SlideMagic Blog

Forecasting the size of a market that does not exist is tricky and nobody will have the right answer. Googling will result in endless research agencies or investment banks or consulting firms throwing in yet another inconsistent number.

With new markets, it is often as important to convince/teach an investor how to think about the market sizing than getting her to accept the answer, the point estimate. So merely quoting a random number without having a clue how it was derived is not going to help you very much.

So here is an alternative approach: make your own and keep the analysis very transparent. Build a spreadsheet that start with hard facts (populations etc., and slowly, slowly, adds more uncertain numbers. Use different colours for numbers with different confidence levels (green for rock solid all the way down to red for I-made-this-up). Put the resulting market size in your presentation, and add the detailed calculation to the appendix of your presentation.

Now you are on top of your numbers and understand where they are coming from. It shows you know what you are talking about, and you can teach your potential investor how to make her own market estimate.

Rattling through 25 points about why your idea is great on page 1 of your deck is not convincing.

• You do not give the audience the ability to warm up, and first of all understand what it is you do
• You dilute the power of the arguments by spending too little time on each: big need, no competition, great team, we all heard them before
• You remind us of weak pitches where the lack of quality of the story is made up for by quantity: products with 25 benefits usually have no benefits

Instead, resist the temptation for detail and explain roughly what you do on page 1, plus the most important differentiator. Then follow with a presentation that is short enough for the audience to focus on your key points.

Every startup pitch has a hockey stick chart that shows its financial path to glory. As a result, investors will not believe it by simply looking at it. You need to explain what she has to believe in order for the end point to be true. What are the 7 numbers you need to multiply in order to reach that $50m in year 5? If she believes in 4 of the 7, and she buys into your methodology to calculate the potential, then you she might connect the year five dot with the 0 today.

I am glad to speak live about startup investor pitches in a Google Hangout organised by the Google Developer community in Israel. The event is this Wednesday 14:00-14:30 Israel time. I think up to 9 people can join the interactive conversation, but Google will live stream the event so other people can follow it “on mute”

Details of the event can be found here.

Sometimes, putting up a slide that says explicitly “We are a robust company!” might make the audience actually think the exact opposite. “Hey, so far this was a fantastic and professional presentation, I did not realize these guys are a tiny startup, that is until now…”

Some sectors of the technology market are “hot”, everyone wants to buy the products, all investors want to get in.

But writing that sentence explicitly in your presentation might just give the impression that you are in a bubble that is about to pop. Get the sizzling temperature of your market across without saying it directly.

As a startup you are used to sitting in the hot seat while the VC (venture capitalist) is grilling you on your business idea, and in the process gives you some advice on how to pitch it better. True, VCs probably know best how it is to pitch to them.

But VCs themselves can improve their pitches as well. I have designed many fund raising presentations for VCs and later-stage private equity (PE) funds pitching their next fund to institutional investors and high net worth individuals. Here are some of the common mistakes in version 1.0 that comes across my desk:

• A lot of attention to the mechanics of the fund; how the due investment process works, and how the fund is organised.
• Very generic descriptions of what sort of companies the fund will be looking for: great product, great management, no competition, sound business model
• (Every fund does this) a chart emphasising that the fund (unlike all other funds) will actually be really hands-on with their portfolio companies
• A dry summary of the investments made and financial returns, forced in the same generic framework that is applied to all the portfolio companies (with completely different stories) often lacking the real story behind the investment decisions and the portfolio’s company progress over time
• Investment banker-style, dense, bullet point slides that are meant for printing and reading, not for presenting.

Investors in VC funds have heard the exact same story from all the other funds that are pitching for their money. VC/PE funds need to really think hard and articulate their story, and how it stands out from other funds.

Following requests, I uploaded the slides I used for my talk in Barcelona about investor presentations. They are pretty minimal, so it will be hard for those who did not attend to grasp the full meaning, sorry. (I am working on documenting its content though, watch this space) Thank you Barcelona entrepreneurs for a great event!

Opening slide bullets:

• Industry #1
• 15 consecutive quarters with growth
• 40% EBIT margin
• Offices in 35 countries

Pretty impressive, but when you put on a slide like this the audience is unlikely to digest the numbers fully. Almost every opening slide of almost every corporate presentation has numbers that look like this (something about growth, something about margin, something about locations, we do not pay that much attention to the actual numbers).

Instead, break up the slide, show that you are bigger than IBM, show a column chart with growth in the past 15 quarters, show that competitors are struggling to achieve 5% EBIT margin, show a map with 35 dots. It takes the same time to present, but your audience will remember.

In many cases it is hard to give a real example of the cost savings someone can achieve with your product or service. Data is not public, or in case of a startup, you might not have that many customers yet. “Making up some numbers” does not sound like an ethical alternative, but it is a good strategy if you stick to some simple guidelines.

• Explicitly say that it is a hypothetical example
• Create a highly realistic artificial customer (1 owner, 3 trucks, 1 warehouse, $x million in annual revenues, etc.)
• And most importantly: explain how you get to your cost savings. If possible break them down into a few simple categories, and use a highly simple and transparent way to quantify them (10 instead of 35 phone calls of 30 minutes each per week equals $x)
• Make the spreadsheet as complicated as you want, but start with a blank PowerPoint/Keynote page to explain your calculation.
• Add everything up and see whether the cost reductions make sense as a % of the total

The main purpose of the case example is to explain how you got to the savings, not the absolute point estimate.