Zoom in, zoom out during the investor pitch

By: Peter Adams Wednesday February 4, 2015 0 comments Tags: Rockies Venture Club

 



By Peter Adams

Executive Director

Rockies Venture Club

This week I saw two companies go down in flames when they turned off investors by taking the wrong perspective in answering questions.

Startup CEOs need to be able to zoom out to 30,000 feet to explain their companies to investors in a five-minute pitch. But they also need to be able to zoom in during Q&A to hit just the right level of detail when answering investor questions.

Failure #1:  "I'm Smarter Than You - Just Trust Me"

The first failure came from a CEO who had a highly sophisticated software product with advanced algorithms that made it unique in its space. Investors were intrigued and wanted to know more. Instead of answering their questions, the CEO took a position of authority and lapsed into buzzwords and acronyms, without really explaining anything. The CEO was incapable of communicating on any level other than the most abstract, and therefore was not only unable to engage investors in his project, but he ended up turning off everyone in the room with what appeared to be an arrogant attitude.

Failure #2: "There's no way I could explain that in five minutes."

The second failure came from an otherwise smart founder who presented a high level view of his software during the pitch. The software seemed cool, but when he was asked about his go-to-market strategy, his answers were also high level and vague. Answers like "It's going to go viral"  or "This will spread by word-of-mouth" left investors believing there was no substance behind the claims. The CEO said he had lots of plans, but couldn't describe them in such a short time. The result was that investors were unimpressed and felt that the CEO had major portions of his strategy unfinished and his company was headed for the walking-dead category.

Both of these CEOs made the mistake of believing that they could stay at the 30,000-foot level in their pitch and Q&A. Neither of them made the equally ineffective decision to dive deep into the weeds with details of how things worked. CEOs giving the pitch need to be able to zoom in and out to the appropriate levels with ease during the pitch and Q&A session following the pitch. Failure to do so will result in a room full of people who won't look at their deal again for a year or more, if ever again.

Effective communication requires that the communicator can convey complex concepts to intelligent people who may not have deep sector expertise, in a short period of time. Here are a few tips for CEOs who are presenting to investors:

  1. Learn to speak in bullets.
    When you need to communicate complicated concepts, you can often walk your audience through the steps required with three to five bullet-style statements. If you can speak clearly and walk someone through the topic in a logical fashion, most people will be able to follow you. When you use this method you're zooming down deeper than 30,000 feet to maybe 10,000 feet, so that there's some detail -- but  not too much.

  2. Think of a metaphor.
    Sometimes it feels like your topic is too complex to explain to lay people, so your best strategy is to come up with a metaphor. Explain your complex topic with a a familiar situation that will resonate with listeners and help them to understand why your technology is unique, powerful and useful to the markets it serves. Be prepared to explain further if asked, but the metaphor takes you to maybe 20,000 feet and some investors may want to go deeper.

  3. Teach your audience.
    Most investors are naturally curious and love learning about new things. A great Q&A response may take the time to teach investors about how something works, even if it's a relatively high level. If investors have an idea of what existing technologies look like and how yours is different, that's usually enough for the Q&A session

  4. Defer to the Deep Dive.
    Startup CEOs need to remember that investors don't invest at pitch events - they make decisions to set up a follow-up meeting or deep-dive where they can take a couple of hours to really understand the details of the technology. CEOs should provide enough of an answer to generally explain the concept with the promise to deliver more detail at the next meeting. If the investors are interested, then they will take the time to learn more at a later event. If the CEO shuts them down, then it's game-over and there won't be a follow-on event and they need to start over with another investor group.


 

Pitch events can be a great thing for companies seeking funding because you can get in front of a large number of active angel investors. The downside is that companies who have not worked out their communications strategies can turn off an entire room full of investors all at once. Companies who do well when speaking to groups have really done their homework in advance and have all the backup information, proformas, strategic plans, backup slides and analysis that help them to answer big questions with succinct answers that keep the process moving ahead.
Peter Adams

About the Author: Peter Adams

Peter Adams is co-author of Venture Capital for Dummies (John Wiley & Sons. 2013) and serves as the Executive Director of the Rockies Venture Club, America’s oldest angel investing group.  RVC is a non-profit organization furthering economic development in Colorado whose companies raised over $23 million in the past year.  RVC’s connects investors and entrepreneurs through conferences (Angel Capital Summit and Colorado Capital Conference), networking events, angel investing educational offerings and facilitation of Colorado’s largest angel investor groups.  Peter is the founder of the Biz Girls CEO Development Program for high school age girls and is an Adjunct Professor in the Colorado State University EMBA program. Peter holds a BA Degree from Colorado College, PhD/ABD from University of Colorado and an MBA from Regis University.