Life's a Pitch

The Different Objectives of an Executive Summary and Investor Deck

A common area of confusion on the part of entrepreneurs seeking to raise capital is the different objectives of an Executive Summary and an Investor Deck (usually a PowerPoint).

Typically an Executive Summary will be sent to an investor before any meeting. The  objective is to engage the investor and often to secure the first meeting. The fact that you will not be present to speak to, elaborate up and clarify the Executive Summary means you must make sure that it is a document that provides an investor with sufficient information to answer the key questions and issues they will focus on.

 It is for this reason that Executive Summary documents are primarily text based and will contain paragraphs of information rather than short sentences. You can read more about the proper content and format of an Executive Summary in my post ‘The Complete Guide to Creating an Investor Focussed Executive Summary’.

In contrast, an Investor Deck is usually presented by an entrepreneur at a first meeting with an investor. The objective at this point is to get the investor to take things to the next stage. As you are present, the Deck should be supporting your investor presentation, not replacing you. You will be outlining the elements of your investor proposition while referring to your Deck to illustrate, demonstrate or reinforce your key points.

The Deck will usually contain a number of graphics, diagrams and charts and should use a bullet point format for information. See my recent post ‘The Investor Pitch Deck and Why Less is More’ for advice on format.

I should add that there are some investors who will request a Deck before meeting you, rather than an Executive Summary. If this occurs, you will need to tweek your Deck to ensure that the information presented is clear enough for the investor to understand without assistance from you.

Three Ways to Kill Your Investor Pitch

It sometimes happens that there is a point during an investor pitch when something is said by the entrepreneur which instantly kills their chances of securing funding. It is the point at which there is no return and nothing can be said to repair the damage. You know it’s happened because the investor(s) stops listening, changes their tone of voice and hurries you on.

I took the opportunity the other night at a dinner with several angel investors to ask them what were the three things that would destroy the chances of an otherwise decent investor presentation. I asked the Angels to focus on substance rather than style i.e. the investment proposition fundamentals rather than pitch technique.  The top three were as follows:

Lack of clarity on the numbers

This evil covers a range of sins including:

1.   Not being clear as to precisely how much investment is required.

2.   Not being clear as to what milestones will be achieved by different stages of funding.

3.   Not being on top of revenue projections. Even though the Angels agreed that projections rarely bear any resemblance to reality, it is essential that the CEO / Founder is on top of the numbers and should not hide behind the CFO.

Not Having a Clear Go to Market Strategy

For reasons that I’m convinced are rooted in human nature, entrepreneurs will often  spend enormous amounts of time, energy and creativity on the development of their product or service but not give sufficient attention to the development of a well thought out route to market.

Without sales, the best designed product in the world, is of no interest to an investor. An entrepreneur’s pitch deck will often identify potential customers but not deal with key issues such as:

1.   What channels of distribution will be used and how will they be established.

2.   Who within the company has the experience and expertise to execute the sales strategy.

3.   How will potential customers awareness of the product / service be created.

Linked to the issue of a lack of go to market strategy, is a confusing of the market size with the addressable market. The addressable market is limited to the company’s industry focus in contrast to high-level market size numbers relating to that sector of the economy.

Maintaining There is No Competition

Competition is a good thing as it implies there is money to be made and provides an opportunity to learn from the competition’s mistakes and triumphs. It is very rare to find a situation where there is no competition, whether they be startups or established companies.

At a minimum, an entrepreneur pitching Angel Investors or Venture Capitalists for funding, needs to be able to:

1.   Identify the competition

2.   Compare the products / services.

3.   Explain what their product/ service has that the competition doesn’t.

It seemed only fair that I buy dinner in return for this free market research…

Why 'How' is Critical to Your Investor Pitch

An entrepreneur’s investor presentation documents and pitch will typically focus on the product or service, numbers, competition, sales strategy and team. What is often missing, however, is ‘how’ key stages and milestones will achieved. In other words ‘how’ the entrepreneur and his team will execute.

An entrepreneur can have an exciting idea with significant revenue potential, but if they fail to reassure the investor that they have the ability to execute, they will not get funded. I spent a couple of years working alongside a very experienced Chief Operating Officer who frequently managed projects worth over $100 million. Whenever a member of the team would state what they intended to do or what needed to be done, she would say ‘by who, by when’ and ‘how’. She even planned her vacations with a Gantt Chart!

When I first encountered Angel Investors and Venture Capitalists seven years years ago, I noticed that they asked the very same questions time and time again of entrepreneurs pitching them. The most common terms used in every meeting seemed to be ‘how’. How will you bring on board your first strategic partner? How will acquire customers? How will you find the CTO you urgently need?  

Reassuring an investor that you have the ability to execute can be achieved in two ways. Firstly, by proving that you have previously launched other startups that are successful. A good track record counts for a lot. Secondly, by having thought through how you will execute all key stages / tasks and being able clearly explain this to investors.

It is not necessary for you to spell out the detail of ‘how’ in your Executive Summary or Deck, as that is not the purpose of these documents. You must, however, deal with ‘how’ at a high level in your documents and be prepared to give detailed answers to the ‘how’ questions that investors will inevitably fire at you.

Why Great Substance + Great Form = A Winning Investor Pitch

It is often said that ‘it’s not what you say but how you say it that matters’. When it comes to investor presentation documents, substance will always triumph over style. If, however, your documents are unprofessional or unclear you run a very real risk of not getting funded.

An investor may pass on the opportunity of funding you if your executive summary, deck or business plan aren’t up to scratch because:

·     You have missed out key information;

·     It is not clear to them how your business will generate revenue;

·     They believe that your inability to prepare professional looking documentation will mean you will do the same for a prospective customer or client; or

·     You simply couldn’t bothered to create investor focused documents.

So while an investor will always primarily focus on numbers, team, execution, sales strategy etc, remember that the key to a successful pitch is great substance and great form.

Why Your Investor Presentation Should Focus on the Past and Future

There used to be a time, not so long ago, when an entrepreneur could secure funding on the basis of an investor presentation that focused on what would be achieved, rather than what had been achieved. Times have changed and investors are far more cautious and skeptical. This means investor pitches must be refocused to include achievements as well as statements of intent and projections.

When creating investor presentation documents e.g. Executive Summary or Deck, think about what you have already achieved and include it. Plainly in the case of a startup seeking seed funding, there may be little that has occurred.

Nevertheless a presentation that outlines some achievements will have greater impact. Obviously sales and customers are persuasive.  It may, however, that the achievements are the recruitment of a strong management team or the creation of a strong brand identity which should be included.

When you start to talk in terms of what you have achieved, it lends credibility to your assertions as to what you will do. You begin to cast yourself as someone who ‘does’ rather than someone who ‘says’, ‘hopes’ or ‘intends’. The ‘doers’ and ‘achievers’ are plainly far more investable in today’s brave new world, so make sure you cast yourself as one.

MAKE IT EASY FOR AN ANGEL INVESTOR TO FUND YOU

I was talking with an experienced Angel Investor recently who tends to mostly invest in tech startups. He had invested in a Silicon Valley startup (B), 2 years ago and was beaming at the fact that it was clear to him that the startup was finally on the verge of generating some ‘serious revenues’.

What interested me was his comment that he had almost invested in another startup (A), with a similar but stronger model, 6 months prior to coming across startup B. I asked him why he hadn’t and he said ‘they were making me work too hard in order to invest in them’.

The Angel elaborated. He said that like most investors he received several pitches and contacts a day from entrepreneurs with the next big thing.   He still runs his own company and has a family, so his time was precious. He went onto to say that he really liked Startup A’s CEO and the people he bought to the pitch. He described them as being ‘committed’, ‘focused’ and ‘resourceful’. The sort of people he could work with.

So far so good. Great idea, great team. ‘The problem was’, the Angel continued, ‘it was more a meeting where I asked them lots of basic questions, rather than them present me with the answers to questions I would have asked’.

This is not uncommon. Sometimes, when you have lived and breathed your business and know the detail inside out, you forget what it is like for someone who is hearing about it for the first time.  This is one reason why it’s so valuable for you to have a dry run of your pitch with an appropriate trusted third party.

Lawyers know that they must anticipated as many of the questions and issues a  judge and jury is like to raise or be troubled by and deal with them at the outset. And salespeople are trained to ‘inoculate’ against a customer’s potential objections.

It doesn’t matter whether you go to your investor pitch knowing all the answers. If the investor doesn’t ask you the question or you get sidetracked, you have lost the opportunity to put across crucial information. It’s critical that you answer the fundamental questions investors are concerned with, in your investor presentation materials and pitch, before they ask them. When you do that, you not only convey competence and professionalism. You also demonstrate and understanding of what is important to an investor and your ability to sell.

Of course any good investor will still drill down on the detail and ask you a range of penetrating questions. That’s to be expected. But you must make sure that you have covered the first layer of detail that any business investor will be interested in.

I asked the Angel whether he knew what happened to Startup A. Never heard of them again he said. The  equation is clear – the easier you make it for an Angel Investor or Venture Capitalist to fully understand all aspects of your investment proposition, the more likely they are to fund you.