That's one of the reasons Rose offers free one-on-one pitch coaching sessions to entrepreneurs invited to present their companies to his group. "I hate seeing companies that have good ideas and great things but can't make a pitch," says Rose. And sloppy pitches can slow down angel groups such as Rose's. At the end of a presentation, the angels want to be evaluating a company as a potential investment -- they don't want to be puzzling over what the company really does.
Rose, a fast talker with a keen eye for detail, jokingly calls himself a "pitch professor." But he knows what he's talking about. He has made hundreds of pitches himself, raising more than $75 million while a serial entrepreneur. "I can pitch in my sleep," he says. He hears more than 500 pitches each year as a member of New York Angels and for his own investment fund, New York-based Rose Tech Ventures.
In August, BusinessWeek SmallBiz sat in on three of Rose's coaching sessions. The entrepreneurs gave 15-minute presentations. Rose then condensed, clarified, and brought them up to snuff. "At the end of this I will open my head and tell you exactly what I'm thinking," he told one CEO. "If I think it's bullshit, I'll call you on it. If I think it's great, I'll tell you." Here's what we -- and they -- learned.WHERE'S THE MONEY?
First up is David Roache, CEO of Waltham (Mass.)-based Jarg. Five-person Jarg -- as in jargon -- has a search engine that analyzes questions posed as complete sentences, then looks for answers in multiple public and proprietary databases. Three hospitals and pharmacies are testing the software, using it to search drug information and medical records. Roache says Jarg can also be used by financial, legal, and other companies.
Roache wraps it up in 15 minutes. Rose is impressed, because most pitches run long. But he finds several problems. First is jargon. Rose tells Roache that using words like "ontologies" and "rich semantic fragment index" when describing how the search engine works doesn't clarify what the company does or how it's different. The angels -- like most investors -- are a "very smart layman's audience, but they don't know your business," says Rose.
Roache also fails to explain Jarg's business model, which relies mostly on subscription fees for software and database maintenance. Rose is livid. "Hello, I'm an investor, I don't care about ontologies. I care about financials!" he says. "I don't know why a strategic company is going to buy you because I don't know where the money is."
Rose also notices a flaw in Roache's fund-raising strategy -- to raise $1 million now and another $1 million in 12 months. Rose advises him to instead ask for a $2 million commitment from investors who would provide some cash now and the remainder after Jarg reaches certain milestones. "You might as well raise the whole thing now, otherwise you're in fund-raising mode [for the next two years] instead of building a product," he says.NO WEASEL WORDS ALLOWED
The next presenter, Charles Miller, CEO of Constellation Services International in Los Angeles, has an unusual proposition. CSI makes a standardized cargo container for delivering supplies to the international space station. Miller wants to raise between $500,000 and $1 million to help his four-employee company win a contract from NASA that could be worth as much as $300 million. If the company gets the contract, expected to be awarded late this year, Miller intends to sell CSI to the highest bidder. If not, he'll close up shop.
But Miller waits until his last slide before explaining the nature of the deal's payoff to investors. Rose tells him to make this point crystal clear right away. "You either get the contract or you don't," he says. "Make no bones about it." Miller also has to be much more direct about CSI's chances. In his pitch, Miller said NASA has "demonstrated willingness" to award CSI the contract, and quotes a NASA executive as saying, "You are just about right." That wasn't enough for Rose. "Those are what I would call weasel words," he says. "It's better to say 'I don't know' solidly than 'yes' smushily."
Rose then suggests that Miller remove two confusing slides -- one a detailed graphic of CSI's cargo container and the other a description of how it would dock at the space station. Miller would be more effective, says Rose, explaining how the container works while a simple animation of the process plays on the screen behind him. "Your technology is complex," he says, "but the concept is easy to understand."CUTTING TO THE CHASE
The final presenter is the COO of a wireless information technology company. (He asked to remain anonymous because he is currently negotiating with a venture capital group.) The company has a successful retail product, which brought in more than $2 million last year. Now the company needs $1 million to move from a retail to a licensing model. The COO, a high-tech veteran, has made hundreds of pitches -- including at least 50 in the past year. But when he pitches to Rose, he tries to jam an hour-long VC presentation into 15 minutes. The result is jumbled and confusing.
Rose tells him to slow down. "Your speech patterns are faster than mine, and I'm from New York," he says. "Think serene, think simple." He replaces more than half the presentation's 1,700 words with product pictures and other graphics, telling the COO to use them to reinforce his verbal explanations. "When I'm looking at text, I'm not looking at you, and that's not a good thing," explains Rose. When text is absolutely necessary, Rose uses the "build" function in PowerPoint to help investors focus on one line at a time. "I'm a big fan of builds," he says. "You have to give people time to process this stuff."
Rose reorganizes the presentation, slide by slide, to create a narrative of the four-year-old company's evolution from creating an innovative retail product to a more lucrative licensing model. "Boom! Boom! Boom! It's a rolling- thunder type thing that gets them all jazzed up by the time you finish this," says Rose. The COO's original presentation concentrated on the company's management, but Rose shifts the focus to the board of directors, which includes a well-known new-media icon who has already invested. "Play [the icon] for all he's worth," he says. "The fact that [he's] putting his cash in is really good."
After the pitch, the COO mentions he'd left out that XM Satellite Radio and Microsoft have expressed interest in buying the company. "I'm not sure if that helps or spooks investors," he says. Rose tells him to include it, because it hints at a possible exit strategy.A HUGE LEAP
The next week, pitching to the assembled Angel membership, Jarg's Roache appeared more confident and capable. But despite Rose's advice, he was unable to convey the unique difference in his company's search engine. "He seemed like a smart guy, but I had no idea what he was talking about," said one investor after the pitch. Says Roache, "I think we got enough people interested that now they're taking a look."
Miller was somewhat more successful. He grabbed the room's attention with his first slide, which spelled out CSI's unusual deal. The animation of CSI's cargo container docking with the space station was so clear that investors spent the session following the pitch asking about financial details, rather than grappling with what the company does.
And the wireless COO's pitch made a huge leap. Now easy to follow and visually appealing, it did its job. One impressed angel wanted to know why the company hadn't already received funding. And nearly every angel in the room expressed interest in investing. By Michael Patterson