Among investors, there’s a premium placed on the selling and presentation skills of the founder or CEO. Investors in private companies know their payday will only occur if the CEO or founder can sell the company or take it public. Investors in public companies want to know the CEO can continuously attract new investors that will offer them the liquidity they need to get out.
This is why you hear investors say things like: “I’d rather invest in a really good company where the founder/CEO ‘gets it’ than a great company run by a physicist.” And so, it this one regard, style actually does finally win one over substance.
With this in mind, here’s a list of common mistakes CEOs and entrepreneurs make when trying to pitch their deal to investors.
TMI vs TLI. Frequently, CEOs say too much or too little. On balance I’d suggest saying too little is better than saying too much. Saying too much challenges attention spans. Further, it increase the chances of saying something that pricks regulators ears, or worse, the imagination of short sellers. Saying too little can be overcome with appropriate responses during the Q&A following the presentation.
Live product demonstrations. These have a knack for failing at just the wrong moment.
Droning. Granted the technical aspects of a company’s product or service are important — inasmuch as they deliver competitive advantages, open new markets, or change the balance of power in an existing one. Beyond that, investors don’t care, at least at an initial meeting. Remember, time spent on science means less time selling the deal. Exception: When an investor is on-site, really kicking the tires.
Poor visual support. The complexity of presenting a deal almost always requires some sort of visual support to ensure adequate comprehension. The most effective presentations are accompanied by 10 to 15 slides that punctuate the speaker’s remarks, and give the listener a constant source of context. As for the slides, each one should look like a billboard, not a novel.
Attitude. A lender will tolerate arrogance. After all, if a company can repay a loan, it can repay a loan and who cares who how its CEO acts? On the other hand, equity investors will not tolerate a bad attitude because they see themselves as partners not lenders. The thinking goes, “If my money’s in the company, the founder’s got to be ready, willing and able to take my input, period.” This kind of thinking extends into boardrooms of even the largest public companies as activist investors urge share buybacks, dividend hikes, mergers, acquisitions and divestitures.
Questions. The most important part of any presentation comes at the end, when the CEO or entrepreneur faces questions from investors. These questions give the investor the opportunity to drill down to see just how carefully the CEO or entrepreneur is running the business. Worst Q&A gaffe: Making investors feel their questions are, well, not very intelligent. As a corollary, remember smart, well informed investors ask smart, well informed questions. Less informed investors ask dangerous questions. Regardless of whether a question is well informed or not well informed, a good answer is always required.