Pitching for

Capital

Kristav ChildressNUS Enterprise Series

15 December 2010

Pitching Vs. Presenting

“We PITCH to PERSUADE”

Principle 1 of THE PITCH

Know Your

Customer (the investor)

Two (Conflicting) Investor Fears

1. Investors are afraid to invest in something that will LOSE their investment money

2. Savvy investors are also afraid that they will MISS an outstanding investment - a Google, Microsoft, HotMail or Yahoo for example - and PASS UP HUGE RETURNS

Preparing to Pitch to Investors

Remember:

Ultimately, its mostly about the money (occasional exceptions – like “green”)

Investors want to understand and trust YOU AND YOUR IDEA before give you their (clients’) money

The investor may not understand your technology, certainly not in detail

You often have only 1-2 minutes to “hook” them

Principle 2 of THE PITCH

Have the Confidence to

Keep

It

SIMPLE!

Simple Is Often Not Easy

“I didn't have time to write a short letter . . . so I wrote a long one instead. “

-- Mark TwainAmerican Author

Message – creating a clear, simple description of your business/product/service that sells can take a lot of work.

K.I.S.S . . . Keep It . . .

COMPLEX (ORIGINAL)

“XipLink is the technology leader in wireless optimization using IETF and Space Communications Protocol Specifications (“SCPC”) standards. Wireless optimization includes protocol acceleration, data compression and HTTP optimization.”

SIMPLE PAIN (MY VERSION)

“ We all spend time waiting for programs to run or files to download over wireless connections. XipLink is the best way to move critical data – e-mails, files and web pages – 2 to 3 times faster over a wireless connection. It cuts waiting time so that users can work faster and finish sooner.”

Guy Kawasaki’s “10/20/30 Rule”

For presentations to potential investors:

“. . . a PowerPoint presentation [to investors] should have ten slides, last no more than twenty minutes, and contain no font smaller than thirty points.”

The “Elevator Pitch”

Use it in your initial discussions with the investor (intro) and adapt to the presentation

Ideally two levels: An ultra short pitch, one or two

sentences that capture the pain and the unique profitable solution

A more detailed (<2 minute) version

The “Ultra Short” Pitch Sample

“Today, the average worker wastes 30 minutes a day just filing and searching for e-mails . . . costing businesses an estimated $60billion per year. Our patented “neural net” e-mail organizer reduces that wasted time by 80% and pays for itself in as little as one week.”

NOTE: Almost NO JARGON, concrete, value is easily understood

Elevator Pitch (<2Min)

Possible format: “Hi, I am ****, [title] of [company]. I (we) have personally seen that [BRIEF description of pain/problem/need] which causes many people (businesses) a lot of [trouble/costs/etc.] They are willing to spend money to solve [problem]. We can solve it by [description of solution] which is unique and addresses the need better than [summary of existing solutions]. Other companies cannot easily duplicate this solution because of [patent, trade secret, etc.] This is a great opportunity, with an estimated market of $X each year. May I tell you more about the opportunity and our team’s unique ability to quickly build a very large and profitable company from it?”

Sample Elevator PitchExample: “Hi, I ‘m Kris Childress, CEO of eMail Nirvana. I have personally seen that [many companies waste thousands of man-hours filing and searching for important e-mails] which costs businesses a lot of [lost time and money, plus sometimes not responding in a timely fashion to important e-mails]. They are willing to spend money to solve [this problem of misplaced e-mails]. We can solve it by [providing an inexpensive, automated, intuitive e-mail box] which is unique and addresses the need better than [existing spam filters and e-mail folders]. Other companies cannot easily duplicate this solution because of [our unique software and trade secret technology].This is a great opportunity, with an estimated market of $350M each year. May I tell you more about the opportunity and our team’s unique ability to quickly build a very large and profitable company from it?”

Principle #3: “Magic Words”

1. Practice2. Practice3. PracticeYou should practice your pitch until it is comfortable and natural.

What Should Be in Your Presentation?Suggested Content

Guy Kawasaki’s 10 Points/Slides

1. Problem (“Pain”)2. Your solution3. Business model4. Underlying

magic/technology

5. Marketing and sales

6. Competition7. Team8. Projections and

milestones9. Status and

timeline10.Summary and

call to action

•Company Logo

•Business Overview

•Team

•Market

•Product

•Business Model

•Strategic Relationships

•Competition

•Barriers to Entry

•Financial Overview

•Use of Proceeds

•Capital ValuationAdapted From David S. Rose's TED Presentation

Rose’s Elements of Investment Pitch

The Elements of the Pitch

Team

KRIS CHILDRESS, Director of Marketing & Strategy. Has held series of increasingly complex and responsible marketing and sales roles with four young technology companies (3 global ) over a 25 year careerr. Currently a mentor in go-to-market strategies for young technology firms in Singapore and the US. CEO of small clean-tech firm in Singapore.

Note: Emphasize experience and success, esp. in startup companies. Meaningful experience is valuable. But don’t “puff it up”.

Market

Who and How big is the market? What is your realistic target market? How fast can you exploit this target

market?Example: Total market is US$1B for computer UPSs

Realistic market segment is companies that need UPSs in remote locations: $200M

We can have 10% of this market ($20M) in 3 years

Product

What is your product or service? Why does anyone care? What are people/companies using

now in the absence of your product?

Business Model

Very simply, how do you plan to make money? Alternatives can include:• Sales• Subscription• SaaS• Gain-Sharing• Rentals• Royalties

• OEM• Ad Revenues• License Fees• Leases• Others • Combinations

What is your “unit” of revenue: units, hours, cpm?

Strategic Relationships

Which companies, agencies, etc., want to partner with you, in some way, that will grow your business? (Proof, like a signed MOU, is important). Examples: Retailer has committed to sell your product Manufacturer will build your product into

theirs A government agency has promised to use

your product exclusively

Competition

If you say you “have NO competition” you are going to lose savvy investors. Either: There is no market for the product/service You are being naïve and haven’t looked at the

market Keep in mind that competition is not just

similar technologies, but also other products that meet the need. An example is different kinds of music players (cd, mp3, etc.)

Barriers to Entry

What are the barriers to entry for others? Are you: First to Market? (How Much Lead Time?) Strong Brand? (Nikes Not “Knock Offs”) Trade-Secret – Know How? Patents? Copyrights? Standards /“natural” monopoly (like Microsoft)? Strong network, partners and/or

complementary technologies? – the Phokki model.

Financial Overview

Build as complete a picture of the costs of doing business and your best estimates of sales, profits, returns, etc. (There are spreadsheet templates that you can customize.)

Have several knowledgeable people review these estimates to confirm that they are reasonable

There may be “optimistic”, “realistic”, “pessimistic” versions – but probably not in pitch

For an initial pitch, a simple projection (3-5 years) of revenues versus costs is often sufficient. KEEP . . . IT . . . SIMPLE!

Simple Example Projected Results

Year 1 Year 2 Year 3 Year 4 Year 5

Expenses 1 1.5 2 2.5 3

Revenues 0.5 1 3 5 9

Profits -0.5 -0.5 1 2.5 6

-1

1

3

5

7

9

Projected Revenues Vs. Expenses

Million

s $

Use of Proceeds

What will you spend capital on?: Be as simple and clear as you can

about where you will spend most of the money▪ Salaries, web pages, market research, consulting, legal, travel, etc.

Don’t waste money but don’t “under budget”

Consider funding in tranches with specific milestones

Capital Valuation

What is your company worth and why? Not an “exact science”: the

valuation of a company is almost always a negotiation

Some pitches do not include this, may be part of follow-up

Some Final Thoughts

The VC PITCH Checklist

Your Pitch slides with presenter notes A “leave behind” version of your

pitch with more details A business plan A 1-2 page summary of the pitched

idea with very brief details Product and company literature, a

web page, name cards, etc.

Some Final Points on the PitchEND

Be able to describe

the business in

15-20 seconds if necessary

The Pitch – Like BP – Should be

your best thinking to

date

Focus, Focus, Focus and Practice, Practice, Practice

Make it “natural” – passionate

but not “scripted”

Anticipate questions

and answer them as much as

practical in the

presentation

A Few Final Pointers

The language on the slides (and from the presenter) should be PURFECT!

Best pitches are usually ONE person with others there to help with questions, demo product, etc.

SAY it and SHOW it: demonstrations can be great, but the product must work flawlessly.Have a backup if you can’t get internet

Even mockups or models can make it “real”

Addendum Slides

Some Useful Blogs

All about being a startup http://blog.startupprofessionals.com/

Blog of an investor http://www.bwm748.com/

Blog on Presentations http://www.presentationzen.com/

Blog Resource for Entrepreneur http://venturehype.com/NOTE: I follow all of these and others on

Twitter