Attracting Equity Capital

Private equity investors expect entrepreneurs looking for equity financing will explain their business. But investors equally want to hear how they will profit and when. Essential that you discuss all 10 points in brief or detail. Have three versions ready to go:

1. verbal 30-second "elevator pitch"
2. 2 page executive summary and
3. 10 PowerPoint slides in 15 minutes

Overall: It is vital to know your audience and tailor the presentation to them. Provide an "example use" or "story" about the product or service that is relevant to the audience. Communicate enthusiasm and vision for business's potential and uniqueness.

1. Introduce yourself, your company and your company stage of development in one sentence.
2. The Need: Explain very clearly what the market pain or need is and who will pay.
3. The Business: Very succinctly describe how: a) you meet this market need profitably and is your business unique with a painkiller "must-have" or a vitamin "nice to have" solution? b) summarize the substantial benefits and/or payback period for the buyer. If investors don't understand the value-to- buyer proposition, you have lost them.
4. Investors invest not in business plans, but in Management teams that can execute business plans. Briefly tell them about the 3 key people (managers, directors or advisors) that will implement the business plan, deliver the profits and increase shareholder value. Explain their knowledge, relevant experience, successes & failures and motivations in joining the company. Identify the management gaps, the recruitment plan and can a qualified investor play a role?
5. What is your Product or Service? Briefly show your product/service so that it is not just a concept. Explain it in terms that your audience will understand by comparing to something recognizable - like a similar, but significantly less technical product. Focus on the value created and who pays and why. Do you have sales or contracts pending that will validate market acceptance?
6. Do you have a clear Competitive Advantage that can be sustained over 5 years? What are your advantages over competitors, what patents and trademarks, uniqueness, exclusivity? What is the payback period? What is your unique selling proposition that will stick in peoples' minds? Explain the strengths and weaknesses of competitors. Will you dominate your market?
7. Identify and quantify the Market and its growth rate with clear third party market data. How will you reach the identified primary market, how much time and resources are required to obtain a sale. How long before buyer pays? Your market share will be?
8. Summarize your mid-case Financial Projections. Identify your burn rate, time to breakeven and your conservative gross margin. Identify who is doing the accounting and why the firm has a fiscally responsible operating culture. Naming the largest business risk establishes credibility. Always communicate the investment opportunity.
9. Specify the funding amount required and purpose to be used in 3 main ways. Know the range of funding that your target investor usually would consider. Don't ask a private investor for $1 million, or an institutional venture capital firm for $500,000. Outline your milestone objectives and funding needed to achieve each one.
10. Know your development stage and what Return on Investment that investors expect for that stage of risk. What ROI per annum are you offering? Value your company calculated 3 different ways as it is absolutely critical that valuation is realistic. But investors will determine final value.
11. How will the investors monitor the company and their investment? What is the realistic and likely exit strategy for the investors in 4-7 years? Shhhh! Just listen carefully to the investor tell you what you need to do to get their money.
Bob Chaworth-Musters initiated in 1997, the BC Angel Forum (www.ANGELforum.org) where companies present to private equity investors. He is a Board Director of Canada's National Angel Organization. October 31 is the company registration deadline for the 16th Angel Forum on November 22 in Vancouver.