Fund Raising Presentation Revisisted:There should be a course taught to all engineers and would-be entrepreneurs that would show them what should be in a presentation for raising venture funding. Actually it could be just one lecture, as the topic isn't really all that complicated. To illustrate my point, I'll make a quick pass as what the lecture would look like here:

Objective: The objective of the entrepreneur should be to get the Venture Capitalist to want to fund the company, which is often a committee decision rather than just that of an individual partner. The committee is there to make sure that all aspects of the investment have been considered and that the idea just isn't some individual partner's wild idea of the moment. At least in the firms that I've worked with, the process is a structured one where a "deal memo" is usually created, presented and defended in a full partnership meeting. The advantage of this process is that multiple people look at the merits of the deal, independently of what they think of the founders or the investment space in general. This unbiased, objective review generally sets a bar high enough that half-baked or too risky ideas don't get through. Thus, the goal of the entrepreneur should be to supply everything that the VC needs for a deal memo in his first presentation. The only problem is that there is no fixed format for these deal memos, or agreement as to what their contents are. To help deal with this situation, I've included an outline with some comments about the kinds of deal memos that I'm used to preparing and reviewing. Hopefully this will help entrepreneurs prepare more adequately.

Fund Raise Presentation Outline:

  1. Summary - try to make this into a one page "fact sheet" - do it last
    1. Stage of company
    2. Founders
    3. Market
    4. Technology
    5. Competitive landscape
    6. Customer base
    7. Finances
    8. Fund raising status
    9. Likely Deal Terms - put down your wishes here, but don't be too unrealistic

  2. Team - don't get too verbose here, just keep it to relevant experience
    1. Execs: Few line history of relevant work history; Bullet for employment history.
    2. BOD: Who they are, affiliations, value-add
    3. TAB: Who they are, affiliations, value-add
    4. Service Providers

  3. Products
    1. First product
    2. Second product
    3. Product Roadmap
    4. Alternatives & hedges

  4. Market
    1. Forecasted major market trends - what are the "mega-trends" and why is this changing the industry
    2. Initial market and size - what are customers spending today and why
    3. Future markets
    4. Industry analysts that are referencable
    5. Note 1: Many VCs, myself included, don't like market risk. The usual case for emerging markets is that the entrepreneur is correct in that the market will change, but almost always they are way off in terms of how long it will take to change. Usually its the case that they are 5-10 years too early. This makes it a non-starter for a VC investment where the life of the fund might only have 5-6 years remaining.

      Note 2: Most VCs don't want to bother with small markets, so they set a minimum size and growth rate combination. Typical numbers might be a $1B market size currently with a 2x industry average growth.

  5. Technology
    1. Description
    2. Uniqueness
    3. Risk
    4. Critical suppliers & Partners
    5. Patents
    6. Technology experts that are referencable

  6. Customers
    1. Who they are and how many (watch our for concentrated buying power)
    2. Industry Food-chain
    3. How profitable are they (watch out for price pressure)
    4. Observation: Some businesses enjoy high margins - not just because they have unique products with lots of Intellectual Property value. The other factor that is often under appreciated is how concentrated the customer base is. Take the case of analog RFICs for the cell phone industry. Normal intuition would say that with such a large market (1 billion units per year and continuing to grow) along with the "black-art" of RF chip design would make this market very profitable for start-ups. The missing factor is that there are only about 5 or 6 big customers and they have further constrained the market by requiring radio chip vendors to work with only two or three different baseband chip providers. The result has been 10's of venture backed companies that have never made any money. Contrast this with the low-end of the mixed signal market, dominated by companies such as Linear Technology or Maxim. Their products are not nearly as complex as a cellular radio chip, but they have much higher margins - mainly because they have 1000's of customers instead of just a few. This is an important lesson in buying-power.

  7. Competitors - this is commonly the most neglected portion of any plan
    1. Who they are and how many (competitive pressure)
    2. Industry Food-chain (threat from upward or downward integration)
    3. How profitable are they (price pressure)
    4. Note: This section is critical, as if you don't do a good job here, you can really lose credibility. If the VC knows more about the competitive landscape than you do - prepared to be roasted, or at least plan on finding funding from someone else. The last thing a VC wants to do is to invest in someone who doesn't know what they are up against.

  8. Milestones
    1. Technology risk reduction steps
    2. Market risk reduction
    3. CFBE
    4. Table of Measurables vs. time (progress, revenue, heads, burn rate)

  9. Risks
    1. Technology
    2. Operational
    3. Marketing
    4. Team
    5. Competitive
    6. Geographic (multiple sites, needing to relocate, ...)
    7. Financial

  10. Finances
    1. Funding required (current & future)
    2. Operations
    3. Revenue Model with GPM%s
    4. Cap Table with option pool
    5. Comparable companies and liquidity events
    6. Exit strategy

  11. Investment Thesis
    1. One paragraph summary of why this investment is going to be a home run

Conclusion: Hopefully this will help out in raising your next round of funding. Try to keep the presentation to about 25 charts with real content (title pages and back-up materials don't count). Make sure it is complete and good luck hunting!