Always New Mistakes

October 4, 2008

6 things you shouldn’t do when pitching a VC

Filed under: entrepreneur — Tags: , , , , — Alex Barrera @ 2:02 pm

Very recently I had the change to listen to several pitches presentations and I understood many of the critics VCs and Angels say about them. When you’ve listen to 3 in a row you start to see a pattern. The following are a couple of lessons I learned by doing my own pitch and listening to the rest.

  1. Do NOT add a balance sheet and/or cashflow analysis slide if you haven’t been asked for. First of, the slide will probably be crowded with numbers which the VCs won’t have time to read. Secondly, balance sheets should be in the business plan so there is no need to show them in a 20min pitch. And finally, adding that information is just looking for problems. If by any chance you screw up your numbers (which you have a fat chance to) and a VC notices it you’ll won’t look good.
  2. Add the amount of investment you are looking for and from whom. This was my personal bad, I forgot to add a slide with the amount I needed to start my company and what type of investors I was looking for. Theoretically you wouldn’t need to add the type of investor as if you are pitching to one, you’ve already chosen, but in my case it was an heterogeneous jury so I got asked.
  3. Ugly presentation design does matter. A presentation pitch isn’t just some random slides where you show your business idea, it’s your brand. In the same way you carefully choose your cloths (or at least you should) when giving a presentation, you should carefully choose your slide design. Please, avoid using canned designs, when you listen to 10 presentations a day, trust me, you can tell when it’s canned. Avoid using ugly color combinations like blue background with yellow letters or standard MS Word titles (yeah, you know which ones I mean, the rainbow title!). And for god sakes, don’t use pixalated images.
  4. Answer the question. This might seem straightforward but what I saw is that most of the time, the CEO is so nervous that when asked a question they answer something completely different with no connection what so ever with what they had been asked. This makes you look bad, makes you look as if you didn’t listen or didn’t understand the question, or both.
  5. Don’t tell the story of your company. I’m sure you wrote it in the business plan, no need to add a slide about it. Investors want to hear the problem and the solution, not your fancy background which I’m sure it’s interesting, but not for a 20min pitch.
  6. Do NOT show fancy market size graphs. This is something Guy Kawasaki stresses and I agree with him. All presentations tend to have a slide with a graph from _insert_your_favorite_analyst_firm_here_ with the market size which, of course, is always huge and getting bigger. Simply, don’t. Throwing some numbers isn’t bad, but please, be original and avoid the “the market is huge and growing” song. And do yourself a favor and avoid any mention to the infamous “” if you don’t have detailed information to back it up.


I have to say I learned a lot by watching a couple of pitches and I now understand why VCs say what
they say. Most presentations are identical, same structure, same market charts, same texts. Be original and listen carefully to VC questions and suggestion, it will help you get better with your
presentations, at least it worked for me.

Want to add another point? Please leave a comment! And remember, if you like this blog, subscribe to the RSS feed here.

Advertisements

January 7, 2008

Valuation snowball

Filed under: Business — Tags: , , , , , , , , — Alex Barrera @ 7:17 pm

Even though investors, entrepreneurs and industry leaders say the current technological bubble is different from the one in 1999, things are starting to get out of hand:

  • SugarCRM: Raises $14.5 Million
  • Ice.com: Raises $47 Milliondollars.jpg
  • Pudding Media: Raises $8 Million
  • Meraki Networks: Raises $20 Million
  • Affinity Labs: Acquired for $61 Million
  • Moniker: Acquired for $65 Million
  • Onaro: Acquired for $120 Million
  • Apertio: Acquired for $206.5 Million
  • XIV: Acquired for $350 Million

All those deals come from last week’s Techcrunch posts. I just did a quick search at TechCrunch’s archive from 2006 and I found some interesting statistics. Lets compare the ratio of deadpooled startups in 2006 versus deadpooled startups in 2007:

Deadepooled companies in 2006:

http://www.techcrunch.com/2006/01/10/searchfox-to-shut-down/ http://www.techcrunch.com/2006/05/04/want-to-buy-a-search-engine-2/ http://www.techcrunch.com/2006/06/15/myspace-nukes-singlestatus/
http://www.techcrunch.com/2006/06/20/myspace-feeds-the-deadpool-nukes-another-startup/ http://www.techcrunch.com/2006/06/29/couchsurfing-deletes-itself-shuts-down/ http://www.techcrunch.com/2006/08/16/ajax-calendar-kikocom-goes-on-ebay-offers-to-delete-accounts/
http://www.talkcrunch.com/2006/09/06/episode-11-elliot-noss-talks-about-kiko-acquisition/ http://www.techcrunch.com/2006/09/21/exclusive-zookoda-auction/ http://www.techcrunch.com/2006/10/04/audioblogger-joins-deadpool/
http://www.techcrunch.com/2006/10/16/livelocker-calls-it-quits-enters-deadpool/ http://www.techcrunch.com/2006/12/30/rawsugar-in-deadpool/

Total: 11

Deadepooled companies in 2007: See TechCrunch post.

Total:55

Granted that counting TechCrunch posts isn’t rocket science and that might not be the most accurate data source. Nevertheless, it’s quite interesting to see that the number of companies that went out of business this year is 4 times higher than in 2006. I haven’t counted the number of launches in 2006, but I guess the number is quite smaller than in 2007 (34 of them reported by TechCrunch).

The number of millions invested in tech companies also suffered an acute increment. In 2006 the investment ranged from $3 to $15 Millions with an average investment of $12.94 Million (all data taken from TechCrunch’s archive of 2006, and don’t reflect exact numbers at all but just a quick, probably biased, approximation).

A comparison with the investments I showed at the top (an average of $22.37 Million) makes my mind blow. In 2007 the number of investments, and the total amount of money per investment grew considerably (these approximated values don’t account for Facebook’s recent investments which would only rise the average).

What is the problem with this you might think? Well, not much at first. It’s great that so many companies are getting investments. It’s a good indicator of strong economical growth in the tech industry. The problem arises when companies start getting valued higher than they really are. It’s true that it’s very hard to valuate a company, specially a dot com company with millions of users but no revenues, but some of the acquisitions and investments are just crazy.

social-bubble.png

On one side it’s great news for all entrepreneurs like myself. It’s getting easier to get investment and it’s also easy to reach a good exit deal thanks to all the acquisitions we are seeing. On the other side, it’s a dangerous situation. I reckon we won’t experience a bubble burst as big as the one in 1999, but when this trend stops we’ll have to face hundreds of deadpooled companies and many VCs will lost big amounts of cash. As a side effect, hundreds or even thousands of engineers will be laid off. I don’t like apocalyptic visions, but I’m afraid there is way too much expectation and we will suffer this. As many economist know, the market will self regulate itself. Just watch and see!

Image credit: bigmouthmedia.com

Create a free website or blog at WordPress.com.