“Do you know how many business owners stand in this room and 15 minutes into the meeting, I still don’t know who the customer would be or what the product would do for them?” says Michael Della Fortuna, an investor in private companies.
“What’s the problem?” I ask.
“The lack of a big, driving goal. Imagine if General Montgomery spent all his time discussing how war ships and planes were built — and their fire power — instead of getting on with the big picture for D-Day.”
Michael takes a breath and continues: “It’s never the technology alone that gets money out of the customer’s wallet. Ask Beta, 8 track tapes, Lotus Notes, all those companies with the way-cool technology that overshot the customer’s need. If you spend your 20 minutes telling me about your technology ... it means you’re just not CEO material.”
Crikey. No wonder owners get intimidated when pitching to investors. But Michael has at least confirmed my own line, which has been to tell company owners who are about to raise capital that pitching to the fund managers is 15 minutes under a hot, hot spotlight. You may have been invited for an hour, but in reality you have just 15 minutes to break through and get the deep pockets wanting to know more. Silver-tongued owners will attract the finance partners to take their company to the next level. Lesser mortals might want to take a cue from Andy Warhol when prepping for pitching: 15 minutes and it’s over.
The pitch is indeed a short time to explain your value and, quite frankly, this process annoys the heck out of owners who know their companies are solid performers. I’ve seen them bristle: “Can’t these guys just read the business plan? We’ll email the PowerPoint...”
Er, no. Private equity investors put their money (often their own cash) into management. The pitch is their first opportunity to assess the team. Put yourself in their place: How would you make your decision? Would you choose the owner who froths at the mouth about his fabulous technology that the University of Waterloo admires? Or the owner who talks in broad brush strokes about the technology, but then about how it will translate into cash for you? Personally, the entrepreneur who can communicate that he or she is thinking about my investment gets my vote.
Many owners I know are surprised at what I’ve surmised over the years: Most fund managers have told me that they would put their money into the great management team with a B product over the less-than-stellar team with the A product. Leadership leads to results. And results, in the end, mean the investor gets his or her cash back and then some.
One of my clients, Angella Hughes of Xogen, swept me up in her enthusiasm because she was able to communicate her business value. Angella said: “Water is a scarce resource, not here in Canada but across the world, and it is dwindling every year. We have a cheap way of purifying water.” Ok, got it. And I know fund managers in the green sector who would agree. She pitched a thesis in a few words that I could grasp. She understood that there would be time to get to her technology and complex business model in the second half of the meeting, once the value had been established.
I don’t want to suggest that pitching is like pushing a Staples Easy Button. Simple is never easy. Deep preparation is needed. The investment community is globally small and, by golly, if you treat the visit to any investor with the same forethought as a chat with a friend in the school parking lot who you’re trying to impress with your new wheels — well, put it this way, you don’t deserve the money.
Jacoline Loewen is an expert at raising capital, and is managing partner of Loewen & Partners.
Originally posted at: http://womenspost.ca/articles/careerentrepreneurship/the-first-step-rais...
