The Best Investor Deck Ever - Finalist: Sequoia Capital

Whoa, check out this link.  Now, if all investor pitches were this smooth....

Don't sugar-coat your investor pitch

There's a natural tendency for entrepreneurs to make their investor pitch as attractive as possible, to make the potential investor get that "I can't miss this deal" feeling.  In fact, I coach entrepreneurs how to do precisely that.  However, it's equally important to be straight with your potential investors, and disclose any and all skeletons, risks, issues, concerns, etc.  It's quite disappointing for an investor to discover these when reading the next update by the CEO after the investment was made.  That ruins the credibility of the CEO in the eyes of the investment community, which could have long-range implications in future fund-raising efforts.

Do you have a start-up chicken-or-egg product?

This is a tough one.  You have a great new idea for a product or service, but no one will want it until others already have it, or a database has been created.  But a database won't get created until you have customers...a classic chicken-and-egg problem.  Examples of this include MMOGs (massive multiplayer online games), auction sites, or anything that requires a database or multiple players/participants.  If you are considering starting such a company, it is imperative that you have a solid, proven go-to-market strategy that addresses this chicken-and-egg problem.

It's really tough to provide a general solution to this issue, since it will depend on your product or service offered.  You might be able to "seed" the site with an initial list of products, or an initial list of participants.  Or, you might be able to create an initial database of phantom players just from within your company.  It will be important to make sure your customers get the feeling that you are up and running with a huge database of products/players/etc.  The point here is, make sure you have thought through this issue and have a solid plan to get through this critical launch of your product before it is needed.

The spectrum of describing your business

There are times when you will need to explain what your start-up does in full detail, and times when all you get to provide is what will fit on a bumper sticker.  So, here's my shot at the entire spectrum of forms that explain your business, from longest, to shortest:

1)  Full written business plan (some start-ups don't do this anymore)
2)  Business plan presentation (your presentation slide deck...sometimes a proxy for a written business plan)
3)  Executive summary (1-2 pages, typically the first section in your business plan)
4)  Elevator pitch (explain your business in 3-5 minutes)
5)  Mission statement (1-3 sentences that describe your company's purpose)
6)  Bumper Sticker (up to five words that describe what your company does)

So, as you move forward with your start-up, have each of these ready for whenever you need them.  Who knows, your next customer or next investor might be sharing an elevator ride with you tomorrow.

I have to write a business plan...where do I start?

Comprehensive advice on writing a business plan requires much more space than a typical blog post can provide, and there are those who even question the necessity of a true, 70-page business plan.  Today, many business plans just take the form of a slide deck (e.g., PowerPoint presentation).  But, how does one even get started?

First, identify the Problem you're trying to solve.  Don't provide your solution yet, but clearly state the problem, and the magnitude of it.

Next, provide the consequences of the Problem.  What is the current outcome of the Problem?  Again, make sure this is quantified.

Next, state your Solution.  Make sure your Solution is disruptive and revolutionary.  Just making something a little better isn't going to fly with investors.  They are looking for home runs, and you need disruptive solutions to hit home runs.

Next, state the consequences of your Solution.  And quantify this.

Once you've done the above steps, you have a great foundation for your business plan and executive summary.  Then you can go on to address the other essential topics in the business plan (market, management, competition, financials, etc.).

Angel investing is changing...does your company still look attractive?

A number of my fellow angel investors and I are finding that the "angel model" of investing just doesn't work in many cases.  We come in at an early stage, and if the company needs multiple rounds of VC investment, we are vulnerable to getting squashed...diluted to nothing, or at least watered down to the point that the return just isn't nearly what it should have been once subsequent investment "preferences," etc., are honored.  So, to make your company attractive, you either need to convince your angel-level investors that a) there really will be a significant step-up in valuation before the next round, b) there will be at most one more round of angel or VC investment after this one (this includes A-1, A-2, etc., rounds), and/or c) you really will reach profitability or cash flow break-even with the money you're raising.  Are you still an attractive angel investment?

Anti-wrinkle cream phenomenon...what?

Well, you've found that your product really doesn't work that well.  But you've found a customer who really needs your product for use in their product.  They need it because they need an "edge" over their competition...something they can use to market a new version of their product and get more market share.  In fact, your product doesn't even really have to work, but it has to be "perceived" as making a difference.  I encountered this situation once, and coined it an "anti-wrinkle cream phenomenon" (because, well, do anti-wrinkle creams really work??).  One can generalize this phenomenon to many "gimmicky" consumer products out there (just tune in to late-night infomercials for some examples).  I'm writing about this today because, while your product might sell in such a situation, do you really want to be part of a company that fakes out its customers (or customer's customers)?  Your company will be much more rewarding for you and all involved if you can build and sell a product that truly has value, and not just a placebo.