Raise the Signal, Lower the Noise

This post is directed at initial investor presentations.

In a first investor presentation, when you have a limited amount of time, you don’t have to communicate everything there is to know about your business.  In fact, after a point, the more information you spew out, the more likely the key information, the “signal” that will get investors interested, will tend to get drowned out by the “noise.”

For instance, if you have a seven minute presentation and you are conveying that your Business Development manager has 15 years sales experience and is a great deal maker, or listing the names of the three resellers you’ve signed up, or explaining with four slides just how your technology works, you’re doing something wrong.  There are more important things that are not getting said.

So what should you cover?  Here are the basic areas that should usually be in a first investor presentation:

• Description of the problem or the need
• Your solution and how it solves the problem – only enough detail to make the case that it does indeed solve the problem well and is credible
• Benefits of the solution to key constituencies (customers, distributors, society in general – any affected party)
• Who the customer is
• Who the competitors are and what are your competitive advantages
• How large can this business become and why, which may require an industry analysis
• How you will sell to the customer
• Intellectual Property (but only if this is a genuine entry barrier or advantage)
• Sales pipeline (if you have one)
• Financial projections (and history if an established business), but not too much detail
• How much money is being raised and the terms, and prior fundraising amounts
• How will the money be used
• Any significant de-risking milestones
• Team

Depending on your business, there may be other areas that are essential.  For instance, if you are an internet business, you probably will spend a lot of time on how you market to and attract customers, what your cost to acquire a customer is, customer retention rate, and other metrics.  If you’re developing a drug and you expect to be acquired before the drug is commercialized, then your exit strategy is essential.  There are too many specifics to list here but, if in doubt, don’t include it in a first presentation (especially if there is time for Q&A after your formal presentation) – but keep it as a backup slide.

In a short presentation, the above is a lot to cover!  You need to be succinct.  The biggest error is providing too much detail.  For instance, presenters often spend too much time on the product’s features and benefits.  Your job is not just selling the product here, you’re also selling the business, and the product is only one component.  In the financial projection portion, you need to provide enough information so that investors understand the big picture – but not more than that.  (Don’t worry, if you get follow-on meetings there will be a great demand for more detailed financial information.) The goal of your “team” portion is to convey that a competent team is in place, nothing more.  You don’t need to read the bios aloud!  My rule is to have one team slide – you don’t need more.

Other examples of too much detail: You may include some testimonials or good publicity, but don’t include a laundry list of everyone who’s ever mentioned your company publicly.  Talking about individual metrics such as your return rate is important if it’s key to your business or underscores your advantages (“our return rate is 1% while the industry norm is 7%”) but otherwise you’re just taking up limited brain space of your audience.

Remember that the audience has limited time, limited interest, and limited ability to retain what you’re saying.  You have to make a compelling case that your business is worth learning more about.  That’s usually best done by focusing on the most important points and limiting the noise.  In fact, it’s often a good idea to repeat the most important points – at the start of the presentation, during the presentations and at the conclusion – at the expense of too much detail.

So I will take my own advice – in a first investor presentation, when you have a limited amount of time, you don’t have to communicate everything there is to know about your business.  Leave the kitchen sink at home.