Steps to Presenting to Investors

Presenting to Investors: The Elements of a Compelling Case

David Griest

Durham, NC 919.530.1177 New York, NY 212.209.3042 www.sjfund.com

Getting Ready for Equity™ Disney Entrepreneur Center Orlando, FL July 23, 2008 >

1

© 2008 SJF Advisory Services

SESSION GOALS Review what basic elements investors are looking for in opportunities Understand the importance of compelling content and effective communication Become familiar with standard investor “pitch” communication forms: Elevator pitch Executive summary Investor presentation Understand the key elements and goals of each of the pitch forms 2

© 2008 SJF Advisory Services

Top 10 Lies of Entrepreneurs by Guy Kawasaki 1. “Our projections are conservative.”

2. “Gartner says our market will be $50 billion by 2010.”

3. “Boeing will sign our contract next week.”

4. “Key employees will join us as soon as we get funded.”

5. “No one else is doing what we do.”

6. “Several firms are doing due diligence.”

7. “Oracle is too slow to be a threat.”

8. “Beta sites will pay to test our software.”

9. “Patents make our business defensible.”

10. “All we have to do is get 1% of the market.”

3

© 2008 SJF Advisory Services

UNDERSTAND YOUR INVESTOR AUDIENCE All want to generate strong financial returns Each investor or fund has a specific prospect company profile Each investor or fund has specific investment criteria Investors have broad expertise Financial and business expertise Entrepreneurial experience Sector knowledge

4

© 2008 SJF Advisory Services

WHAT ARE INVESTORS LOOKING FOR IN “PITCHES”?

Market and growth drivers

• Large and growing market • Clear reasons why people will purchase more of the company’s product or service • Company is different and special when compared to competitors

Product/ technology/service

Financial plans

• Simple explanation of how product or service works

• Credible projections of strong financial growth

• Technology or systems that support it and any relevant patents or protection

• Method of how sales and cash will be generated • How invested money will be spent

• Management has relevant sector experience • Management has track record of success • Management has a clear strategy in place to achieve targets

• Team works well You must have credible content for a compelling together

investment opportunity 5

Management/ execution

© 2008 SJF Advisory Services

A TYPICAL QUARTER IN THE LIFE OF A VC… Invest in 1

Follow-up with 8

Meet with 20

200 Prospects You must effectively communicate your compelling content to gain investors’ attention 6

© 2008 SJF Advisory Services

STANDARD INVESTOR COMMUNICATIONS “Elevator Pitch”

2- to 5-minute description of your business and investment opportunity

Executive Summary

1 to 2-page summary of your business plan

Investor Presentation

15 to 20-minute presentation of your business and investment opportunity

THE BASE: Business Plan Comprehensive description of your business, its market, and its growth strategy

7

© 2008 SJF Advisory Services

THE BUSINESS PLAN Comprehensive description of your business, its market, and its growth strategy Process of creating the plan should be valuable to you Should be a useful document to monitor your progress Doesn’t have to be long and wordy – could be detailed bullet points in a presentation format Most investors will expect this

Demonstrate your understanding of your market, business operations, competitive advantage, growth strategy and business needs 8

© 2008 SJF Advisory Services

THE ELEVATOR PITCH 2 to 5-minute description of your business and investment opportunity The investor should leave your conversation with: Concise, basic description of the business Demonstration of growing market demand for product or service Sense of your competitive advantage Positive impression of management

Attract investors’ interest, invite further discussion about your opportunity 9

© 2008 SJF Advisory Services

10

Š 2008 SJF Advisory Services

ELEVATOR PITCH KEYS TO SUCCESS Practice, practice, practice Questions that recur from dry-runs show what’s missing from the core pitch Have a 1- or 2-minute version ready for networking events or impromptu meetings Have a 5-minute version ready for longer conversations or opportunities to pitch Exchange cards, provide Executive Summary, follow up

11

© 2008 SJF Advisory Services

THE EXECUTIVE SUMMARY 1 to 2-page summary of your business plan, including:

Concise, basic description of your product/service Brief description of the team Summary of the growing overall market and your target market Description of the competitive landscape and your competitive advantage(s) Achievements to date – market penetration/distribution/financing, etc.

Financial summary – historical and projected summary income statement Financing need and use of funds Contact information Demonstrate your understanding of key success factors for your business, make investors want to learn more

12

© 2008 SJF Advisory Services

13

Š 2008 SJF Advisory Services

THE INVESTOR PRESENTATION 15 to 20-minute presentation of your business and investment opportunity Still need to be relatively concise – no more than 20-25 slides: Problem/solution Product/service Market Competition and competitive advantage Management team Business model and financial projections Milestones/accomplishments to date Use of funds and exit strategy Summary Get investor to seriously consider investment, begin due diligence

14

© 2008 SJF Advisory Services

INVESTOR PRESENTATION KEYS TO SUCCESS Don’t make slides overly complicated, detailed or “busy” Graphics can be very effective or just distracting Financials should not be too detailed/hard to read; stick to key metrics (but have detailed backup ready) Keep your financials up-to-date and make sure you meet your projections!

A good presentation takes time to create, edit Practice, practice, practice Give presentation to advisors, other friendly audiences for feedback Let other members of the management team speak

15

© 2008 SJF Advisory Services

INVESTOR COMMUNICATIONS: DON’TS / Lie, be misleading or evasive / Be overly confident or reject feedback / Say you have “no competition” / Rely on the product or service alone to entice investors / Make up answers to an investor’s questions / Expect fundraising to be easy or quick / Be discouraged by rejection (but do learn from it!) / Be set on a valuation / Send mass emails soliciting investment / Send your pitch to info@xyzventurecapital.com

16

© 2008 SJF Advisory Services

INVESTOR COMMUNICATIONS: DO’S 9 Prepare, practice, update pitches & presentations 9 Meet your projections (don’t under-deliver during capital raising!)

9 Be concise in communications, but have backup detail ready 9 Consider and adapt content to your audience 9 Network before you’re actively seeking capital 9 Treat “no” as a feedback and networking opportunity 9 Be confident AND coachable 9 Be upfront about risks, weaknesses—and how you plan to address them 9 Research and target the most appropriate investors 9 Personalize all investor communication 17

© 2008 SJF Advisory Services

CLOSING THOUGHTS ON INVESTOR COMMUNICATIONS Effective communication of compelling content is key to success No guarantees Securing equity investment is a process that takes time Important to find a good fit in your equity partner Use what you learn from investor feedback and the process to improve your business

18

© 2008 SJF Advisory Services

Top 10 Lies of Venture Capitalists by Guy Kawasaki 1.

2.

3.

4.

5.

6.

7.

“We can make a quick decision.”

“I liked your company, but my partners didn’t.”

“If you get a lead, we’ll follow.”

“Show us some traction, and we’ll invest.”

“We have a lot of dry powder.”

“We’re investing in your team.”

“We saw this coming, so we didn’t invest in B2B or B2C.” 8. “This is a vanilla term sheet.”

9. “We can open the doors for you at major corporations.”

10. “We like early-stage investing.”

19

© 2008 SJF Advisory Services

Presenting to Investors: The Elements of a Compelling Case

David Griest

Durham, NC 919.530.1177 New York, NY 212.209.3042 www.sjfund.com

Getting Ready for Equity™ Disney Entrepreneur Center Orlando, FL July 23, 2008 >

20

© 2008 SJF Advisory Services