Communicating with Angels
John May, Managing Partner, New Vantage Group
Communication is the vital link in building a relationship with a business partner – in this case a mentor (angel) capitalist. These angels can be a positive and supportive part of a high impact company’s growth plan.
Over the years, my fellow angels and I have listened to hundreds if not thousands of entrepreneurs pitch their ideas. We recommend you prepare a compelling, clear, and honest set of presentations about your investment opportunity. Then you need to learn where and when to use the right presentation for the right audience whether it be an angel or venture capitalist. The following simple yet time-tested pointers should help you find the right partner and save you hundreds of hours of precious time so you can focus on growing your business.
The Elevator Pitch
In the time it takes to take an elevator down eight floors in a building, you need to be able to articulate your compelling business concept. You need to leave the listener with the “ask” – what do you need from the investor and what is the next step for your relationship. Practice this pitch with friends, family, and advisors until you get it down pat.
Whether you are meeting an angel for the first time after a panel presentation, are introduced casually over coffee, or are in a crowded auditorium, you must be able to slip a one-page synopsis of your business plan and funding opportunity to the investor. They will slip it in a coat pocket or purse and likely read it on the way home.
Almost all Web sites for angel groups and venture capitalists – as well as venture forum application sites – have a two-page format for introducing your business plan to potential funders. It almost always has bold headings to be filled in – such as management team, marketing plan, business model, and competition. Be ready to provide these two pages of data – and no more – to give to the angels you meet. Always include your contact information so the investor can follow up with you if they want to know more.
The Executive Summary
This four- to six-page, tightly argued piece might be the most valuable presentation of your venture. You can provide several paragraphs on each key area of your business operations, instead of the two to three sentences in the one and two pager. Edit it well – and ensure there are no typos.
A Brief and Pithy PowerPoint Presentation
Over the last decade this bullet-point driven, ten- to fifteen-slide format has become de rigueur for entrepreneurs if they want to attract equity capital. Guy Kawasaki, author and entrepreneur behind Garage Technology Ventures, uses his so-called 10/20/30 rule for PowerPoint® presentations (contained in this eVenturing Collection). His rule calls for no more than ten slides of data, no more than twenty minutes to present these slides, and thirty-point font or larger to avoid eyestrain and overwhelming presentations.
A Full Business Plan with Tabbed Appendices and Due Diligence Binder
If the elevator pitch or two-pager draws further attention from a prospective investor, always be ready to promptly provide the complete business plan that displays your grasp of an industry and your role in it. Don’t make it too long, but have it fully edited and spell checked – no mistakes are allowed at this level of detail. Oftentimes, twenty to thirty pages will do to lay out your strategy, background, and funding needs.
In order to answer the inevitable questions that arise about assumptions, develop a set of alpha-tabbed appendices that can be clearly referenced within the text of your plan. The appendices might include out-year projections, full resumes, and other details that clog up your narrative plan.
Never overwhelm the new investor with details and attachments and ad nausea projections within the main plan. Place patent information, multi-year projections and prior financials, reference information, and other written documents and contracts in a separate binder – known as the due diligence book. This is where you lay it all out. And do not give this book to too many prospective investors. Provide it only those who are sincerely far along in their interest with your company and who have given you a tentative term sheet.
Now that you have this arsenal of materials for your prospective mentor capitalist, learn how to use them in real time. Nothing can be worse than inundating an investor with the wrong documents at the wrong time – either in person or through overnight mail.
First impressions are key – show how businesses like yours are poised for success by utilizing the right size and stage presentation at the right time. The way you handle the fundraising process is a key indicator to investors of how you approach customers, strategic partners, and new hires.
Being fully prepared and rehearsed for any and all fundraising opportunities by following these pointers will enhance your business success odds and increase your confidence in pitching your company to equity investors.
© 2005 Ewing Marion Kauffman Foundation. All rights reserved.