David S. Rose on pitching to VCs

Good morning. My name is David Rose. I am a serial entrepreneur turned serial investor. And by the use of pitching PowerPoints to VCs, I have personally raised tens of millions of dollars from VCs through PowerPoint pitches. And then, turning round to the other side of the equation, I have personally supervised the investment of tens of millions of dollars into companies who have been pitching me with PowerPoint presentations. So I think it's safe to say I know a little bit about the process of pitching.

So, the very first question that you've all got to figure out is: what is the single most important thing that a VC is looking for when you come to them pitching your new business idea? And there are obviously all kinds of things. There are business models, and there are financials, and there are markets and there is that. Overall, of all the things that you have to do, what is the single most important thing the VC is going to be investing in? Somebody? What? (Audience: People.) David S. Rose: People? You! That's it -- you are the person. And so therefore, the entire purpose of a VC pitch is to convince them that you are the entrepreneur in whom they are going to invest their money and make a lot of money in return.

Now, how do you do this? You can't just walk up and say, you know, "Hi, I'm a really good guy, and a good girl, and you should really invest in me." Right? So, in the course of your VC pitch, you have a very few minutes, and most VC pitches -- most angel pitches are about 15 minutes, most VC pitches should be less than half an hour. People's attention span after 18 minutes begins to drop off, tests have shown. So in that 18 minutes, or 10 minutes, or five minutes, you have to convey a whole bunch of different characteristics. You actually have to convey about 10 different characteristics while you're standing up there. What's the single most important thing you've got to convey? What? (Audience: Integrity.) DSR: Boy, oh boy, oh boy! And that's a straight line we got right over there. And I didn't even prompt him. You're right, integrity. Because that's the key thing. I would much rather invest in somebody -- you know, take a chance on somebody -- who I know is straight than somebody where there's any possible question of, you know, who are they looking out for, and what's going on. So the most important thing is integrity.

And what's the second most important thing after integrity? Let's see if you can get this one. (Audience: Self-confidence.) DSR: Close enough! Passion. Right, so here you want -- entrepreneurs by definition are people who are leaving something else, starting a new world over here, creating and putting their lifeblood into this kind of thing. You've got to convey passion. If you're not passionate about your own company, why on Earth should anyone else be passionate? Why should they put more money into your company, if you're not passionate about it? So, integrity and passion: the single most important things out there.

Then there are a whole panoply of other things that you've got to do, to wrap up in this package that you're presenting to a VC. Experience. You've got to be able to say, "Hey, you know, I've done this before." And "done this before" is starting an enterprise and creating value, and taking something from beginning to end. So that's why VCs love to fund serial entrepreneurs. Because even if you didn't do it right the first time, you've learned the lessons, which are going to stand you in very good stead the next time.

And now along with that, along with the experience of starting an enterprise, or running something -- and it doesn't have to be a business. It can be in an organization at school, it can be a not-for-profit. But they want experience in creating an organization. Next up is knowledge. If you're telling me you're going to be the great developer of the map of the human genome, you'd better know what a human genome is. I mean, I want you to have domain expertise. So I don't want somebody who's saying, "Hey, I've got a great idea in a business I know nothing about. I don't know who the players are. I don't know what the market is like." So you've got to know your market. You've got to know your area.

And then you have to have the skills that it takes to get a company going. And those skills include everything from technical skills, if it's a technology business, to marketing, and sales, and management, and so on. But, you know, not everybody has all these skills. There are very few people who have the full set of skills that it takes to run a company. So what else do you require? Well, leadership. You've got to be able to convince us that you either have developed a team that has all those factors in it, or else you can. And you have the charisma and the management style and the ability to get people to follow your lead, to inspire them, to motivate them to be part of your team. All right, then, having done all that, what else do I want to know as a VC? I want to know that you have commitment. That you are going to be here to the end. I want you to say, or I want you to convey, that you are going to die if you have to, with your very last breath, with your fingernails scratching as they drag you out. You're going to keep my money alive and you're going to make more money out of it. So I don't want somebody who's going to cut and run at the first opportunity. Because bad things happen. There's never been an angel- or a venture-funded company where bad things didn't happen. So I want to know that you're committed to be there to the very end.

You've got to have vision. You've got to be able to see where this is going. I don't want another "me too" product. I want somebody who knows, who can change the world out there. But on top of that, I also need realism. Because I need to know that you know that while changing the world is great, it doesn't always happen. And before you get to change the world, bad things are going to take place. And you've got to be able to deal with that. And you have to have rational projections and stuff.

And then finally, you're asking for my money, not just because it's my money, but because it's me. You need to be coachable. So I need to know that you have the ability to listen. We've had a lot of experience. People who are VCs or angels investing in you have had experience and they'd like to know that you want to hear that experience.

Okay, so how do you convey all these 10 things in 10 minutes without saying any more? You can't say, "Hey, I've got high integrity, invest in me!" Right? You've got to do a whole pitch that conveys this without conveying it. So think about your pitch as a timeline. It starts off, you walk in the door. They know nothing at all, whatsoever, about you. And you can take them on an emotional -- all pitches, or all sales presentations, are emotional at some level. You can go up, you can go down, right? And it goes from beginning to end.

You walk in the door. So the first thing you've got to do -- the overall, you know, arc of your presentation -- it's got to start like a rocket. You've got maybe 10 seconds -- between 10 and 30 seconds, depending on how long the pitch is -- to get their attention. In my case, "I've invested. I have got tens of millions of dollars from PowerPoint pitches. I have invested tens of millions of dollars." That's it -- that should get you right there. This can be a factor, and everybody can be saying it's counterintuitive. It can be a story, it can be experience. But you've got to grab their emotional attention, focused on you, within that first few seconds. And then from there, you've got to take them on a very solid, steady, upward path, right from beginning to end. And everything has got to be reinforcing this. And you've got to get better, and better, and better, and better. And it's revving up to the very end, and then at the very end you've got to -- boom! -- knock them out of the park. You want to be able to get them to such an emotional high that they are ready to write you a check, throw money at you, right there before you leave.

Okay, so how do you do that? Well, first of all, logical progression. Any time you go backwards, any time you skip a step -- imagine walking up a staircase where some of the treads are missing, or the heights are different heights. You stop, you've got to figure it out. You want a nice logical progression. Start with telling them what the market is. Why are you going to do X, Y or Z. And then you've got to tell me how you're going to do it, and what it is you're going to do. How you're going to do it. And the whole -- it's got to flow from beginning to end.

You've also got to let me know that there are touchstones. You want to tie in to the rest of the world out there. So, for example, if you reference companies I've heard of, or basic items in your business, I want to know about them. Things that I can relate to: validators, or anything that tells me somebody else has approved this, or there's outside validation. It can be sales; it can be you've got an award for something; it can be, people have done it before; it can be your beta tests are going great. Whatever. I want to know validation, that you're telling me not just what you're telling me, but that somebody else -- or something else out there -- says this makes sense. And then, because I'm looking for the upside here, I've got to have believable upside. And that's two parts. It's got to be upside, and it's got to be believable. The upside means that if you're telling me that you're going to be out there, five years out, making a million dollars a year -- hmm. That's not really upside. Telling me you're going to be out there making a billion dollars a year -- that's not believable. So it's got to be both sides.

On the other hand, there are a lot of things that drive me down, take the emotional level down, and you've got to recover from those. And those, for example, are anything you tell me that I know is not true. "We have no competition. There's nobody else who's ever made a widget like this." Odds are I probably know somebody who has made a widget. And the minute you tell me that -- boom! You know, I discount half of what you're saying from then on. Anything that makes me think. Anything that I don't understand, where I have to make the leap myself, in my own head, is going to stop the flow of the presentation. So, you've got to take me through like a sixth grader -- dub, dub, dub, dub, dub -- but without patronizing me. And it's a very tricky path to do it. But if you can do it, it works really, really well. Anything that's inconsistent within the concept of your thing. If you tell me sales of X, Y or Z are 10 million dollars, and the next slide, or five slides later, they're five million dollars. Well, one may have been gross sales, one may have been net sales, but I want to know that all the numbers make sense together. And then finally, anything that's an error, or a typo, or a stupid mistake, or a line that's in the wrong place. That shows me that -- if you can't even do a presentation, how the heck can you run a company? So this all feeds in together.

All right, so the best way to do this stuff is to look at our betters, look at people who have done this before. So let's look at the most successful technology executive in the business and see how a presentation goes. Bill Gates' PowerPoint presentation over here. Here's Gates doing a thing for Windows. Is this the way you should do a PowerPoint presentation? What do you think? No. Who do you think we should look at as our role model? Oh, isn't that funny! There's another great one over here. Yes? OK, Steve Jobs. You want absolute -- this is the Zen of presentation, right? Here he is. One little guy, black jeans and stuff, on a totally empty stage. What are you focusing on? You're focusing on him! This is Steve Jobs.

So, you know, our great -- these wonderful long bullet points, a whole list of things, you know -- good! No, they're not. The long bullet points are bad. What's good? Short, short bullet points. But you know what? Even better than short bullet points are no bullet points. Just give me the headline over here. And you know what? How many bullet points or headlines does Steve Jobs use? Basically none. What do you do? Best of all, images. Just a simple image. I looked at the image -- a picture's worth a thousand words. You look at the image and you see that, and you drop the whole thing. And then, you come back to me. And you're focused on me and why I'm such a great guy, and why you want to invest in me. And why this whole thing makes sense. So with that said, we only have a very, very short time.

So let's run through the things you've got to include in your presentation. Well, first of all, start out. None of these big, long-titled slides with blah, blah, blah, blah, blah, blah and I'm presenting to so-and-so, such-and-such a date. I know the day, I know who I am, I know you're presenting. I don't need all that. Just give me your company logo. I look at the logo, and it sort of ties it to my brain. And then I come back to you. I'm focused on you, OK? You do that, you give me your quick 15-second or 30-second intro, grab my attention. And then you want to give me a quick business overview. This is not a five-minute pitch. This is, you know, two sentences. "We build widgets for the X, Y, Z market." Or, "We sell services to help somebody do X." You know, whatever. And that is like the picture on the outside of a jigsaw puzzle box. That lets me know the context. It gives me the armature for the whole thing you're going to be going through. And it lets me put everything else in relation to something you've already told me.

So there you go -- walk me through, show me who your management team is. It's helpful that you've had experience and you've done this kind of thing before. And I want to know the market -- the size of the market. Why is this market worth getting at over here? I want to know your product, and that's very important. Now, this is not a product pitch, not a sales pitch. I don't want to know all the ins and outs, and the gazuntas and the yaddas and stuff. I just want to know -- what the heck is it? If it's a website, show me a screenshot of your website. You know, don't do a live demo. No, never do a live demo. Do a canned demo, or do something that lets me know why people are going to buy whatever it is.

Then I want to know -- now that I know what you're selling, tell me how you make money on it. For every X you sell, you get Y, you do your services of Z. I want to know what the business model is on a sort of per-unit basis, or for the actual product that you're selling. I want to know who you're selling this thing to, in terms of customers. And I want to know if you have any relationships that are going to be special to help you. Whether you have a distribution relationship with somebody, you know, you have a producing partner. Or, you know, again, validation. This helps to say you're bigger than just one little thing over here.

But then, everybody has competition. There has never been a company that doesn't have competition. Even if the competition is the old way of doing something. I want to know exactly what your competition is, and then that will help me judge how you fit into the whole operation over here. But then, I want to know how you're special.

If I know what your competition does, how are you going to prevent your competition from eating your lunch over here? And then all this ties into the financial overview. And you have to have -- you can't do a VC pitch without giving me your financials. I want to know three and, you know, a year or two back, or as long as you've been in existence. And I want to know three or four or five years forward. Five is a bit much. Probably four is rational. And I want to know how that business model that you showed me on a product basis is going to translate into a company model. And, you know, how many widgets are you going to sell? You're making X amount per widget. I want to know what the driver is. We're going to have 1,000 customers this year, and 10,000 next year. And our revenues are going to go this, that and the other thing. And so that gives me the whole picture for the next several years into which I'm investing. And I want to know how the money you're going to get from me is going to help you get there. You're going to open an offshore plant in China, you're going to spend it all on sales and marketing, you're going to go to Tahiti, or whatever out there.

But then comes the ask. This is where you tell me how much you actually want to get. You're looking for 5 million -- at what kind of valuation? Two million at 100,000. What's the money in so far? Who invested? I hope you invested personally. Because I'm following on. If you can't invest in your own thing, why should I invest in it? So I like to know if you have friends and family, or angel investors in there, or you've had more VCs before. What's the capital structure up until this point? And then finally, having done all that, you've now told me the whole thing, so now you've got to bring it back to that conclusion. This is that rocket going up. So hopefully everything has been positive, positive, positive, more positive. And everything, everything you say clicks with me, and it all makes sense. And I'm thinking, "This is really, really great."

And then you take me back to your logo. Just your logo on the screen. And I look at the logo -- okay, good. Now I come back to you. Nothing else to look at, right? And now, you've got to wrap it up and tie it up here. You've got to give me the final, you know -- boom! -- the final pitch that's going to send me into space. Now, in the process of doing this over here, how do you remember the sequences and doers? You've noticed here that I'm not looking at the screen, right? The screen is, actually, in this room, is set up so it's in front of me. So, I couldn't even see if I wanted to. So now, how do I know what's going on here? Well, I've got a laptop in front of me, but you're looking at me. And you're looking at this. What do you think I'm looking at? You think that I'm looking at that? No, I'm looking actually at a special version of PowerPoint over here, which shows me the slides ahead, the slides behind, my notes from here, so I can see what's going on. PowerPoint has this built into every copy of PowerPoint that's shipped. If you use Apple's Keynote, it's got an even better version in Keynote. And then there's another program, called Ovation, you can get from Adobe, that they just bought last summer. Which actually helps you run the whole timers, and it lets you figure out what's going on.

So, here's my wrap up to take you to the moon, right? David's -- I usually do a top 10, we don't have time for top 10s. So David's top five presentation tips. Number one: always use presenter mode, or Ovation, or presenter tools, because it lets you know exactly where you're going. It helps you pace yourself, it gives you a timer so we end on time and the whole bit. Number four: always use remote control. Have you seen me touch the computer? No, you haven't. Why not? Because I'm using remote control over here. Always use remote control. Number three: the handouts you give are not your presentation. If you follow my suggestions, you're going to have a very spare, very Zen-like presentation, which is great for conveying who you are and getting people emotionally involved. But it's not really good as a handout. You want to have a handout that gives a lot more information, because the handout has to stand without you over here. Number three: don't read your speech. Can you imagine? "Well, you should invest in my company because it's really good." It doesn't work, right? Don't read your speech. And the number one presentation tip: never, ever look at the screen. You're making a connection with your audience over here, and you always want to do a one-on-one connection. The screen should come up visually behind you, and supplement what you're doing instead of replace you. And that is how to pitch to a VC.