What ever happened to the business plan? What do investors need to see to invest? What are automatic deal killers? These are just some of the thoughts that were floating around the room at the Quorum’s monthly Coffee & Capital session.
This session featured Dr. Shahram Hejazi, a venture partner at BioAdvance. BioAdvance is an evergreen, non-profit fund that invests in early-stage BioTech/BioPharma/Health-IT companies. Dr. Hejazi provided insightful answers to the above inquisitions.
Hejazi cut to the chase on what investor’s are looking for. He noted that since angels invest in about only 1%-3% of the companies they see, investors are looking for reasons not to invest, thus making it easier to sort through.
So, generally, what are some of these deal killers?
- Not having an exit strategy (remember that angels are looking for returns on their investment, that means getting the company to a successful exit)
- Naivety for your market, i.e. stating that you have no competition ( if there aren’t others in your market, there’s probably a reason), under-estimating your competition (is your space too saturated?), you should list your competitors and then explain/illustrate why your product or service is better
- Inability to present your product/service ( investors are seeing less and less formal business plans, and more and more pitch decks, which are short power point presentations designed to effectively and efficiently communicate your “business plan”) Hejazi pointed out the theory of quality vs. quantity in a plan, “it’s not the length of time or document that matters-I’ve gotten more info from a 3 minute pitch than a 45 min. presentation”.
You obviously can’t provide every single detail about your company in a 15-20 minute pitch deck, but you don’t have to. The pitch deck should give the investors just enough information to keep them asking questions and wanting to know more. If you’ve peeked their interest, you will get to present all those tiny details through the due diligence process.
Then, what should the pitch deck definitely include?
- Why are you asking for money? (It may seem obvious, but you should evaluate and analyze exactly why you are asking for money from this specific investor or angel group, if you don’t know why you are asking for money than you won’t be able to convince anyone to give it to you)
- Where is that money going to go? (Be sure to explain how this investment will move your project forward and why having this investment is crucial for that to happen)
- What is your exit plan? (Again, you should be thinking about the space/companies that would have interest in acquiring your company)
- What are you revenue models and how successful or unsuccessful have they been? (Include projections into the future of what you estimate your financials will be)
Remember to do your research when presenting your pitch. What type of investors will you be pitching to? Tailor your pitch to your audience, but make sure to include the key points.