One of the toughest interviews that you will ever have is the one that places you face to face with a member of the venture funding community. One key mistake entrepreneurs make when entering into this world is not preparing fully for the process. If you look at the statistics, the chances of getting funded can be equally daunting. Angel groups may see in one year any where from 400 to 800 executive summaries. There may be only 50 per year that will have the ability to pitch to the group, with 20 who go through due diligence and get funded. On average less than 10% of the executive summaries reviewed in a given year may receive some level of funding.
How do you improve your chances? Let’s start with the stage that you are in.
Seed: entrepreneurs have a concept, and may need money to manufacture, initiate measures to determine proof of concept, or create a prototype of their product, etc.
Early: now you are ready to initiate commercial-scale manufacturing and sales. There may not be any revenue or a nominal amount of revenue at this point.
Expansion: these rounds of funding provide the entrepreneur with working capital to, for lack of a better word, expand. Grow a management team, expand into new markets, essentially, role out the next phase of the business plan to capitalize on new markets and opportunities.
Your audience will have a general interest in one of these phases of development so be sure you understand the needs of the group that you will want to pitch to.
Next, evaluate whether or not your executive summary investor ready. There are many ways to create an executive summary, however, remember that the more popular investors and clubs may see per month a minimum of 25 or more executive summaries. Keeping your summary to a page to a page in a half will help to gain more exposure to your company. Determine if you answered many of the preliminary questions. Just to pose a few: Do you have a valuation or a realistic one? Have you clearly defined the business model? What is the experience of the management team? Is there truly a market need and do you completely understand the market you are entering? Why is your product or service unique?
For the presentation, you will need to keep it to 10 to fifteen minutes. The maximum number of slides should be no more than 8 to 12. It should flow in a logical format, not forgetting to address how you will use the funds and ROI for the investors. Keep the content simple and bullet point each item. Be sure that your presentation does not distract your audience from evaluating your speaking ability and to determine if you have the necessary skills to deliver as president or CEO of your organization. Upon answering questions, if you do not have an answer, be honest. Bring other members of your team who may have a better handle on handing those questions that you may have less familiarity with. Be focused, good eye contact, and most importantly, do not read.
Now that you have successfully completed these steps, the investors may want to begin the process of Due Diligence. I have seen more entrepreneurs fail at this step due to lack of preparedness. If everything falls into place expect this process to move in one to three months including a Soft Circle Agreement and Term Sheet. The key element, be prepared to provide investors everything they ask for when asked. Groups you are presenting to will have a Due Diligence check list to help you prepare. Use all available resources to obtain one ahead of meeting with investors.
I mentioned earlier that this can be a challenging path to travel. It does, however, not come without many rewards. You will learn more about your market, business, and self than you ever imagined. There are opportunities if to find, meet, and develop more strategic partnerships with investors and possible service providers who may be present. You may receive valuable insights and introductions that will only help you to become more successful in business.