by making part of their content public. The first stage of a fund raising round does not have to be the closed meeting room of the VCs that happen to be located in the same city as you are. Obviously you would not put your core IP, financials, or other sensitive strategic content in a public presentation. Another option would be to make the sensitive part of your investor pitch on your web site pass word protected.

I like these airy web sites. Lots of white space and information that you can scroll through freely, up and down. I actually first skim the whole site in a few seconds, then go back up to start reading in more detail. This is so much better than the nervous clicking on a small button in a SlideShare window (especially when people design slides that -click- break up -click- a sentence -click- in 5 -click- slides.

It is still tricky to design from this new medium though. The DressRush example uses beautiful muted colors (interrupted here and there by images and facebook logos) and takes an infographic approach to investor pitches. On certain pages it works, on others it does not. In whatever direction the technology develops, you still will need to eye of a good designer to get your investor pitch right, also in HTML.

Hardly anyone puts a valuation number on a PowerPoint slide in an M&A negotiation or an investor pitch. In publicly quoted companies there are legal constraints, but most of all: a buyer is unlikely to believe a number put up buy the seller. So how do you as a seller get the buyer to move in the right direction using a presentation?

The answer is: teach and spoon-feed the right assumptions. Someone on the buy-side is going to construct an Excel valuation model of your business. Put yourself in her shoes and guide her through the process.

What components of value are there? The business units of today. The future growth of these existing businesses, but remind her to include growth options beyond that as well.

Valuation models are forward looking, financial data looks backward. So it is important to teach the buy side how to model your business going forward without giving the answer. Instead suggest how the sales of your business works (it is all about number of stores and sales per square meter). Suggest some non-financial growth rates, or give an indication of your store opening program. Explain how the cost structure works. We can support 50 more stores without adding cost to our head quarters.

Give the sell-side a quick refresh about the theory of calculating discount rates. What should be taken into account. What ranges of values do you see?

The best way to prepare such a presentation is actually to design a valuation model yourself without inside information. It teaches you the process the other side will go through.

I had a phone call with a potential client yesterday. He needed an investor presentation but also was interested in a full business plan.

There are different documents that both are called business plan. One is a stack of files (spreadsheets, gantt charts, PowerPoint slides) that contains the company financials/budget, competitive analysis, and development mile stones. In short: real content. It does not have to look pretty.

The second one is a long document created in Microsoft Word in which market research data is copy pasted (IDC says our market is $1bn), the company opportunity is described with lots of buzz words, and so forth.

You need the first one, you can forget about the second type of business plan. They take forever to write, they take forever to iterate, and as a result they are always out of date. No one reads long written text. Brad Feld and others have called them obsolete.

My client admitted that the business plan job was simply a matter of writing up material that was already there. He was willing to invest lots of money and 2.5 months of work with a consulting firm to have the document rubber stamped, paying for the logo on the front page.

I think it is a waste of money, time, and effort. If the only thing the consulting firm does is write down stuff that already exists, investors will look right though it and judge the investment opportunity based on your content, not the way in which it is written. If it is market data you are after, pay for the market data directly, rather than by hiring a consulting firm in the middle.

I am linking to 2 posts related to venture capitalist Vinod Koshla today.

The first is about brutal honesty in investor presentations by Michael Arrington. He argues that indirect polite language because people are afraid to turn down a startup is not helping anyone (including the pitching startup).

The second is a blog post by speech coach Jerry Weisman: the 5 second test. If your (test) audience fails to produce the point of a slide when you hide at after 5 seconds, the slide is too complex. An audience trying to figure out what a slide means is not listening to the audio track.

(Thank you Wouter Deelman for pointing this out to me)

In many of my investor presentations I mix slide design styles.

• In the beginning, big images to catch the attention of the investor and make her feel the pain that you are trying to solve. These slides are good enough to put up in a big keynote address.
• Later on, more dense slides follow with details of the technical architecture, the financials and the team experience. These work in a small conference room, but definitely not on a large stage.

The slide design is not completely consistent, but I find it works well for me.

The investor presentation (both slides and video) of the upcoming Groupon IPO are online (link). Robin Wouters of TechCrunch has made a few screen shots of some of the slides. Usually these presentations are held in private meetings with potential investors, and I think it is great that they are now available for everyone to see.

Overall this is not a bad presentation, the presenters rehearsed, the slides are organized. There is still room for improvement though.

Slide design. The slides look like a beautification of a standard business presentation. The beautification is done professionally: sophisticated graphics and custom-made illustrations. Some of them look great (I love the slide with all the competitor logos). Still, Groupon could have gone further by designing the slides from scratch, making them simpler. For example, the slide right after the competitors on Wouter’s page is not clear. Also, the template could have done without all the trackers that are repeated on every page page.

Examples. Groupon is a business that happens all the way down in the street, at a small merchant. Like retailing, detail is what matters. The case examples could have been featured more prominently. Bigger images of the restaurant, more specifics of the deal. When the VP Product goes through a long list of the detailed information that Groupon has available, it sounds abstract. Why not take one very specific example and show how shoppers for flowers have different habits in 2 streets of San Francisco. The specifics of the detail make the big point.

Big market disruption, check. Experienced team, check. Company traction, check. Trimmed down the investor pitch deck to 10 minutes, check.

But you forgot one thing: the sales pitch. Yes, this is an investor presentation and not a sales presentation, but still, every pitch to an investor should include an example pitch to a potential customer. The investor needs to get a feel that a customer will actually buy your product. The sales story on the slides is important, but even more important than that: they way you present the slides as a salesman.