SlideMagic Blog

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.

Method 1 - emphasize subject: you can apply all bold, italics and underline effects, increase the font size, and pick a nice bright red character color (make sure you use all effects at the same time)

Method 2 - de-emphasize background: cut out all the visual clutter and distractions so that the point you want to make just appears by itself.

Guess which one I prefer?

This TED talk by Hans Rosling (not the one that brought him world fame) is a great example of replacing PowerPoint slides with simple props.

(B.t.w., I like how he attached the Flip video camera stand to the Volvo car model)

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.

A story from the early 90s. Back then I had recently joined McKinsey as a Business Analyst and got involved in recruiting presentations at Dutch universities to try to convince more engineers to apply for a  position. The slide deck covered it all: our offices, our expertise, our clients, our selection process.

Until one day we did a survey asking the audience to rank how useful this presentation was. The outcome: people already knew that we were probably very smart, worked with prestigious clients, were unlikely to starve because of lack of financial resources, and were very professional.

The questions the students had were: are you guys human or nerds, do you really have to work 80 hours a week, how on earth can a physics engineer be useful there? These questions you cannot really address on a slide, so we cut the introduction presentation to the minimum (to re-confirm what people already knew), and then switched off the projector and started talking about us as a person, and opening up the discussion for questions.

Preaching to the converted is a waste of time. Instead, use your presentation to address the issues the audience has.

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.

How do you convince an overly confident, highly senior executive that it makes sense to rehearse tomorrow’s presentation? “Me, hey, I have given thousands of presentations in my career, I will wing this one!”

Winging does not work, you need to know your substance in-and-out in order to be spontaneous. A presentation without rehearsing produces of one of two possible results: a poor performance, or a replay of the presentation you gave last time without emphasizing the new content in the deck.

I do not have the ultimate answer. You can say that Steve Jobs took days to rehearse a keynote. You can scare her and say that the analysts in the audience tomorrow see hundreds of presenters each year, and you better stand out. Or sometimes, people agree to go through the presentation with an outsider like me, the presentation designer, in a closed room where non of their subordinates have to hear the corrections we discuss.

What does work for you?

When your boss is editing your slides, there is a risk that she will add the same key message on every slide. She has not fully immersed herself in your story. She does not see the full context of the presentation. Time is short, too short in fact to study the presentation in detail.

Better make sure that the point “our architecture is flexible” gets mentioned a few times in the deck. Extra bullet on page 3, a nice bubble on the side on slide 7, foot note on page 15, and bold the flexibility point on the last page.

Have the courage to stand up and stop her.

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.