Here are some of the questions I heard raised on the private placement offerings presented to an angel investor group last Friday:1. Has anyone paid for your product/service? If not, how do you know they will?
2. What is the market / market opportunity / competitive advantage of your product?
3. What is your exit strategy?
4. Are you building a business or a product?
5. What is your 3 to 5 year plan for the business? (i.e., are you seeking an asset or stock sale for royalties or set price, or are you building this business for your grandchildren?)
6. Have you done this before? (i.e., have you ever built a business from the ground up?)
7. What are the barriers to growth for your business? (e.g., manufacturing caps, agricultural risks, supply chain limitations…)?
8. What is the scalability?
9. Do economies of scale apply?
10. What is the expected ROI?
During the presentation, it is good to focus on the uniqueness of your product (if that is in fact the case), but don’t feel like you have to labor on this too long. The investors are more interested in a solid business model than just the market splash of a product. Make the point and move on. This is typically difficult for the presenter if he is also the inventor of the product. I thought all of the presenters last Friday did a good job with creating excitement for the product and then went on to the business.2. What is the market / market opportunity / competitive advantage of your product?
3. What is your exit strategy?
4. Are you building a business or a product?
5. What is your 3 to 5 year plan for the business? (i.e., are you seeking an asset or stock sale for royalties or set price, or are you building this business for your grandchildren?)
6. Have you done this before? (i.e., have you ever built a business from the ground up?)
7. What are the barriers to growth for your business? (e.g., manufacturing caps, agricultural risks, supply chain limitations…)?
8. What is the scalability?
9. Do economies of scale apply?
10. What is the expected ROI?
I saw probably the best slide I have ever seen at an investor presentation. The presenter flashed up a copy of a check from a customer. What a simple but huge statement. You are not only telling the group that you have customers, but you are showing them the actual dollars coming in. Great slide.
I saw some bad things in the presentations too.
One of the presentations showed a slide referencing the business’s process for making money. It was a convoluted story board which started in the bottom left, moved around clockwise and ended in the center. It took me a few minutes just to figure out where to start. Take note, in America we read from top left to top right, and then down the page in a likewise fashion. Don’t create a new way to read print.
Also, way too many MBA hockey stick graphs in the presentations. One of the pre-revenue SaaS presenters was estimating $90,000,000 revenue in five years.
NEVER use the phrase “Our projections are conservative.”
Finally, if you are not a great presenter, hand off parts of the presentation to a well-polished presenter. There is nothing worse than sitting through boring presentations – even if the material is great. This is true anywhere but especially in a presentation to a professional private equity firm which you should be well prepared for.
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