Impress Potential Investors in 12 Steps

To convince investors to fund your business, you'll need to address their chief concerns. Here's how to craft a presentation to do just that

by David E. Gumpert

David E. Gumpert has authored or co-authored seven books on business and written extensively about starting a business from scratch. The following advice on business plan presentations is an edited excerpt from his latest book, Burn Your Business Plan! What Investors Really Want from Entrepreneurs.

If you're trying to raise investment funds for an early-stage venture, one of the best opportunities is an in-person meeting with venture capitalists or angel investors. In preparation, you should develop a 20- to 30-minute slide presentation to address their most pressing questions and concerns.

To get you started, I've developed a list of 12 key questions you need to answer. I recommend devoting one slide to each question, for a presentation of 12 slides. Assuming it will take about two minutes to explain each slide, your entire presentation should take 24 minutes, which is right in the ideal range (BusinessWeek.com, 6/4/07).

I suggest you answer each question with three to six bullet points or phrases. If you can't capture the necessary details in bullet points or phrases, save them for the oral explanation you will provide for each slide. Jot down notes for each slide that will serve as the basis of your discussion. Your presentation should be more than a simple recitation of the points on each slide.

1. What is the opportunity? In other words: What is the problem you are fixing? Many Internet businesses—such as online car markets or travel agencies—aim to fix an inefficient and cumbersome market via a more open and speedy system. If it's a new problem or opportunity, investors will invariably wonder why no one has tried to fix this problem before? Or, if someone has tried, why didn't it work?

You also need to convince potential backers that there are huge premiums for solving the problem. Resist the urge to dwell on marketing studies showing annual growth of 50% for the next 200 years—investors have come to despise them—and instead provide data on the size of today's market, with various estimates of potential market growth. If the marketing data are suspect or incomplete, say so.

2. What gives you special advantages in solving the problem? Investors want to understand the competitive advantages your business brings to the marketplace. The ideal competitive advantage from their viewpoint is something proprietary—say, a patent on a new drug or important chemical or manufacturing process. A patent provides a form of government protection against imitators. Other proprietary advantages can come from trademarks and copyrights, though these are less desirable because they tend to be less protective for small companies. (A young company's trademark typically isn't well-known, and thus is less important in the marketplace than well-established corporate trademarks.) So be careful about overemphasizing trademarks or copyrights.

Another special advantage may be the experience of your management team. Simply having "a head start on the competition" isn't usually considered significant—unless you can create what are known as "barriers to entry," which make it difficult for new competitors to imitate your offering. For example, exclusive licensing agreements with corporate partners may help you create barriers to entry, and if so are worthy of mention.

3. What makes your team especially qualified to develop this business? Another way of asking this question: What makes this a business only you can do, or why is this business right for you? Investors are extremely skeptical about a team's ability to succeed, so it's best to anticipate their skepticism, and try to answer questions before they are asked.

The best answer provides evidence of past performance—not just that you started another company, but how that company fared. Many entrepreneurs gloss over this because the outcome wasn't clear-cut.