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Investor pitching 101, with Communitech’s Frank Erschen - Francis Moran & AssociatesFrancis Moran & Associates

Investor pitching 101, with Communitech’s Frank Erschen

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By Leo Valiquette

“It’s all about the content, it’s not about the sizzle. You have to give investors the content they need to make an investing decision.”

So says Frank Erschen, pitch coach, angel investor and executive in residence at Communitech. While in Kitchener-Waterloo last week, I had the opportunity to sit in on his session with Erisvaldo Gadelha Saraiva Junior, executive director of Brazil’s Yupi Studios.

Yupi Studios is a startup focused on developing apps, games and other creative content for smartphones, tablets, smart TVs and social networks. While it is paying the bills as an app factory for hire, its goal is to raise the $500,000 to $1.5 million it needs to devote itself entirely to developing its educational gaming platform, Yupi Play. Here is a recap of Erschen’s counsel on how Yupi Studios and any other startup in search of capital should structure their pitch to make the most of that eight to 12-minute opportunity to woo an investor.

For Erschen, an effective presentation should include the following slides, to tell a single compelling story with a natural progression:

Slide One: The title slide, which should include, in addition to the company name and graphic, the presenter’s name and their role with the company, as well as the reason why this pitch is being made (though it’s not necessary at this point to state how much investment capital is being sought).

Slide Two: What is the pain or problem in the market that you intend to address? This should be established for the audience as soon as possible. “From there everything else follows,” Erschen said. “If you start with product or something else, people can’t figure out what box to fit you in.”

Slide Three: How big is this problem? How big of a market opportunity does it represent? What are the target segments?

Slide Four: Our solution. Here you introduce your product. Avoid the temptation to go into so much detail that this becomes a product pitch or manual, but say enough so that investors get it.

Slide Five: How are you going to take this product or service to market? Your answer must address three things:

  • Validation: How have you validated this is a good idea? What market research have you done? If you already have, for example, an app that is available, how many downloads have you had?
  • Acceptance: Have you been able to sell the idea to someone other than friends and family? Acceptance is most easily demonstrated with paying customers.
  • Traction: What are you doing to get traction? How are you entering or going to enter a market and then grow and scale your company? To grow and to scale are not the same thing, but represent two different phases of a company’s development. This will be a setup for a later slide when you talk about how much capital you’ll need to achieve your targets.

Slide Six: Why is now the time for this product? Erschen pointed out that this question is popular with California VC firm Sequoia Capital, which has recently included Kitchener-Waterloo on its investment radar. The answer could be rooted in social trends, issues that have become more acute, an opportunity with a government program that is soon to expire, a recent technological advance and so forth.

And then there is the competition — who do you expect to face? What is your differentiation and is it sustainable or only temporary?

Slide Seven: What is your business/revenue model? How are you going to make money? “Investors are not out there as a charity,” Erschen said. “To get a return on their investment they have to understand when you are going to make money.”

Slide Eight: Projections and forecasts. “What I like to see is the first four quarters out from where you are now, quarter by quarter, and the next two years as full years,” Erschen said. “That’s three full years. Everyone knows anything beyond that is a guess.”

Investors want to know what your revenue curve looks like, what the cost curve looks like and, if possible, what your cash flow will be. All of this allows you to calculate how much money you will need and at what point you may be looking for additional rounds of investment.

Lastly, how confident are you on these numbers and do they appear realistic based on the strength of your case?

Slide Nine: The team. Now comes the point where you introduce “the team that will make all of this happen.” A pitch should never begin with the team slide, said Erschen, unless you have some high-profile rock star to boast about. The presentation of the management team should also include their roles, pictures, and what qualifications and previous experience they have. And don’t forget that even though you’re not presenting the team slide until now, the audience has been evaluating you and your team (through your charts) from slide one.

Slide 10: Financing. Summarize in a couple of lines what you have raised to date, including how much you and your team may have personally invested. And be specific about the amount you are looking to raise, rather than offering a range. This slide should also include how you plan to use the proceeds.

Slide 11: Summary. At this point, many presenters have a simple “Thank You, any questions?” slide. Instead, this slide should also recap three or four key points from the presentation without offering any new information. The information you include here may influence the direction your audience takes with their questions. Compared to the other slides, “this is the screen that is going to be up there for the longest period of time,” said Erschen, because it will be displayed during the Q&A phase of the presentation.

And don’t forget about ‘alignment’

Erschen also evaluates a presentation on its “aligment,” in three ways:

  • Vertical alignment: Does the headline and the content on each slide support each other? “You don’t want to confuse the audience by forcing them to have to think about what you are presenting,” he said.
  • Horizontal alignment: If the slides were to be laid out in a row on a table, they should have a cohesive flow, a single story arc. There shouldn’t be, for example, several examples of problem/solution. This is distracting and confusing.
  • Diagonal alignment: Does the information displayed on the slide correspond with what the presenter is saying? They should complement each other, rather than be two separate things.

Also, be specific with facts and figures and think creatively about how they can be presented in a visually interesting manner.

And Erschen’s last piece of advice?

“Everyone you ask for advice will give you different pieces of advice. You are the final filter.”

Erschen is a busy fellow in the Kitchener-Waterloo region. He is CFO and chair of Stratford startup Powernoodle Inc. and its cloud-based work collaboration platform, chief strategist and chair of Toronto ecommerce startup Katapult Business Solutions, and a member of the Golden Triangle Angel Network selection committee.

Image: European Innovation Academy

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