Tis’ the holiday season full of parties and busy shopping.  As always the old-time classics are back on TV including Rankin/Bass “The Island of the Misfit Toys”. This is the land of strange toys that did not have a child to love them such as a water gun that squirts jelly or a “Charlie”-In-The-Box. Basically these misfit toys were unable to find a home since they did not match the needs of a child.

Amazingly fundraising for entrepreneurs has much of this same theme. The most critical part of fundraising is matching stage of the company with expectations of the capital. In my last blog, I talked about the importance of non-dilutive capital through the SBIR process. This funding is a critical lifeline for very early stage companies and provides validation for the business through the formal review process. The negative part of the federal funding can be the limited capital available (~100,000 for Phase I) and the long cycle time for funding. The amount and timing needs to be considered to match the company’s needs.

Angel/Venture Capital is generally the next step in a company’s fundraising plan. Before diving into presentations and phone calls, first consider their needs so that your company minimizes wasting time and energy in this process:

The most important factors to match are:
• Stage of technology development (prototype/pre-clinical, beta/clinical, fully functional, etc.)
• Revenue (pre-revenue, $5M, etc)
• Technology focus (internet, social media, life-science, etc)
• Market Opportunity/Potential Exit ($100M, $500M, >$1B, etc)
• Management (Experienced team required or willing to build out team)
• Other factors (Geography, fundraising cycle of the firm, prior successful/unsuccessful investments in the same space by the firm, etc)

When you take into consideration these points your company should be able to match the company stage with capital and successfully avoid the “Island of Misfit Capital”.

- Erika Smith

“What’s your value proposition?”

 It’s a simple question, really.  But I’m consistently amazed at how many entrepreneurs stumble over the answer.  They will usually launch into a technology- laced riff about features, functionality, code stability and clueless competitors. 

 Creating (and being able to articulate) a compelling value proposition is one of the most crucial foundations of any go-to-market plan.  If you struggle to find your value prop, so will your potential customers. 

Before we jump into the weeds of value prop discovery, let’s define value. Here’s a really simple math equation that even the arithmetically challenged can follow:

 Value = Benefits – Costs

If the costs exceed the benefits than the value is less than zero!  Selling a zero-value product generally doesn’t meet with much success.  A product’s value can be derived from driving increased revenue, delivering operational efficiencies, fostering customer retention and more.  The key is to make sure the benefits delivered are greater than the cost of ownership.

What is a Value Proposition

Your value proposition should clearly explain why a prospect should buy your product.  What benefit will they receive? Why is it worth the price? What problem do you solve for them that no one else can? It must be concise, easy to understand, and short– no more than one or two sentences.  Put another way, a great value prop succinctly states the value your product brings to the potential customer.

Discovering Your Company’s Value Proposition

Finding your value proposition isn’t difficult, it just takes honest introspection and a deep understanding of the domain you sell into. 

Look deep into the soul of your product and ask yourself the following:

 Does our product…

 … increase customer revenue?

 …decrease customer costs?

 …increase their profits?

 …boost operational productivity?

 …improve the satisfaction, retention, and growth of their customers?

 …improve their product quality?

A good value proposition must deliver on at least one of these.  The best value props offer three or more key benefits. 

Concurrent with honestly assessing your core benefits you must gain a deep understanding of your prospects, your competitors and your industry.

Know your potential customers

• What are their biggest problems and concerns?
• Why, how and when do they buy products like yours?
• What are their unmet needs?
• What do they think of existing solutions?

Know your competitors

• What are their biggest strengths?
• What are their weaknesses?
• What is THEIR value proposition?
• How does your solution leverage their weakness?

Know your marketplace

• What are the critical technology trends?
• What are the operational trends?
• Where is your position in the value chain?
• Who are potential partners, emerging competitors?

Once the navel contemplating is finished and the data has been gathered go back to the beginning and ask yourself:  What value you bring to the potential customer?  Write it down in one or two sentences, involve your executive team, kick it around, workshop it until it articulates your benefits clearly and concisely.

Here’s an example of the value proposition from my previous company which produced software for online newspapers.

“We help newspapers bring their print content online to generate additional ad revenue from existing content.”

It’s concise and promises three key benefits: increased revenue, increased profits and improved operational productivity.

Finding your real value proposition is the first step in creating a comprehensive go-to-market plan.  It’s a living statement of worth that should evolve as your company and market needs change. And remember, if it can’t fit on the back of a napkin, you probably haven’t found it yet.

I believe that seed stage venture is the business of approximations, both on the entrepreneur and on the investor side of the equation.  Should you be fortunate enough to have a golden hour (or less) with an investor, it is absolutely imperative you make a positive lasting impression about what makes your new venture extraordinarily valuable especially considering the abundance of alternative proposals. 

So when I first become acquainted with an entrepreneur, I begin the initial familiarization with the same sorts of orientation questions any prospective investor would experience at first encounter.  On any given day at the CIT, I am part of a team that might be pitched by a clean tech, life sciences and software entrepreneur.  Each story brings with it varying levels of cost, complexity and clarity. Part of our job is to quickly arrive at a reasonably informed image about what is special about your “innovation” … and if we agree with your assessment.

But today I will skip the initial litany of customary starting point questions ordinarily facing investors and, instead, focus squarely on innovation and what the entrepreneur really brings to the table.  Note – for those purists out there in the audience, bear with me as we hold aside academic discussions about what innovation means. Perhaps one of my CIT colleagues will take this discussion in the future. ; )

Instead, I am more interested in quickly taking stock of what is inside your start-up, be that the technology / intellectual property bundle, the business model, advantaged institutional relationships and so forth.  And since we don’t yet know one another well enough to know what’s behind the curtain, I’ll key you in on front-of-mind pragmatic questions I believe would be helpful to make your abstraction much more tangible:

• What is your secret sauce or magic machine and why is it valuable?
•  How good is it really and why would the market care?
• Have you vetted it with customers both as the widget level and at the vendor level?
• Would you ascribe the superlative – “breakthrough” or incremental advancement?
• How ready is it (R&D or product) – and – what what’s it going to take to make it fieldable?
• Who owns it and what obstacles are in the way to bring this out of skunk works?
• In what form(s) is it protected – trade secret, provisional patent, awarded patent?
• Are you able to describe what prior art / IP landscape looks like?
• If there are dependencies on a research institution, what strings are attached?
• Who else is working on this that might have a bearing a future market offering?
• Is your development plan realistic both for milestones and funding required?

And I am sure I could just keep going on with a little more time and effort but these are the bigger ones.  The important point to remember is to have investigated and rehearsed your responses in an honest manner.  That will elevate your standing with the audience and increase your odds of a favorable disposition.

So my advice to you is this – we need to get to the bottom of what you got and do so quickly and we need you to lead us there.  Before meeting with the investor audience, I would strongly recommend you devote your energies to providing a clear, concise and honest assessment of where your innovation is right now and where it could realistically be if funded.  Remember – you may have only one shot with the money people so come very prepared.

I answered my phone to speak with and had email exchange with countless entrepreneurs last week and I enjoyed talking/writing to each one of them, but they were wasting my time and theirs. Sure, I provided suggestions, asked thought provoking questions, and I learned about competitors to companies I might invest in. Yes, you read that right, they were competitors for companies I might invest in.

All these companies had one critical mistake in common – they didn’t do their homework! Not a single one of them met our investment criteria of being located in Virginia or being a tech or life sciences company. As soon as the miss fit was established they wanted warm referrals to other VC firms, and the answer was no. Had they called (or emailed) and said, “Hey Jen, we don’t meet your investment criteria because we are (not located in VA, not a tech firm, not early-stage, etc) but we would like to get your suggestions on who the right VCs maybe and about our company in general, I would have been happy to provide referrals.

So why was my answer no? My answer was no because VCs live and die by their reputation with other investors. If I start sending companies that don’t do their homework or are not good companies to all the other early-stage players then everything I send their way will be viewed as such and deleted. I won’t be able to find co-investors for companies I want to invest in.

Lesson One: Do your homework before approaching VCs and make sure you meet their investment criteria.

Apart from the management of CIT GAP Funds, The Center for Innovative Technology – through a special professional services group – provides consultative services to federal, state, and private entities. Over the past several weeks, the CIT GAP Funds Investment Team has worked with this group to develop and deliver a training program for DARPA-funded companies seeking to commercialize technology developed under the SBIR Program.

If this seems like “inside baseball” to the readership, let me back off a step. DARPA is the Defense Advanced Researched Project Agency – an agency within the Department of Defense that has been around since the late 1950s for the purpose of developing next-generation technologies for use by the military. All of DARPA’s R&D is performed on an “extramural” basis – i.e, all DARPA-funded projects are performed by private contractors or teams of private contractors; non-profit organizations may also participate. DARPA Program Managers – an elite group with deep subject matter expertise generally under contract to DARPA for a brief 5-6 year rotation – manage, but do not participate directly in the research. If things go according to Hoyle, the outcomes of the research find their way into out-year DoD mission critical applications such as weapons systems.

“SBIR” stands for Small Business Innovation Research grant. The SBIR program is a large pot of R&D money – about 2% of the federal research budget — deployed through 10+ federal agencies and dedicated for federal investment in R&D projects undertaken by small (less than 500-person) business. Small businesses apply for these funds through a standard federal solicitation process. Federal agencies have implemented SBIR programs in two flavors. “Grant Agencies” like NIH and the National Science Foundation, focused on the advancement of science and technology untethered to a specific federal government application – neither of these agencies will ever “consume” the product of R&D that they fund – tend to write research requirements more broadly. Contract agencies such as DoD – who controls about half of the entire SBIR allotment – author more tightly-circumscribed requirements tied directly to immediate or anticipated technology needs of mission critical systems.

A few take-aways from our training seminar:

• I was pleasantly surprised by the level of business sophistication that this group of companies brought to the training discussions. I had expected to host an audience of lone scientists who had just one their first federal R&D award and who had given little thought to how to build a business. I was surprised by the level of business acumen in the audience.
• Most companies brought to the discussion a realistic set of expectations about the potential growth path for their business. Of their nature, most of these companies are working on technologies aimed squarely at the DoD marketplace, with little immediate cross-over potential to commercial markets.
• For SBIR-backed companies, funding their innovations to the point of commercialization continues to be a problem. Invariably, the milestone-driven, technology development-oriented nature of the phased SBIR award program leaves the company short of where they need to be – on both the technology and business side – to achieve commercialization.
• The entrepreneurs in the room – for the most part – had a good sense of their range of funding options for their businesses. Given the limited commercial potential of most of their technologies, they were invariably less focused on venture funding as a tool for business growth, and more inclined toward bootstrapping techniques such as a self-funding, out-licensing of technologies, and consulting.
• One final note — the companies that were the most impressive were the ones that had a firm sense of how they wanted to build their business exclusive of SBIR award. One of the biggest dangers for companies pursuing these sorts of R&D funds is that they may easily substitute the requirements and direction of the award requirements for a technology development roadmap and business strategy. This substitution could result in a company having a dangerously narrow customer base and – should government acquisition requirements change – no business base at all.

All in all, the training seminar was a successful experience. I walked away thinking that everyone had learned a lot – both students and instructors.

- Tom Weithman

At 6’2”, two-and-half centuries younger, and without a drop of Corsican blood, I find that I have darn little in common with Napoleon Bonaparte save an admiration of the attribute he is said to have prized most highly in his generals – “luck.” It’s good to invest in entrepreneurs that are lucky.

That said, the Magic Eight Ball I have displayed on my office credenza routinely fails me when I apply it as the sole method of decision-making, so I have been forced to develop and alternate calculus in management team due diligence.

I recently had the opportunity to update my thinking on this subject when invited to guest speak at an MBA class at the University of Notre Dame (having spent four years at ND lowering the level of academic discourse, I was delighted to ante up one more afternoon). Classroom discussion provided me with a few more ideas on what makes a good entrepreneur

What follows – in no particular order and by no means presented in a mutually exclusive fashion — is the collective wisdom of classroom discussion and a few unique thoughts of my own on the list of characteristics that make up an investable entrepreneur:

Integrity – This one seems like a given. It is. Any investor with integrity expects the same from the entrepreneur. Investors anticipate that entrepreneur will “spin,” but at some point the spin engine has to turn off. The slightest whiff of anything that would call the entrepreneur’s integrity into question – at any point in the investment process — is automatic grounds for the gong.

Intellect – Again, this one seems like a given. It is and it isn’t. For one thing, the range of intellectual attributes driving success in an entrepreneurial endeavor can be difficult to apprehend. Ivy League diplomas and the throw-weight of one’s doctoral dissertation, while perhaps (or perhaps not) correlating to IQ and indicative of other worthy attributes, are not necessarily indicative of the intellectual attributes required of entrepreneurs: strategic mindset, problem-solving orientation, and people-smarts.

Passion – The drive that keeps you working long after others would have quit; that keeps you singularly focused, energized, and instills the fervor to evangelize the vision to customers, partners, and investors. A soft and fluffy way of saying “tenacity.” Passion can be driven by both positive and negative experiences and characteristics. It almost doesn’t matter as long as it can be positively and productively channeled. (Had I been shorter, I too might have tried to hasten European unification.) Passion is best demonstrated, rather than articulated.

Emotional Intelligence – The “EQ” to the “IQ” of raw intellect, emotional intelligence is the ability to perceive, process, and manage the emotions of one self and others. In the individual, this is a key ingredient to “Self-Awareness,” below, and the foundation of “Coach-ability,” also below. As the individual applies this ability to others, a high level of emotional intelligence is the foundation leadership and team-building, partner formation, and salesmanship.

Strategic Mindset – “The vision thing.” The ability to simultaneously see the trees, the forest, and the woodsman, and the implications of global equatorial deforestation. And the ability to adapt to if all this suddenly changes. Both of these components are essential. The first speaks to the ability to conceive of an expansive vision based on the domain expertise of the lone entrepreneur or founding team. The second speaks to an intuitive ability to conceive of the myriad challenges that the enterprise will confront in the course of its growth and the potential ways to address those challenges.
Centeredness – OK everybody, let’s don our yoga attire and bow to the spirit within. “Centeredness” is the ability to endure the extreme highs and very low lows that define the emotional rollercoaster of entrepreneurship with minimum impact to emotional or physical well-being, personal and professional relationships and decision-making ability. The ability to “act” not “react.” As Kipling would have it, to “…meet with triumph and disaster and treat those two impostors just the same.”

Self-Awareness – To be self-aware, one need to know exactly who one is … and who one is not. The self-aware entrepreneur has an honest inventory of one’s strengths and weaknesses – domain experience, functional expertise, leadership capabilities, emotional make-up, intellectual strengths, and “scale-ability” – the ability to grow and grow with — the enterprise. Great companies are built by teams, not individuals. If the entrepreneur does not have an honest appraisal of whom he or she is, it will be difficult to make good decisions about the types of people who will best augment the enterprise.
Coach-ability – More than just VC-speak for knowing when to cede the CEOship to a more experienced navigator, coach-ability results from self-awareness and an openness to establish mentoring relationships on a full 360-degree basis. General, statesman, and Nobel Prize winner George C. Marshall said of his mentor and WWI American Expeditionary Force Commander John “Black Jack” Pershing,” that he could withstand more constructive criticism than anyone he had ever known. A good trait to have, whether launching an invasion or new product — or meeting with one’s investors.

Problem-Solving Orientation – In launching a new business, the entrepreneur – no matter how seasoned — will invariably be confronted with a new set of challenges involving, markets, people, and technology – some controllable, but most not. The successful entrepreneur is one who can live in continuous problem-solving mode, comfortable with ambiguity and content with optimization.

Record of High Achievement – The best indication that an entrepreneur will succeed is that he or she – as an entrepreneur – has succeeded before. With a first time entrepreneur who doesn’t have those quals, the best proxy for probability for success is a record of high achievement in past endeavors reflecting singular dedication or talent. Examples include: graduating summa cum laude from Harvard, attaining the rank of Eagle Scout, completing Marine Corps OCS, or working one’s way through Community College while supporting a family and bootstrapping a start-up enterprise.

Domain Experience – In very general terms, a sufficiently high level of intimacy with a specific vertical or horizontal to understand and articulate a market deficiency, its differentiated and defensible solution, and the means by which the solution can be provided at a profit –presumably very large profit. No one person has all the answers (if they did they wouldn’t be very coachable), so (presuming an adequate level of self-awareness) you can bring in a co-founders to help fill in the gaps.

So there’s my cut at it. What did I miss? Fun to write …. Hopefully fun to read. I wish you great success in your entrepreneurial endeavors. And most of all … good luck.

- Tom Weithman

Seed stage investing is like pearl diving—you’ve got to shift through a whole lotta oysters to find a pearl. CIT is one of the few organizations still making seed and angel investments so we do our fair share of shucking–sitting through more than 100 company presentations each year and reading another 300. Not surprisingly, the quality ranges from great to good to bad to oyster ugly!

The bad and ugly pitches share a few common, fatal flaws, which I’ll talk about in a moment. However, the foundation of a great pitch is a great deck—distill your business plan into a twelve to twenty page compelling PowerPoint (or some other software package) presentation that succinctly tells your story.

(Next week my colleague Marco Rubin will outline the critical components of a great presentation deck.)

Once you’ve created the deck but before you begin to practice it relentlessly in front of your colleagues, friends, spouses and family pets, think about how you can avoid these six critical mistakes many founders make when pitching investors.

Mistake #1—Not Doing Your Homework
I’m continually amazed at the number of folks who pitch us having done little or no research on how and why we pick companies in which to invest. At the very least, visit our website to see if you fit our investment criteria!

When I was raising the B round for my previous company, I would spend half a day researching a VC firm before I met with them. Here’s what you need to know about any VC firm: At what stage do they like to invest? What’s their ideal investment size? Do they have any complementary or potentially competitive investments? How are investment decisions made? What specific criteria do they look for in an investment? Who will attend the meeting?

Much of this data can be gleaned from their website and from various blog posts, venture databases and other online resources. Call the partner, angel or associate you are working with and ask them! Before your meeting you should completely understand the firm, the players and their investing criteria.

Mistake #2—Straying off message
Every page in your deck should be scripted and memorized with the key points you want to convey. Often VCs will interrupt with questions which are explained later in the presentation. Resist the temptation to answer and NEVER start clicking through the deck to find the relevant page. Simply say, “I’ve got a slide that answers that question, can you hold that thought until we get there?” When you do arrive at the relevant spot in the pitch, acknowledge the question and answer it as succinctly as you can. “You asked how we will differentiate ourselves from the competition—we do that three ways…”

You need to think of your pitch as an enticing sales story that builds a case for an investment. Avoid meandering digressions, industry anecdotes, irrelevant asides, and marketplace pontification. Stay on message!

Mistake #3—Not Understanding the Competitive Landscape
How exactly will you sell against your competition? Why would a customer choose you? How is your pricing different from your competitors? Which of them are venture funded and at what level? Who are their customers?

A deep understanding of your competitors’ strengths and weaknesses is essential to crafting an effective go-to-market strategy and should be a foundation of your pitch. That ole chestnut, “We don’t have any competition,” just doesn’t track to the realities of the marketplace. Investors know this and will usually reject out of hand a company that makes such claims. Even the most novel technologies have competition—it’s called market inertia.

Mistake #4—Over-Selling Fauxmentum
VCs love actual, genuine momentum–customer acquisition traction, monthly revenue increases, critical team hires—these are all key indicators of a company on the rise.

It’s difficult for many early-stage companies to generate real momentum because they are often pre-product and pre-revenue. These folks often make the mistake of over-selling what the wise Don Rainey at Grotech calls fauxmentum—fauxmentum is the ugly step-sister to real momentum. Blogger buzz, partnership “discussions”, press release carpet bombs, industry awards, press mentions, advisory board appointments are great examples of fauxmentum. Tread carefully when including fauxmentum in your pitch—a single slide on industry buzz and press coverage is fine but don’t over-play your hand. Savvy VCs will roll their eyes and once eye rolling ensues, you’ve lost ‘em..

Mistake #5—The Tough Question Two-Step
“I don’t know, let me get back to you on that,” is a perfectly acceptable answer to an obscure or difficult question, unless of course it’s a question to which you SHOULD know the answer!

I’ve been in plenty of cringe-worthy pitches where the hapless CEO tried to fake or finesse an answer to a question for which he clearly had no clue–bloodletting usually followed. The best CEOs anticipate all possible questions VCs will ask and are prepared with succinct answers. If your deck doesn’t clearly explain your competitive advantage expect a drill down. If you don’t speak to the use of funds, you will be asked about it! If your market size data doesn’t show your addressable market size, the question will certainly come. Look at each page in your deck with a critical eye and ask yourself what additional data you would need on that topic to make an investment. Find the answer and be prepared—but don’t dance the tough question two-step!

Mistake #6—Pitching a Six Month Runway
I am constantly gobsmacked by entrepreneurs who project only a six month cash runway for their angel round. “In six months we’ll raise a Series A,” is the usual response to my obvious incredulity. Seed stage investors love bootstrappers and look for the fiscal restraint to continue after the seed money is invested. A $500,000 angel round should last a minimum of twelve months–longer the better. In this current funding environment, early stage companies are unlikely to get funded without clear revenue traction and that usually takes nine months to a year from product release. A typical Series A raise takes six months from kick-off to close. Closing a seed round doesn’t mean the end of bootstrapping…it means now you’ll be bootstrapping with a very involved parent looking over your shoulder!

While seed stage investing may be a bit like pearl hunting, raising money is all about selling. You must present a clear and concise sales story to your potential investors. A great deck with succinct scripting, a whole lot of practice and an awareness of these six serious mistakes can turn even the most technical CEOs into a Dale Carnegie closer. You still may not get the investment, but at least you’ll be placed among the pearls.

- Chris Scotton

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Your mission – to provide essential information to stimulate interest and attention quickly so that investors want to know more.
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I watch American Idol on occasion. Simply, the Show is about finding the next great singing talent. Aspring artists come from all walks of life waiting in long lines to be discovered. It’s a giant televised fish bowl requiring enormous heart and ambition on the part of the contestants.

Despite the main aim to showcase great talent, however, most performances are utterly unviewable. Fortunately, the audience is spared as most poor performances are edited out. Judges, however, must endure the good, the bad and the ugly in significant volume over lengthy periods of time.

Just like the Idol judges, I have reviewed thousands of investor presentations and can’t help but see the parallels. If you intend to present to institutional investors someday, you might consider taking a few lessons from the judges’ perch. So let’s begin today’s discussion by my making this plea about entrepreneur presentations to investors: please don’t make me feel Simon Cowel’s pain.

Though Simon’s mean-spirited critique is part of the Idol, we can learn something from his outspoken vitriol. That is, evaluating the talent feels a lot like the way we perceive presentations from applicants in search of capital. With that said, here’s a new way to think about about the creation and delivery of great presentations.

So Welcome To Investment World – We are constantly on the lookout for fresh, compelling investments to seed. And it may come as no surprise that our first contact takes on a diverse array of acceptable methods, formats and quality levels. That info comes to our investment decision making “nerve center” in the form of emails, a summary document, a business plan, a website, product literature, a demo, a cold call, a referral or a combination of the above. It can be a lot to absorb especially if the information is complex or hard to understand.

At this point, a CIT GAP Fund team member begins the vetting process for heightened consideration. If your company passes the initial screen, we bring you in to present to the investment team. Our aim, metaphorically speaking, is to take an X-ray image of you and your business to determine a positive or negative outcome three to five years hence. This mental snapshot is your one and only chance to make a highly favorable impression.

So what is it about those who succeed in raising money? In my opinion, that comes down to the ability of the entrepreneur, specifically the leader, to effectively tell a credible, compelling story that entices us, the investment team with a highly-appealing opportunity.

In Search Of The Elusive, Great Presentation – I’ve listened to many thousands of such pitches and, for me, the best ones share a common foundation:

(1) a compelling deck — smartly designed slides which clearly communicates your story with the least amount of clutter possible,

(2) a compact sound track — the accompanying voice over to your deck which completely complements the slides without parroting the content and

(3) a convincing Q&A delivery — a thoroughly rehearsed interaction, which when shared with the audience, pursuasively indicates you have done your homework and can answer questions directly and succinctly…and no more. Kinda like watching a professional ballroom dance routine.

I’ve observed combinations of the above with widely varying outcomes. For instance, I’ve seen beautifully prepared slides only to suffer from a poor delivery or an incredible claim. On the flip side, I’ve seen entrepreneurs with terrible PowerPoint slides recover with relatively strong oral delivery and Q&A.

So after a long day of reviewing back-to-back presentations, I’ve grown to truly appreciate the beauty of a succinct, clearly understandable story based on a well-thought out thesis based on realistic information with the opportunity clearly identified.

Oh yes, and a leader capable of getting to the point quickly with the potential to deliver on a future promise. Remember, the presentation is an indicator to us about how well you are able to sell yourself to fellow investors, customers, channel partners and talent.

The well-prepared entrepreneur leaves nothing to chance with a strong performance that draws upon all three of the above ingredients.

Below are some steps to help you build a great investor presentation.

A. Walk before you run – I suggest starting with these steps:

1. Write down your business story in elevator speech form. Begin by summarizing in clear terms what it is you do – and – how you make money. You can find freebies about how to cultivate a succinct business message on blogs (over 600 entries at last check) at http://www.thechiefstoryteller.com/. There is an ample supply of resources readily available.

2. Build a basic deck using the core elements of your investor story—team, customer need, your solution, market size, competition, revenue model and use of funds—park supporting details in an Appendix. There are no hard and fast rules on length but shorter tends to be better. I prefer 10-15 slides but the length is variable to suit the audience. Again, there is a wealth of free resources available such as Guy Kawasaki’s “The 10/20/30 Rule of PowerPoint”. Suggestion – unnecessary detail, animation, bells and whistles and parlor tricks only serve to detract. Avoid this temptation if at all possible.

3. Practice your public speaking so that you are ready for presentations to private and perhaps public audiences. Should you need practice time on the dais or need to conquer your stage fright, try Toast Masters and get practicing.

Then test drive your story with ordinary folks to hear their frank reactions. Friends and family members might serve as the common sense test for clarity and cost nothing. Advisors can serve in this capacity as well. But don’t let your practice run be with live investors. You would rather have mom’s eyes glaze before ours.

B. Work on advanced exercises – A litmus test is how well the three foundation points, compelling deck, compact sound track and convincing Q&A, each standalone. In other words, the presentation must be understandable without the presenter. Moreover, the presenter should be able to deliver a simple but brief sound track without the aid of the slides if, for instance, caught in an elevator with an investor.

C. Follow this checklist of essential “must haves” and “must avoids” – everyone seems to love lists so here is a sampling of mine:

The “must have” list not in order of importance:

• Concise, well-designed presentation with a soundtrack to match
• Coachable, committed management team
• Sound value proposition
• Clearly understood target markets with customers (or potential customers) by name
• A dispassionate treatment of exact and inexact competitors
• Clarity on the business and business model itself
• Well-understood plan to build revenue and value
• Viable exits (demonstrate you know your industry)
• Honesty and realism about how much financing is required

The “must-avoid” list also not in order of importance:

• Inexperienced team with weak idea
• Absurdly large markets
• Understated capital needs
• No competition
• Ill-defined exits
• Overly complicated plans with too many moving parts
• Lengthy presentation with a droning sound track
• Errors and typos; getting cute on graphical features; missing contact information.

Capital is extremely difficult to come by in today’s economy. However with the markets returning, investment appears to be increasing over the last quarter. PWC provides excellent tracking of investment quarter by quarter.

https://www.pwcmoneytree.com/MTPublic/ns/index.jsp

CIT focuses on two investment areas: technology and life sciences. In general, life science investments require extensive investment with a long time line for return. For example, the Center for the Study of Drug Development (CSDD) at Tufts estimates that a new therapeutic product requires ~$1B and takes ~10 year from Phase I to market. http://healthcare-economist.com/2006/04/29/802m/. However, the payoff can still be be enormous! For example, Lipitor is the world’s best-selling drug had revenues of $10.86 billion last year.

That being said, pharmaceutical companies are currently challenged with replacing the $65 billion worth of product expected to go off patent in the next four years must dramatically rethink their R&D models for future success, according to a report released by Deloitte. Given the high development costs, dwindling pipelines, and products coming off-patent, big pharma is actively looking for smaller/start up companies with innovative products. Given the need for products and the emphasis on better health care….there must be funding! Where is it?

One of best places to seek financing for early stage life sciences companies is through the SBIR process. SBIR awards are grants and therefore non-dilutive. In addition, this type of funding, especially when provided by well respected organizations such as the NIH, provides validation of the technology. The grants can be small ~$100,000 to start but have the oportunity to be multi-millions in follow up investment.

In the next discussion we’ll talk more about other types of financing and what is needed to be successful.

- Erika Smith

I must be 17 years old again – heading off to a summer entrepreneur honors program at a VA university, my on-line shoe store just an idea in my head – , at least according to the dismal numbers associated with companies being funded by VCs. According to PWCMoneyTree, VCs are on track to invest $12M to $13M in US companies this year, numbers not seen since 1997.

During Q2 2009, VCs invested $44.5M in 12 Virginia-based companies. Of which, 4 deals were considered seed or early-stage. The most active funds for VA companies included Novak Biddle, CIT GAP Funds, CNF Investment, Connecticut Innovations, Edison Venture Fund, Intersouth Partners, New Vantage Group, Paladin Capital, Physic Ventures, and Redshift Ventures.

So, what does that mean for start-ups? It means capital is harder to come by and bootstrapping is more important than ever. Traditional angel groups and seed-stage funds are moving upstream, focusing on companies with $2M-3M in annual revenue, simply because they can. SBIR dollars are must to build your beta before you start knocking on doors.

So, how do I raise capital in this economy if everyone is going upstream? That will be the focus of this blog over the next several months.

- Jen O’Daniel