David Mamet fans will recognize the title from one of the more memorable lines in Alec Baldwin’s “pep talk” speech to a slumping sales team in Glengarry Glen Ross. I bring this up in the wake of sitting through back to back pitches this week where companies failed to make evident what was being sought from the discussion. As Fred Wilson discussed in his recent post on the subject, it is critical for start-up teams to, for lack of a better term, ‘ask for the order.’
Asking for the order simply means laying out for investors what you are asking of them. One would be surprised at how many flashy, full-color presentations a venture investor receives in a given week where what is being sought is not made clear in the materials. Countless hours are invested by a management team in a good set of investor documents. In many cases, a full set of integrated financial statements, an exhaustive analysis of the competitive landscape, and projections so detailed that the itemization of the number of staplers for the admin pool in the year 2011 is provided. Unfortunately, what is often omitted in all this superfluous detail is how much in funding the company is seeking, in what form, and how those funds will be allocated.
Every 8th grader remembers the building blocks of English Composition. Every course inevitably presented a maxim that, broadly speaking, went something like this: Tell them what you’re going to tell them; tell them; then tell them what you’ve just told them. Tangential to this maxim was the part in every good term paper that was referred to as the ‘Call to Action.’ What is it, dear author, that you are requiring of your reader? What are you asking of them?
These same principles, although admittedly a bit broad and simplistic, still apply in a general sense to a good investor presentation. Re-inventing the wheel is not necessary. Some of the best presentations I have ever seen were less than ten slides and had no whiz-bang graphics. Indeed, I have come to believe that longer presentations are not at all desireable unless there is a very specific reason when a longer presentation is necessary. Few companies meet that criteria.
So, in summation, I recommend that before start-up teams send off their documents or book a meeting with an investor, be sure that what is being sought is made abundantly clear in the documents. Most likely, it took you a great deal of time and effort to get an all-hands meeting at that venture capital or angel fund. Don’t blow it – as they would say in the newspaper business — by “burying the lead.” Put yourself in the place of a venture investor and ask yourself the following: How much are you seeking? How did you arrive at that number? What will that capital allow the company to accomplish? How far will it take the company? What are the milestones tied to that capital? [i.e. how will I, the investor, know that you have met your projections and objectives?]
Clearly, investors will have a great many more questions, but be sure that, at a minimum, the above questions are clearly addressed. Closing a round requires many elements too numerous to itemize and address in a single post. That said, no closing is likely to occur when the objective is vague and the path forward muddled and undefined.