The Greek writers said there were only seven original stories. As far as I can tell, all seven of them were about wide-eyed youth needing funding to start a business….The Quest, Voyage and Return, Overcoming the Monster, Rags to Riches, Comedy, Tragedy, and the Rebirth! (Booker, The Seven Basic Plots: Why We Tell Stories)
Essentially raising capital is as simple as a good story well told. It sounds overly simplistic. And, it sounds flippant. But, it is the truth. You must have the “minimum ante to play,” (great product/service, great team, great plan) but from that point forward, it is all about you and your story. Remember, according to Simon Sinek, people buy WHY you do something, not what you do. Your first objective is to appeal to an investor at an emotional level to engage them in a conversation. Your second objective is to close the deal….sales 101.
Everyone asks how to design a pitch deck for funding. And, my answer has changed over the years. As a fuzzy-haired scientist turned young entrepreneur, I focused on making sure there was not a single question left unanswered in the presentation. I did this because I wanted to look like the smartest guy in the room to inspire investment in my cause (young buck, propeller-head inventor mentality). After getting taken to the woodshed by some trusted mentors/advisors/investors, I realized that was the dead-wrong approach. So, I shifted to a factual format that presented a balanced look at the business, team, market, and financials. I would write eloquent essays with detailed presentations on the company, products, and grand future that were worthy of framing. It started with an explanation of the product and ended with a call to action to invest. But, it was not a conversation, it was a soliloquy. And, it bored the investors to the point of tears. I could see the their eyes glaze over and roll back as sleep simply would not be denied, but investment would be. Back to the woodshed…… But, one of them told me something that resonated with me to this day, “this is the only joke in the world where you tell the punchline first!” And, that changed the way I began to think of the pitch. And, it brought me around to my current premise – this is a conversation and a sales job, not a lecture. Selling shares is no different than selling products and services. And, it’s all about you and your story stupid!
There are many different stylistic opinions on how to pitch, but from a foundational perspective, start with a story. Then, develop a “story board.” Then, develop your pitch. Most importantly, start with the WHY. You started this business because you had an experience and saw a problem. That got you thinking. That thinking turned into a passion. You then infected others with that passion because they believed in you and saw the vision (e.g. they related to your experience and story!). Now, it is time to do the same for a new class of partner, your investor.
Clearly, you need to understand and convey where you fit in the broader market. Clearly, you need to understand and articulate your unique and sustainable competitive advantage. Clearly, you need cut to the chase and present your WOW factor. Once you understand these things, the process is very straightforward. I start with 10 bullet points that state my story and make my case in the most honest and appealing way. Things you need to cover:
- Why you started this business?
- What you are doing?
- Who are you doing it to (describe the market)?
- Who is your competition and why are you better?
- Why would someone buy from you at the price you ask?
- How do you make money (your business model)?
- What do the next five years look like from a financial perspective?
- What does the investor get out of it?
- Who is leading the company?
- Why should the investor trust you?
I recently met a company that is launching a chronic care medical technology platform. They sent me a 28 page pitch deck with 12 point font that painstakingly described the full business plan. The entrepreneur spent his whole time describing the widget and how to build one, not why we needed and wanted the widget. So, I sent him back what I thought his story really was:
- We want to make chronically ill folks more healthy and reduce healthcare spending where it is hemorrhaging.
- Medicare codes have adapted to aggressively pay for healthcare coordination in recognition of the severity of the broken system.
- Very profitable business in serving this population and a tangible means of reducing healthcare costs in line with the new mandates for value-based medicine.
- Built the IT platform and company infrastructure to be a first mover in this space; room and plan to expand into many other health IT and medical applications (scalable and not a one-trick pony).
- Have contracts, including one of the largest health care corporations in the country, and access to a vast number of patients representing $X.
- The market segment is $Y now and $Z in 5 years; we have not even scratched the surface yet.
- We have $A in revenue now and $B by the end of the year; expect $C in top line revenue in five years.
- Looking for $D.E M to scale the business with the priority of optimizing margins.
- Licensing opportunities exist to take advantage of the broader market opportunity – already have one JV that is generating cash!
- Very opportunistic market place, and we expect to be gobbled up quickly by a large healthcare corporation; already had three acquisition overtures – lots of M&A activity in the space!
- Call to action! We have the team, the tech, and the clients. The timing is perfect. We just need your support to make it happen.
Only after you have your story down, start to put your pitch deck together. That presentation should be started and finished in 15 minutes, leaving plenty of time for Q&A. Craft your narrative around your story board. Investors will understand the message, feel the flow of the information is intuitive and internally cohesive, enjoy the conversation (engage the audience in a discourse, not a lecture!), and appreciate your professionalism. Happy hunting!
Copyright Eric L. Dobson, 2016