Your company needs a capital infusion, and you can’t get the local bank to help out. One alternative is an angel investor to provide cash in exchange for some equity ownership.
You should prepare to meet sophisticated investors, even though many will not be “sophisticated.” You’ll have to talk to many investors to find the right match, and sophisticated investors will require information, data and likely perform some type of due diligence.
Developing your pitch
First, develop an elevator pitch, a short summary that defines your product/service and its value proposition in one to two minutes. This is the first impression to catch the attention of the prospective investor.
If you are then invited to meet the investor, you will be expected to have a slide deck as a guide for discussion.
The slide deck should follow Guy Kawasaki’s 10/20/30 Rule — 10 slides, 20 minutes, 30-point font. Twenty minutes is the average adult attention span, and 30-point font is required to avoid “eye chart syndrome” where you lose the viewer’s interest when he or she can’t see it.
Here’s a guide for the flow of the 10 slides:
1. Opening slide — includes your organization name and your value proposition.
2. Identify the problem — describe the pain your product/service helps.
3. Solution to the problem — explain how your company alleviates this problem.
4. Business model — describe how you’ll make money.
5. Underlying magic/technology — describe your intellectual property and barriers to competition.
6. Marketing and sales — explain how you reach customers; estimate market size and the percentage you can penetrate.
7. Competition — provide a view of the competitive landscape, including indirect competition. All companies have competition; if you say you don’t have competition, it will kill your opportunity immediately.
8. Management team — list key players and their qualifications, including your board. This is important, as sophisticated investors understand success is all about execution.
9. Financial projections and key milestones — this is often done with bar charts and graphs projecting growth in sales, expenses, head count, etc., and demonstrating gross margin and net income. Make sure you identify cash flow breakeven.
10. Exit strategies or ROI — describe how you’ll make money for investors by selling the company, or providing dividends. Be sure to show the offering amount, terms and conditions. It’s best to state they are negotiable if you want to strike a deal.
Possible pitfalls
Some common mistakes to avoid are:
- Discussing only the product, not the actual business. Investors want to know more about the business to understand how they’ll get a return on their investment.
- A lack of preparation. Anticipate questions, have back-up slides that can answer those questions, and rehearse and know your slides.
- Too long of a presentation that doesn’t build momentum.
It’s important that you maintain confidence and enthusiasm throughout your discussion. Don’t let gnarly or arrogant investors throw you off. If they are gnarly or arrogant, perhaps it’s not a good match.
Catherine V. Mott is the CEO and founder of BlueTree Capital Group, BlueTree Venture Fund and BlueTree Allied Angels
