Crafting a compelling investor briefing

Crafting a compelling investor briefing

The Investor Briefing Document is your first introduction to a potential investor. The purpose of the Investor Briefing Document is to sell, not to describe. It’s therefore critically important that you create the right first impression.

You do not need to explain the entire business plan in 250 words. You need to convey its essence, and its energy. You have about one minute to grab an investor’s interest. You want to be clear and compelling. As the old saying goes, ‘you never get a second opportunity to make a first impression’.

Here are the key components that should be part of your Investor Briefing Document:

1. The Grab

You should lead with the most compelling statement of why you have a really big idea. This sentence (or two) sets the tone for the rest of the Brief. Usually, this is a concise statement of the unique solution you have developed to a big problem. It should be direct and specific, not abstract and conceptual. If you can drop some impressive names in the first paragraph you should—world-class advisors, companies you are already working with, a brand name founding investor. Don’t expect an investor to discover that you have two Nobel laureates on your advisory board six paragraphs later. He or she may never get that far.

2. The Problem

You need to make it clear there is a big, important problem (current or emerging) you are going to solve, or opportunity you are going to exploit. In this context you are establishing your Value Proposition—there is enormous pain and opportunity out there and you are going to increase revenues, reduce costs, increase speed, expand reach, eliminate inefficiency, and increase effectiveness, whatever. Don’t confuse your statement of the problem with the size of the opportunity (see below).

3. The Solution

What specifically are you offering to whom? Software, hardware, services, a combination? Use commonly used terms to state specifically what you have, or what you do, that solves the problem you’ve identified. Avoid acronyms and don’t waste the few words you have here to ‘sound smart’. Write so that a 12-year-old would understand it. Don’t create a bunch of terms that won’t mean anything to most people. You might need to clarify where you fit in the value chain or distribution channels—who do you work with within your sector, and why will they be eager to work with you. If you have customers and revenues, make it clear. If not, tell the investor when you will.

4. The Opportunity

Spend a few more sentences providing the basic market segmentation, size, growth and dynamics—how many people or companies, how many dollars, how fast the growth, and what is driving the segment. You will be better off targeting a meaningful percentage of a smaller, well-defined, growing market than claiming a microscopic percentage of a huge, heterogeneous, mature market. Don’t claim you are addressing the $24 billion widget market, when you are really addressing the $85 million market for ‘specialized arc-widgets used in the emerging wocket sector’.

5. Your Competitive Advantage

No matter what you might think, you have competition. At a minimum, you compete with the current way of doing business. Most likely, there is a near competitor, or a direct competitor that is about to emerge. Understand what your real, sustainable competitive advantage is, and state it clearly. Do not try to convince investors that your key competitive asset is your “first mover advantage.” Here is where you can articulate your unique benefits and advantages. You should be able to make this point in one or two sentences.

6. The Model

How specifically are you going to generate revenues, and from whom? Why is your model leverage-able and scalable? Why will it be capital efficient? What are the critical metrics on which you will be evaluated— customers, licenses, units, revenues, margin? Whatever it is, what impressive levels will you reach within three to five years?

7. The Team

Why is your team uniquely qualified to win? What have you done in the past that is relevant to the future success of this project? Don’t just regurgitate a shortened form of each founder’s resume; explain why the background of each team member fits. If you can, state the names of brand name companies your team has worked for. Don’t drop a name if it’s an unknown name, and don’t drop a name if you aren’t happy to give the contact as a reference at a later date.

8. The Promise

When you’re pitching to investors, your fundamental promise is that you are going to make them a truckload of money. The only way you can do that is if you can achieve a level of success that far exceeds the capital required to do it. Your Summary Financial Projections should clearly show that, but if they are not believable then all of your work is for naught. You should show at least three years of revenues, expenses, losses/profits, cash and headcount. You should also show a key driver or two, such as number of customers and units shipped each year.

9. The Ask

This is the amount of funding you are asking for now. This should generally be the minimum amount of equity you need to reach the next major milestone. You can always take more if investors are willing to make more available but it is hard to take less. If you expect to be raising another round of financing later, make that clear, and state the expected amount.

You should be able to do all this in six to eight paragraphs, possibly a few more if there is a particular point that needs emphasis.

You should be able to make each point in just two or three simple, clear, specific sentences. This means your Investor Briefing Document should be about two pages, maximum four. Some people say it should be one page, however most investors find that there is not enough information in one page to understand and evaluate a company.

Please remember the outline above should not be applied rigidly or religiously. There is no template that fits all companies, but make sure you touch on each key issue. You need to think through what points are most important in your particular case, what points are irrelevant, what points need emphasis, and what points require no elaboration.

Some other general points:

  • Don’t acronym your own name. “Virgin Blue” did not build its brand so quickly by calling itself “VB.”
  • Avoid phrases and adjectives that sound impressive but carry no substance. Everybody thinks their market is “enormous”, their software is “intelligent”, their application is “easy-to-use,” and their financial projections are “conservative.”
  • State your value proposition and competitive advantage in positive – not negative – terms. It is what you can do that is important, not what others are unable to do.
  • Use analogies to explain and benchmark your model, as long as you are clarifying rather than hyping…ABC Childcare was described as the McDonald’s of the child care industry.
  • Don’t lie. You would think this goes without saying, but too many entrepreneurs cross over the line between passionate enthusiasm and fraudulent misrepresentation.
  • Go back and reread each sentence when you think you’re done: Is each sentence clear, concise and compelling? Ask yourself how you can reduce each and every sentence by 25%.
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