David S. Rose: 10 things to know before you pitch a VC for

Good morning.

My name is David Rose.

I am a serial entrepreneur turned serial investor.

And by the use of pitching PowerPoints to VCs,

I have personally raised tens of millions of dollars

from VCs through PowerPoint pitches.

And turning to the other side of the equation,

I've personally supervised the investment of tens of millions of dollars

into companies who have pitched me with PowerPoint presentations.

So I think it's safe to say

I know a little bit about the process of pitching.

So, the very first question you've got to figure out is:

What is the single most important thing that a VC is looking for

when you come to them pitching your new business idea?

There are obviously all kinds of things --

business models and financials and markets and this and that.

Overall, of all the things that you have to do,

what is the single most important thing

the VC is going to be investing in?

Somebody? What?

Audience: People!

David Rose: People! You! That's it -- you are the person.

Therefore, the entire purpose of a VC pitch is to convince them

that you are the entrepreneur in whom they are going to invest their money

and make a lot of money in return.

Now, how do you do this?

You can't just walk up and say,

"Hi, I'm a really good guy, good girl, and you should invest in me." Right?

So in the course of your VC pitch -- you have a very few minutes;

most VC pitches, angel pitches, are about 15 minutes,

most should be less than half an hour --

people's attention span, after 18 minutes, begins to drop off.

Tests have shown.

So in that 18 or 10 or five minutes,

you have to convey a whole bunch of different characteristics,

about 10 different characteristics,

while you're standing up there.

What's the single most important thing you've got to convey? What?

Audience: Integrity.

DR: Boy, oh boy, oh boy!

That's a straight line, look at that!

And I didn't even prompt him.

Right, integrity. The key thing.

I would much rather invest in, take a chance on,

somebody who I know is straight than where there's any possible question

of who are they looking out for, and what's going on.

So the most important thing is integrity.

What's the second most important thing?

Let's see if you can get this one.

Audience: Self-confidence.

DR: Close enough. Passion.

Right? Entrepreneurs, by definition, are people who are leaving something else,

starting a new world, creating and putting their lifeblood into this thing.

You've got to convey passion.

If you're not passionate,

why should anyone else be, or put money into your company

if you're not passionate about it?

Integrity, passion: the most important things.

Then there's a whole panoply of other things you've got to wrap up

in this package you're presenting to a VC.

Experience: you've got to be able to say,

"Hey, you know, I've done this before."

"Done this before" is starting an enterprise, creating value,

and taking something from beginning to end.

That's why VCs love to fund serial entrepreneurs --

even if you didn't do it right the first time,

you've learned the lessons, which puts you in good stead the next time.

Along with the experience of starting an enterprise or running something --

doesn't have to be a business,

it can be an organization in a school, a not-for-profit.

But experience in creating an organization.

Next: knowledge.

If you tell me

you're going to be the developer of the map of the human genome,

you better know what a human genome is; I want you to have expertise.

I don't want somebody who says,

"I've got a great idea in a business I know nothing about.

I don't know who the players are, what the market is like."

You've got to know your market, your area.

And you have to have the skills that it takes

to get a company going.

Those skills include everything from technical skills

if it's a technology business,

to marketing and sales and management and so on.

But, you know, not everybody has all these skills.

Very few people have the full set of skills it takes to run a company.

What else do you require? Well, leadership.

You've got to be able to convince us that you either have developed a team

that has all those factors in it, or else you can.

And you have the charisma and the management style

and the ability to get people to follow your lead,

to inspire them, to motivate them to be part of your team.

Having done all that,

what else do I want to know as a VC?

I want to know that you have commitment.

That you are going to be here to the end.

I want you to say -- or I want you to convey --

that you are going to die if you have to, with your very last breath,

your fingernails scratching as they draw you out.

You'll keep my money alive and make more from it.

I don't want someone who'll cut and run at the first opportunity.

Bad things happen.

There's never been a venture-funded company where bad things didn't happen.

So know that you're committed to the very end.

You've got to have vision to see where this is going.

I don't want another "me too" product.

I want somebody who can change the world out there.

But on top of that, I need realism,

Because while changing the world is great, it doesn't always happen.

And before you get to change the world,

bad things are going to take place;

you have to deal with that.

And you have to have rational projections.

Finally, you're asking for my money --

not just because it's my money, but because it's me.

You need to be coachable.

I need to know you have the ability to listen.

We've had a lot of experience.

People who are VCs or angels investing in you have had experience,

and they'd like to know that you want to hear that experience.

So how do you convey these 10 things in 10 minutes without saying them?

You can't say, "I've got integrity, invest in me!"

You've got to do a whole pitch that conveys this without conveying it.

Think about your pitch as a timeline.

It starts off, you walk in the door.

They know nothing whatsoever about you.

You can take them on an emotional -- all pitches, all sales presentations,

are emotional at some level.

You can go up, you can go down, right?

And it goes from beginning to end.

You walk in, the first thing you've got to do,

the overall arc of your presentation, it's got to start like a rocket.

You've got maybe 10 seconds --

between 10 and 30 seconds, depending on how long the pitch is --

to get their attention.

In my case, I've invested.

I've gotten millions of dollars from PowerPoint pitches.

"I've invested millions." That should get you right there.

This can be a fact or something counterintuitive.

It can be a story or an experience.

But you've got to grab their emotional attention, focused on you,

within that first few seconds.

And then from there, you've got to take them

on a very solid, steady, upward path, right from beginning to end.

Everything has to reinforce this.

And you've got to get better and better and better,

revving up to the very end,

then you've got to -- boom! --

knock them out of the park.

You want to get them to such an emotional high

they're ready to write you a check, throw money at you,

before you leave.

How do you do that?

First of all, logical progression.

Any time you go backwards, any time you skip a step --

imagine walking up a staircase where some of the treads are missing,

or the heights are different.

You stop, you need to figure out a nice, logical progression.

Start with what the market is: Why are you going to do X, Y or Z?

And then you've got to tell me how you're going to do it,

and what you're going to do.

And it's got to flow from beginning to end.

You've got to let me know there are touchstones,

to tie in to the rest of the world out there.

For example, reference companies I've heard of,

or basic items in your business.

I want to know about things that I can relate to:

validators, or anything that tells me somebody else has approved this,

or there's outside validation.

It can be sales; it can be you got an award for something;

it can be people have done it before;

it can be your beta tests are going great, whatever.

I want to know validation -- not just what you're telling me,

but that somebody or something else out there

says this makes sense.

And then, I'm looking for the upside; I need a believable upside.

That's two parts; it's got to be upside and believable.

The upside means if you tell me that five years out,

you're making a million dollars a year, that's not really upside.

Telling me you'll be making a billion dollars a year --

that's not believable.

So it's got to be both.

On the other hand are things that take the emotional level down.

You have to recover from those.

For example, anything that I know is not true.

"We have no competition. Nobody makes a widget like this."

Odds are I know somebody who's made a widget,

and the minute you tell me that,

I discount half of what you're saying from then on.

Anything I don't understand,

where I have to make the leap myself, in my own head,

will stop the flow of the presentation.

So you've got to take me through like a sixth-grader --

dub, dub, dub -- but without patronizing me.

And it's a very tricky path.

But if you can do it, it works really well.

Anything that's inconsistent within your concept --

if you tell me sales of X, Y or Z are 10 million dollars,

five slides later, they're five million dollars ...

One may have been gross sales, one may have been net sales,

but I want to know that all the numbers make sense together.

And then, finally: anything that's an error or a typo,

or a stupid mistake or a line that's in the wrong place --

that shows me that if you can't do a presentation, how can you run a company?

So this all feeds in together.

The best way to do this is to look at our betters,

people who have done this before.

Let's look at the most successful technology executive in the business,

and see how a presentation goes.

Bill Gates's PowerPoint presentation over here.

Here's Gates doing a thing for Windows.

Is this how to do a PowerPoint presentation? What do you think?

No. Who do you think we should look at as our role model?

Oh, isn't that funny! There's another great one over here.

OK, Steve Jobs.

You want absolute -- this is the Zen of presentation, right?

Here he is, one little guy, black jeans and stuff,

on a totally empty stage.

What are you focusing on?

You're focusing on him! This is Steve Jobs.

So are these wonderful long bullet points, whole list of things good?

No, they're not. The long bullet points are bad.

What's good? Short. Short bullet points.

But you know what? Even better than short bullet points are no bullet points.

Just give me the headline.

And you know what?

How many bullet points does Steve Jobs use?

Basically, none.

What do you do?

Best of all, images. Just a simple image.

I look at the image; a picture's worth a thousand words.

You look at the image and you've got the whole thing.

Then you come back to me; you're focused on me, why I'm such a great guy,

why you want to invest, why this all makes sense.

That said, we only have a very short time,

so let's run through the things to include in your presentation.

First of all, none of these big, long-titled slides

with blah, blah, I'm presenting to so-and-so on X date.

I know the day, I know who I am -- I don't need all that.

Just give me your company logo.

I look at the logo, and it ties it to my brain.

Then I come back to you. I'm focused on you, OK?

You give me your quick, 15-second or 30-second intro, grab my attention.

Then you give me a quick business overview.

This is not a five-minute pitch. This is, you know, two sentences.

"We build widgets for the X, Y, Z market."

Or, "We sell services to help do X." You know, whatever.

And that is like the picture on the outside of a jigsaw puzzle box.

That lets me know the context.

It gives me the armature for the whole thing you'll be going through;

it lets me put everything in relation to what you've told me.

Then you've got to walk me through, show me who your management team is.

I want to know the size of the market. Why is this market worth getting at?

I want to know your product, that's very important.

Now, this is not a product pitch or sales pitch.

I don't want to know all the ins and outs, just what the heck is it?

If it's a website, show me a screenshot of your website.

Don't do a live demo. Never do a live demo.

Do a canned demo, or something that lets me know

why people are going to buy whatever it is.

Now that I know what you're selling,

tell me how you make money on it.

For every X you sell, you get Y, or services of Z.

I want to know what the business model is on a per-unit basis,

or for the actual product you're selling.

I want to know who you're selling to in terms of customers

and if you have any special relationships that will help you,

whether it's a distribution relationship or a producing partner.

Again, validation.

This helps to say you're bigger than just one little thing over here.

But everybody has competition.

There's never been a company with no competition,

even if the competition is the old way of doing something.

I want to know exactly what your competition is,

and that will help me judge how you fit into the whole operation.

I want to know how you're special.

I know what your competition does --

how are you going to prevent them from eating your lunch?

All this ties into the financial overview.

And you can't do a VC pitch without giving me your financials.

I want to know a year or two back, or as long as you've been in existence.

And I want to know four or five years forward.

Five is a bit much. Probably four.

And I want to know how that business model, on a product basis,

will translate into a company model: How many widgets will you sell?

You make X amount per widget. I want to know what the driver is.

We'll have 1,000 customers this year and 10,000 the next,

our revenues will do this and that.

That gives me the whole picture for the next several years

into which I'm investing.

And I want to know how the money from me will help you get there.

You're going to open an offshore plant in China,

you're going to spend it all on sales and marketing,

you're going to go to Tahiti, whatever.

But then comes the ask, where you tell me how much you want.

You're looking for 5 million -- at what valuation?

Two million? 100,000?

What's the money in so far? Who invested?

I hope you invested -- if you can't invest in your own thing, why should I?

So I like to know if you have friends and family,

or angel investors, or more VCs before.

What's the capital structure up until this point?

Finally, having done all that, you've now told me the whole thing,

so now you bring it back to that conclusion.

This is that rocket going up.

Hopefully everything has been positive.

And everything you say clicks, it all makes sense.

And I'm thinking, "This is really great!"

Then you take me back to just your logo on the screen.

And I look at the logo -- OK, good.

Now I come back to you. Nothing else to look at, right?

Now you've got to wrap it up to give me the final -- boom! --

the final pitch that's going to send me into space.

Now, in the process of doing this,

how do you remember the sequences and do it?

You've noticed I'm not looking at the screen, right?

The screen is in front of me,

so I couldn't even see if I wanted to.

So how do I know what's going on?

Well, I have a laptop in front of me.

You're looking at me and at this.

What am I looking at?

You think that I'm looking at that?

No, I'm looking, actually,

at a special version of PowerPoint over here,

which shows me the slides ahead and behind, my notes,

so I can see what's going on.

PowerPoint has this built into every copy of it that's shipped.

If you use Apple's Keynote, it's got an even better version.

There's another program called Ovation you can get from Adobe

that they bought last summer,

which helps you run the timers and lets you figure out what's going on.

So, here's my wrap-up to take you to the moon, right?

I usually do a Top 10, but we don't have time,

so: David's Top Five Presentation Tips.

Number five: always use presenter mode,

or Ovation, or presenter tools.

It lets you know exactly where you're going,

helps you pace yourself, gives you a timer, the whole bit.

Number four: always use remote control.

Have you seen me touch the computer? No. Why not?

Because I'm using remote control. Always use remote control.

Number three: the handouts you give are not your presentation.

If you follow my suggestions,

you'll have a very spare, Zen-like presentation,

which is great to convey who you are and get people emotionally involved,

but not good as a handout.

You want a handout that gives more information; it has to stand without you.

Number two: don't read your speech. Can you imagine?

(Reading) "You should invest in my company ... "

It doesn't work.

And the number one presentation tip: never, ever look at the screen.

You're making a connection with your audience,

and you always want a one-on-one connection.

The screen should come up behind you

and supplement what you're doing, instead of replace you.

And that is how to pitch to a VC.