|Aug. 19, 2004|
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Pitching to Investors
by Jan D'Arcy
What is Your Objective?
If you're making a high-stakes investment pitch to potential investors, funding may be your ultimate aim - but should it be the objective of your presentation?
Clarify what your true objective is. Although you may have experienced love at first sight in your personal life, very few angel investors or venture capitalists will write out a check the moment you are finished with your presentation. And if they did, you may be sure there would be restrictive conditions attached.
Many "dog and pony" shows only allow you fifteen-twenty minutes to pitch to investors. What can you realistically accomplish in that amount of time? What do you want your listeners to do? Present your unique product or service, the expertise of a stellar management team, a well-thought-out business plan, and strong financial projections in a sustainable market. Avoid spending too much time explaining the minute scientific details of a complex product or service. What do you want your audience to feel? Many decisions are made based on emotions, not on facts. Investors must trust your leaders and have a gut feeling that your company will be successful. Don't leave your audiences response to chance. Be specific about your objective. It will influence what information you include, what you will omit, and the way you deliver your material.
The best objective is to have your listeners want to get a cup of coffee with you and continue the conversation. Grab their attention and gain their interest in following your progress. They may be pre-occupied salvaging their current portfolio. Perhaps investing in your company might not fit into their immediate strategy but they can refer you to another funding organization, suggest a competent CFO or other management team member, or get back to you when conditions change in the future.
What's In It For Me?
The ultimate goal of angel investors or venture capitalists is to invest in "wow" products and services and share in their growth and profits over time. Obviously, investors want to avoid being involved with a poorly managed company and financial failure. Some entrepreneurs are so eager to talk about the science of their products and services that they expect their audience to wade through the material to discover if there is any value for them. A good presenter will demonstrate that he or she understands the audience's needs, desires, and goals.
Angel investors may have a different outlook than venture capitalists and can be more swayed by your enthusiasm or their emotions and even be tempted to forget all the rules about sound investing. Taking a risky flyer in biotech is "pushing the envelope" but what fun to be bragging about their huge return down the road! Conversely, the mere mention of life sciences may send up a red flag. Investors are besieged with current headlines announcing failed clinical trials, a volatile market, and the years it takes to make a profit. However, your socially responsible product may appeal to them even though it won't double their money.
Venture capitalists can take a more pragmatic approach to your presentation. They will probably have set investment criteria and no matter how passionate you are about your product and the pizzazz of your graphics, they will turn away with nary a regret. Realistic facts, statistics, valuation, etc. will have more appeal and will be double-checked.
However, a venture capitalist may emotionally respond to your company and expect to fill in the gaps with their expertise just as an angel may be only interested in statistics. A former client has several bookshelves devoted to cycles in the stock market. Her multiple graphs make a convincing case of how industries will go in and out of favor as the economy runs through cycles. She is an angel investor and her purchases have to coincide with cycles going back to the 1800's. Would you be able to deal with this fixed belief?
Angel investors and venture-capitalists seek diversification. If they have no biotech stocks in their portfolio, they may be curious and want to learn more about your company. If you know an investor's present portfolio is heavily loaded with technology stocks, how will you address the risk if you are in biotech and they were burned by dot.com's?
What is Your Audience's Map of the World?
When you have an opportunity to meet with a potential venture capitalist, gather as much information as possible from their website and on-line industry related items. Review latest news items, bios of principals, their current portfolio, and staff changes. Conduct on-line research on angels. Is there any common connection? Where did they go to college? What associations do they belong to? Phone or email every contact you have to get information on the person's business and personal background, especially if it is just a one-on-one conversation. That golf anecdote or mention of a best-selling author in their field may be the conversational bridge to a rewarding discussion and they may want to continue talking with you in the future. Conversational skills are important! To connect with listeners during a presentation or conversation, recognize they do not respond and behave according to our perceived "reality" of a situation, but to their perception of "reality." Difficulties are compounded if you are highly technical and your listener doesn't have a clue what you are talking about.Pitching to potential investors is always challenging but bullish venture capitalists and enthusiastic angels will continue to selectively invest into the life sciences. Conduct thorough research and anticipate how investors will react to your company's products and services. Select appropriate material that helps your audience relate to your ideas and personnel. Translate complex scientific and medical data into the simple, concise, and clear information. It is your challenge to communicate your vision persuasively. You can command attention and reach your objectives if you take the time to analyze your audience, respond to their needs, and speak in a language they can easily understand.