One of the biggest mistakes entrepreneurs make when pitching to angel investors is bombarding them with data and boring PowerPoint slides instead of inspiring and engaging them. This is one of the key lessons I learned as I followed a Forbes.com reader and entrepreneur on his journey to attract funding for his start-up.
The entrepreneur owns a successful hair salon and is building a product for the salon industry. He is being mentored by a group that prepares start-ups for the next step in the funding process. One of my books was on the group’s recommended reading list as well some of my Forbes.com articles. The entrepreneur used the information to craft his presentation. He then invited me to attend the actual pitch since it was being held near my town. I watched the live 20-minute presentation, listened to the investors’ feedback, and had the opportunity to speak to investors after the meeting to gain their insight. The investors ranged in net worth from $25 million to more than $200 million and, like most wealthy investors, put their money behind an idea in return for convertible debt or ownership equity.
Based on my experience and the conversations I’ve had with investors making early stage seed investments, here are five things entrepreneurs and business leaders must do when presenting to this audience.
Tell stories. The salon owner began with a personal story about his family’s 100-year history in the industry. He spoke about the innovations his great grandparents pioneered in the salon business and about his own personal experience growing a successful business.
Stories are powerful and emotional, yet unappreciated in many business presentations. Angel investors tell me they’re different than venture capitalists. They both want to make money, of course, but while VC’s are much more focused on data, angels often take a mentoring role and are making an emotional and financial investment in the idea and the people. “The most memorable presentations don’t start with data,” according to one investor. “They start with a compelling personal story. It’s not about data; it’s about engagement.”
Use pictures to tell the story. The first two slides of the presentation I saw didn’t have any words. Instead the entrepreneur showed black and white photographs of his family breaking ground on their salons or ‘barber shops’ as he talked about their history.
Pictures are far more memorable than words. Studies have shown that people will remember 10 percent of information when the content is delivered verbally. Add a photograph and retention soars to 65 percent. Angel investors—like all investors—want to see charts, graphs, tables and other slides showing the hard numbers behind an idea. The key is to break up the slides to give the eyes and brain a break. Tell stories and use pictures to complement the narrative. On a related note it’s important to keep your entire slide deck to a minimum. One angel told me the kiss of death is a 45-slide PowerPoint deck. Investors prefer 10 to 15 slides at most.
Express your passion. Angels invest in relationships and they want to build those relationships with entrepreneurs who have a fire in the belly, a consuming passion to move the world forward. Over the past several months I’ve been pouring over academic research studies, which have found that angel investors weigh passion as one of the top three factors or variables that influence their ultimate investment decision. Passion is contagious, literally.
Simply ask yourself this question: “What am I really passionate about?” The answer will be considerably different than the answer to the question, “What is my idea?” For example, I recall meeting with top executives at one of the world’s largest medical device companies. They were about to launch a major product and wanted my feedback on their message.
“What’s the product?” I asked.
“It’s the first dynamic high-volume CT-scan that utilizes 320 ultra-high resolution detector rows to image an entire organ in a single gantry rotation,” the CEO said.
After my eyes had glazed over, I tried a different tactic.
“Why are you really passionate about this product?” I asked.
“If you suffer a stroke, our product could mean the difference between going home and living a full life or never recognizing your family again”, the CEO answered.
The CEO kicked off the presentation with his ‘passion statement’ and successfully won over the audience. While passion is essential, it is not sufficient to persuade investors. Investors need to know that the product addresses a real world pain.
Introduce a villain and a hero. Great stories and movies have a villain who causes problems and a hero who saves the day. In the context of a business presentation, think about villains and heroes as problems and solutions. What is the problem your idea solves? In the presentation I saw, the salon owner/entrepreneur spent three slides explaining the problems (the inefficiencies) in the salon industry and how his product would help solve those problems. Angel investors need to understand the pain—or problem—your customers are experiencing and how your idea, product, or service alleviates the pain.
Share the stage. Investors want to see a team. I urged the entrepreneur to avoid delivering the entire presentation on his own. He decided to introduce his marketing director who demonstrated the product, and his CTO who explained the back-end technology behind the product. He even showed a video clip of a potential customer in the industry who praised the idea. The video served two purposes—it added a fourth presenter and provided a multimedia component to the presentation.
As soon as the presentation ended, an angel investor raised his hand said, “I don’t have a question, but a comment: Bravo. In most of the presentations we see, the CEO delivers the whole thing, but we know it’s impossible for the CEO to know everything. I liked the fact that you gave your team a role…and the video testimonial was great.” The entrepreneur’s presentation successfully persuaded several investors to take the next step. He’s on his way to seeing his dream become a reality.
Although venture capitalists grab the headlines, Forbes.com contributor Dileep Rao says most entrepreneurs will never see the inside of a VC’s office. It’s important to understand angel investors because they are a primary source of funding for start-ups. To pitch your idea successfully, you must reach their minds and their hearts—inspire and engage.