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October 28, 2010

The ABCs of Starting an Investor Pitch Meeting – Always Be Credible

Malcolm Gladwell made famous the natural human reaction of judging other people in the first few minutes of an encounter with his book, Blink.  Like many other businesspeople, VCs and angel investors (“investors” going forward) blink and judge entrepreneurs very quickly in the first few minutes of an interaction.  That’s why the way an entrepreneur starts an investor pitch meeting is a key determinant of their success in that meeting.  Those first 10-15 minutes, where the entrepreneur presents themselves before they even present the idea, are very critical in establishing credibility and the right to continue to pitch to an engaged audience.

Yet, it is amazing to me how few entrepreneurs start investor meetings crisply and confidently.  The formula for the start of the meeting is almost always the same – you are trying to answer the simple question on the mind of the investors:  who are you and why are you here?  But when asked to review their backgrounds, entrepreneurs often fumble through incoherently, or ramble on tangents that aren’t relevant to the situation.

So, how should you start an investor meeting?  It’s as simple as ABC:  Always Be Credible.  Investors are looking for credibility – can we trust that you have a uniquely good idea or insight, are you capable of executing on it, and are you the real deal or full of bluster and BS?

When you talk to investors and ask about this opening gambit from entrepreneurs, you hear a consistent pattern about why they like a certain entrepreneur they’ve invested in. When you distill the inputs into a coherent pattern, here are the top three things you typically hear entrepreneurs should do:

  • Be genuine and personable – Let your personality show, professionally of course.  At some point in the introduction, say something that makes you smile, which will make those around you smile.  If you don’t engage your audience, they’ll jump to their Blackberries.  For example, ZestCash CEO/co-founder Douglas Merrill is a charming character and, even putting aside the shoulder-length hair and tattoos, you can’t help smile when he introduces his background (raised dyslexic in Arkansas, followed an unlikely path of earning a Princeton PhD, leading Google engineering and IPO in his role as CIO for 5 years, and now has developed a vision to transform short-term consumer credit by blending online data with traditional underwriting techniques).
  • Be crisp and on point – The most compelling background speeches are crisp, straightforward and very demonstrate relevant links to the opportunity at hand.  For example, SaveWave CEO/co-founder Dave Rochon gave the following brief narrative when pitching investors:  “I worked at Catalina Marketing for 10 years in sales and launched their Internet couponing business, then joined Upromise the year it was founded and built the grocery business for 10 years, serving for three years as president after the acquisition by Sallie Mae. I now want to transform the online and mobile grocery coupon business.”  Dave’s Series A round was way over-subscribed by folks like First Round, Ron Conway, Roger Ehrenberg, Founder Collective and I think it’s in no small part because his background and delivery were so crisp and relevant.
  • Keep it short.  I find that the more impressive the entrepreneur, the shorter the introduction.  The worst situation – 20 minutes into the presentation, the entrepreneur is still bragging about some random product they launched in a completely irrelevant industry sector.  The VCs are already hitting their Blackberries and wondering how they can end the meeting gracefully.  And you run out of time to actually pitch the big idea.  Meandering introductions are the death of a pitch.

And here are the top three things to avoid:

  • Do not exaggerate.  Assume that everything you say will be thoroughly checked out in due diligence.  If you claim credit for a company where you played a small role, it is bad form.  I recently called the CEO of a company that an entrepreneur bragged they had led during the pitch.  When the CEO told me they were a minor player and left after a brief two years, I stopped spending any more time evaluating the opportunity.  Remember, investors are professional BS detectors.  Err on the side of underselling your background because the BS alarm bells may ring in the first few minutes of introduction and spoil the rest of the presentation.
  • There’s no “I” in team.   When entrepreneurs talk about themselves in grandiose terms in their introductions, it’s usually a sign of egotism.  When entrepreneurs talk about the teams they built and the smart people that somehow they were able to convince to join them in their cause, it’s a sign of great leadership.  Guess which of these two profiles investors are more attracted to?
  • Don’t name drop.  Some investors are notorious name droppers, so this is a bit of the pot calling the kettle black, but investors get very turned off when the entrepreneurs name drop in their introductions.  We don’t need to hear every famous person you’ve met or pitched or worked with.  Establishing a few common points of contact is a good thing.  Acting like you are best friends with folks who wouldn’t recognize you if you bumped into them in the grocery store on a Sunday afternoon is not recommended.

Remember, be credible, humble and specific and you’ll do fine.  Take the 5-10 minutes time to establish that initial credibility, and then move on.  Investors like to back great people, so spend as much time thinking about how to present yourself in a compelling fashion as you would your idea.

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what are your thoughts regarding youth and/or limited prior experience? Is it possible to be "credible" as a 20-something first time entrepreneur, or does that credibility come with building a killer product and saying "look at this."

thx.

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It’s absolutely possible to be a
very credible 20-something founder. In that case, you’ve got to emphasize
the parts of your background that lead to the unique insight you have on your
new venture.  Remember, every VC in the room is trying to figure out if
you’re the next Bill Gates, Mark Zuckerburg, Sergei Brin, etc.  No
one wants to miss out on those young superstars!
 

Hi Jeff,

I noticed your response to Ian about youth not being a factor, then what do you say concerning experience? I notice of the people described in the above article they are coming to the table with a wealth of experience concerning their specific product or service, but what if you don't have the actual experience but possess vision and the determination to bring a product or service to market? Can a VC conversation be generated on that basis?

thanks Jeff

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Definitely.  Many VCs do have experience
bias, but they also recognize that some of the greatest entrepreneurs in
history have come from people from outside an industry with little experience
(e.g., Jeff Bezos).
 

Good stuff on Bezos thanks...

Just saw a clip on gifts vs. talents at Princeton (encouraging). But reading up on him he has a passion in the sciences, a computer science degree, and he worked as a financial analyst in NYC. I see how all of that can be applicable to him starting up a tech company. But, what I was referring to was about the "treps" with little (to no) experience who for the last 2 years have consistently built upon a vision or concept (in a similar fashion to Bezos garage inventor) seeing the idea/product/service as viable and hoping to bring it to market. Yet the "trep" lacks the programming knowledge to methodically build even a prototype to scale or the lacks the financial background to estimate the 3 to 5 year projections etc. He/she has a vision and believes that there is something of value there. How (if you can) direct that person to where they need to go? Or should they steer away from approaching VC's at this time?

Hope this makes sense...

thanks

Find mentors. That's my best advice.

Thanks for your help Jeff...

Any suggestions?

take care

Frank

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