Investor Presentations

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Investor Presentations

Investor presentations are an important but often overlooked aspect of entrepreneurial efforts to secure financing for their businesses. Presentations are particularly important to small business owners hoping to raise money from private investors. Whereas institutional investors such as banks rely primarily on financial statements, business plans, etc., in making their lending decisions, private investors are more likely to be swayed by other factors, such as the owner's vision of a new product's appeal, knowledge of the marketplace, or ability to present a compelling picture of future profits for both the owner and the investor.

Poor investor presentation may close the door on potential avenues of financing, even if the entrepreneur's idea for a new business or product is a good one. "Putting together a winning presentation isn't as easy as it might seem," said David R. Evanson in Nation's Business. "Whatever the forum—a formal dog-and-pony show before a roomful or institutional investors, a clubby luncheon with 10 to 15 wealthy individuals, or a one-on-one meeting with a venture capitalist—founders … have often shown they can shoot themselves in the foot with deadly accuracy." Entrepreneurs and small business owners seeking expansion capital need to make certain that their presentations grab the attention of investors and inspire them.

KEYS TO SUCCESSFUL INVESTOR PRESENTATIONS

Several considerations should be kept in mind when planning a presentation to potential investors. These considerations range from tips on public speaking to recommendations on presentation content.

Tailor Presentation to Audience

Some business owners make investor presentations that are only negligibly different from presentations that they make to internal salespeople or to customers. This choice—which is often a byproduct of laziness more than anything else—can have a negative impact on the owner's chances of landing an investor. "Topics such as product features, new technology and customer service—the things that matter to customers—are of interest to investors only as part of an overall menu of competitive advantages that will help drive sales," said Evanson. Moreover, no two investors are alike; one individual may have a reputation for daring business initiatives; another may be predisposed toward (or away from) involvement in a specific industry; still another may be most interested in receiving assurances about the competence of the enterprise's management team. Entrepreneurs preparing to make a pitch toward private investors should find out as much as possible about their audience's interests and investment philosophies beforehand.

Judicious Use of Visual Aids

Visual aids should augment the presentation, not dominate it. Slides and overheads can be valuable tools in a presentation, but their use contains a number of potential pitfalls for entrepreneurs. Some people place so much importance on the visual component of their presentation that they flounder in situations where they have to deviate from their script. Others cram their visual aids so full of information that viewers are unable to digest it all, which merely triggers resentment or annoyance from potential investors. However, visual support—when intelligently utilized—can be most helpful in providing context and illustrating key points.

Presentation software programs, like Microsoft's Power Point, for example, are utilized frequently today for public speaking events. Such programs have several advantages. They can compose impressive displays and their content can be altered quickly to reflect needed changes. Moreover, their portability is a big improvement over big slide carousels, overhead projectors, and display boards. But many of the advantages associated with computer displays hinge on a certain level of program mastery and design skill. Always remember: a visually interesting presentation is a very good idea, but substance should always trump style.

Live Demonstrations

It may be tempting for an entrepreneur to make a live demonstration or his or her product as part of the total presentation package, but demonstrations have a pretty hefty downside. This is especially true of technology products, which can end up looking hopeless because of some minor glitch. "As people with sales experience will tell you, the customer has a picture in mind of what the product is and what it's supposed to do," wrote Evanson. "Any uncontrolled situation that distorts that image is ultimately counterproductive to closing the sale." Of course, there may be situations wherein the presenter is pointedly asked for a live demonstration by a potential investor. Not granting such a request may throw prospects for financial assistance in jeopardy as well, so entrepreneurs should be prepared to make such a demonstration if it seems necessary. Finally, there are certain categories of products (generally involving simpler, non-technological designs) that can be demonstrated with less worry for a negative outcome because of a technical glitch. Each presenter has to judge the potential risks of a live demonstration for him or herself.

Relevance

Presentations that spend excessive amounts of time on relatively unimportant points are unlikely to attract investors. Instead, presentations should remain focused on the basic information that investors are likely to want to hear, such as company background, ownership/management background, key employees, product development, market opportunities, existing competition, present and future marketing plans, and financial analysis.

Communication Abilities

This element of presentation encompasses several different areas. First of all, the presenter should ideally be able to speak in an authoritative, confident, and smooth manner. Fairly or not, public speaking ability can make a profound difference in an entrepreneur's success in securing investors for his or her business or product. "There are a number of golden rules in making a presentation and plenty of speakers break them all," observed Sue Bryant in Marketing. "No eye contact. No pauses. Patronizing the audience by putting text on screen and reading it out loud. Writing a speech, failing to rehearse and reading it woodenly. Fumbling with equipment and muttering: 'Now, how do I work this thing. Indeed, Bryant pointed out that excessive use of visual aids can often be traced to a presenter's discomfort with public speaking. Given the importance of a good delivery, an entrepreneur who is uncomfortable with speaking in public should consider investing in a course designed to help people with public speaking and presentation skills.

Presenters also need to make sure that the presentation itself is appropriately focused and understandable. Karen Kalish, author of How to Give a Terrific Presentation, stated that effective presentations have seven key organizational elements:

Audience-grabbing opening
Well-organized information (including examples, analogies, and anecdotes where appropriate)

Logical transitions
Short sentences
Understandable language
Good closing
Appropriate responses to questions

Entrepreneurs are often very intimately involved in the details of their products or services. This may lead to a tendency to drift off into a lengthy discussion of technical matters. The last thing that one wants is to bore prospective investors. Avoid lengthy explanations of relatively esoteric subjects. "Yes, the technical aspects of your company's product or service are important," wrote Evanson and Art Beroff in Entrepreneur, "inasmuch as they deliver competitive advantages, open new markets or change the balance of power in an existing market—but to investors, technology is not important in and of itself."

Honest Presentation

Presenting projected financial performance for a company or product is an important and delicate part of the investor presentation process. Entrepreneurs naturally want to put their prospects in a good light, but consultants warn that private investors are wary of overly optimistic numbers, and view misleading data in this area as a clear sign that they should withhold assistance. "With so many exciting opportunities in the marketplace, you've got to walk a very fine line between numbers that are exciting enough to attract investors and those that will turn them off because they're simply unrealistic," one successful business founder told Entrepreneur.

Length of Presentation

Most experts advise entrepreneurs to limit their presentation to between 20 and 30 minutes. It may be tempting to devote more time than that—and in some cases it may be warranted (the potential investor has already indicated that he or she wants a full accounting, the entrepreneur's idea is a complex one)—but for the most part, entrepreneurs should limit themselves as indicated above. Whereas excessively long presentations can bore investors and unduly short ones can leave investors wondering if they are being told everything, presentations of 20-30 minutes can usually provide an adequate overview and leave sufficient time to answer investor questions.

Question-and-Answer Sessions

Questions from investors are an inevitable part of investor presentations. Entrepreneurs who avoid answering certain questions, answer with rambling sermons in "tech-speak," or respond in an arrogant, "know it all" fashion are unlikely to favorably impress their audience.

Follow-Up

Entrepreneurs should follow up with investors within a few days of the presentation, but they should be careful not to badger him or her with multiple queries. "When raising capital, particularly from individual investors, the old rule is that yes comes fast, and no takes forever," commented Evanson and Beroff [emphasis added]. "Still, many investors test the mettle of the business owner by seeing how long it takes him or her to follow up. If it's not forthcoming, even for reasons of perceived courtesy, many investors get turned off. On the other side of the coin, calling every day doesn't work, either."

Finally, rehearse both the presentation and various responses to anticipated questions. Entrepreneurs seeking funding from private investors are competing with many others. Take full advantage of the limited time afforded during an investor presentation to convince the audience that your business strategy makes sense and that your management team is capable of successfully executing the plan.

see also Business Plan

BIBLIOGRAPHY

Arthur, Audrey. "Keeping Up Public Appearances: Master the Fine Art of Public Speaking and Give a Great Presentation Every Time." Black Enterprise. July 1997.

Bryant, Sue. "Speak for Yourself." Marketing. 31 October 1996.

Casteel, Lynn E. "Tips from the Pros: Effective Investor Presentations." Community Banker. April 2004.

"Elements of a Great Speech." Industry Week. 17 February 1997.

Evanson, David R. "Capital Pitches that Succeed." Nation's Business. May 1997.

Evanson, David R., and Art Beroff. "Perfect Pitch." Entrepreneur. March 1998.

Greer, John, and Francie Murphy. "Be Prepared When Making Multimedia Presentations." Los Angeles Business Journal. 22 September 1997.

Kalish, Karen. How to Give a Terrific Presentation. AMACOM, 1997.

Weissman, Jerry. Presenting to Win: The Art of Telling Your Story. Financial Times Prentice Hall, 2003.

Hillstrom, Northern Lights