Investors only need to know 2 things
Have a meeting with an investor? If you can nail your explanation of two things–”Value Now” and “Value Later”, you’ll win that next meeting more often than not. And keep in mind – the only goal of THIS meeting is to get invited to the NEXT meeting. You’ll never be able to explain your entire business in one PowerPoint deck or in one elevator ride. It’s not possible. Save the good stuff, the juicy “how” of it all, for meeting 2, 3 and 4. Focus your first impression on effectively communicating the two primary data points that investors need.
In order to understand what data the investor needs, we need to first understand the investor’s primary goal. The only thing the investor wants to learn from their first meeting is whether or not you fit into their portfolio. There are a lot of moving parts in making that decision on the investor’s side, but the most important part of that decision is the return on investment. They’ll need to cash out their investments at some point in the future, and they’ll need to exit with a lot more money than they put in.
Of course, these will be estimates – and you’ll need some hard data to back them up. But that is the purpose of this first meeting – to convincingly make a case that the “now” number is realistic and the “later” number is achievable.
- Value Now – What is the value of the company now? How much investment are you seeking? Will you need more investment to reach your goals? If so, how much can the investor expect to be diluted by these future rounds? Break it down to simple numbers: $XX in investment gives the investor Y% ownership of the company at exit. Don’t spend a ton of time on this, and my suggestion is to get it out of the way up front. These data points are important to VCs and will help them frame the rest of your presentation.
- Value Later – Keep in mind that one of the most important keys to a successful venture is scalability, so investors want to know how your business will scale, mathematically. To illustrate that, you’ll need a deep understanding of your market, your customers, and their buying patterns. From that data, you can extract the goodies that investors are after: What size is the market (in dollars)? How much will the market grow between now and the potential exit (%)? How much of that market are you going to capture (%)? What is your revenue and profit per customer ($/customer)? What is your Go-To-Market strategy and how quickly will you capture market share (%/yr)?
These numbers will be the basis for the calculations the investors are doing on that notepad while you talk. And if the numbers don’t work, the deal won’t work. Of course you’ll need to tell a good story — convince the investors that you’ll be able to achieve these numbers. But if you remember that the whole point of this first meeting is to convince the investor of only these two numbers — value now and value later — you’ll find the presentation much easier to create, and much more coherent to listen to.
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