Transcription
We're going to do two things today. I'm gonna talk a little bit about the stages of investment and how you fit into there, so you have a Google maps of kind of knowing where you are and knowing how investors look at you. And then I'm going to take you through the pitch deck. Pitch stack is more than just reaching out for investment, so I'm going to cover those two things and see if I can actually use a piece of technology here. So let's go through the five points first.
Of all, the business life cycle we're going to take you through so you know where you are. Because some of you understand, but maybe you don't know how investors and others look at you, and maybe how a bank would look at you. Then, seeking investment: know why and when to get it. The investors: know the animals that are out there in the investment jungle and which animals you should be talking to at which time and which to avoid. Then, the uses of capital: know what is and what isn't bankable and how they look at you as you try to raise capital. And finally, the meat and potatoes of this presentation today, which I love, is the pitch deck, taking you through the three tools, which is your elevator pitch that you make in two minutes. Some of you are really good at doing that; I've seen some of them today. Some of you are a little longer, and you can be concise and even more powerful with the story that you're so passionate about. And then the deck itself, and I'm going to show you, you can present yourself in 15 slides to your bank, to someone you're recruiting, or to potential investors. Let's jump in.
The life cycle: the key to running a company and then communicating with these constituents is really knowing where you are. This is the Google map of where your company is. Your company is somewhere on this chart. You could be a startup, and you're down here in the valley of death, where you've been trying and trying and trying. You had an idea; you've burned through some money, and it's just not working, and you need to just go on to the next one. Thomas Edison said, "I didn't fail a hundred times making the light bulb; I failed a hundred times making a light bulb." Right? I found 100 ways not to make a light bulb. Well, he ultimately succeeded, but sometimes you give it up; that's the valley of death. But you're more experienced for your next run. You finally go up from that; that's where seed and startup in early stage are. You ultimately break even; there's an exit there. Sometimes there's early exits where someone knocks in the door, "Hey, we love what you're doing; it's very, very early, and we're gonna go take it." If anybody knows the history of YouTube, you know that they sold very early for what everybody thought was an insane number to Google. Had they waited some years later, it would have been 10, 10x at nonetheless; it was an early stage, and they said, "Okay, we'll do it." Then you finally come up to your truly established company. Next exits usually happen up there, where it's repeatable, where somebody maybe in your ecosystem says, "Hey, you're doing it; you're doing it right; you're repeating it; you've really got something going on here. You know what, I think we want to add you to what we're doing." Could be a competitor; could be another company that wants to add you to make what they do more powerful. You know, you make peanut butter; they make chocolate; together you make Reese's Peanut Butter Cups; some combination like that. Finally, you get to the high growth; many of you in here are there, where you're talking about the pain points of high growth, and that's why you're at Sales Leadership Summit; that's why you're at a business planning workshop; that's why you're in there, and there are pages in this book already that you got these stars next to because you're trying to eliminate those pain points and drive it even higher. You may exit by reaching a certain point and selling to a competitor across town, but at that, and finally, the home runs, where you get out there to late stage, and then at 65 or some time you decide to do it. But this is the Google Map; your company is somewhere on this, and knowing where you are and how to talk about the stages with investors is important.
Then we get to seeking investing: know why and when. What's really interesting is I hear some of you saying, "Hey, I want to go out and raise capital." What do you need to do? Well, we really don't pay ourselves, you know, the full amount right now. Uh, we've been, you know, kind of ramen and pizza and Red Bull at midnight. And I says, "Wait a minute, so the costs that you show when you make your little financial is not the real cost of your business?" Well, it's all we can afford. I get that, but if you were paying natural costs, you'd actually still be losing money, but you're prudently not spending that because you don't have it to spend. Okay, well, when you talk to investors, it's not that you need money to right-size your cost; it's that you haven't scaled to get to the size where you can afford the natural cost of the business. It's understanding how to convey all that. It starts at the seed stage: "Hey, we're Founders; I got a business plan; we have a little P&L; we have our MVP, minimum viable product; and we have a go-to-market plan, and I put some of my own money in it, and I'm just looking for 200 or 500 to go to the next base." Check startup phase: you're a backable CEO because your idea is working, and you've got some traction, and you've got a few people that have joined you, your early management team. You have a beta product that's actually in the market, and you've got a few customers; you have some revenue, and so you're at what we would call a Series A point, actually trying to raise money to then go to the next milestone. Repeatable: now you're in business; you didn't just have a few first customers; you got more, more doing the same thing, the same way, hiring another salesperson, training them the same way, and going, and you're off and running. Many of you that go to the Sales Leadership Summit have talked about, "Wow, I'm glad I came here because it really showed me how to build my sales team for success." At this repeatable stage, and you've got a team that's got a little bench, and you've got your product roadmap; you're adding customers; maybe you've gotten several million dollars now in sales, and you'd be what we would call like a Series B level. And finally, growth, and growth can go on for 15 years. Pat was almost eight years in business before we got the expansion capital for PHP, and he said, "Hey, I'm making profits; it's a very profitable business, but I want to build this into a truly technology-enabled insurance distribution agency of the future. To do that, I'm going to double down on technology; I've got all these Millennials selling for me; they expect everything to be on mobile; I need to be ahead of the game; I can't wait for the industry; I need to do this." See how that works? What a wonderful story for expansion capital, and he got it, including someone named Oscar De La Hoya that joined in because, "I love that you're reaching out to the Hispanic community." So you become a magnet for the investment; the investment kind of helps to find you because you've got a good story. And it is harder to find great companies to invest in than it is to find money. Now, all of us that have started companies, like me, will tell you it's the opposite; it just seems painfully hard to find money. Well, sometimes that's true.
Then we get to investors: know who you should engage. This is really interesting. People come up and say, "Hey, a friend introduced me to a private equity guy, and I want to talk to him about raising money." But this doc, how should I talk about it? Tell me about your company: "One and a half years old; three of my friends and I just graduated Syracuse University." I might hang on a second. What? What kind of sales do you have? "We have about half a million in sales; we've done, believe it or not…" Well, if you're talking to a private equity guy, I think you're talking to the wrong person. Now, think about it; if you knew a friend that was a doctor and you had something wrong with you, wouldn't you say to them, "What kind of doctor is it?" I said, "Well, what's wrong with you?" "Well, I went skiing, and I've either got a strain or a tear in my knee; I took a bad fall on a snowboard." That's it. And he says, "Your cousin's a doctor, right? Can I go see him?" We just… not what you would say. He said, "What kind of a cousin is your doctor?" "He's a gynecologist." Okay, probably not the one to go see for my knee. So you… we have these times in life; we do that. But if someone's got money and you've got an early-stage, you know, company, it's like watching football; fumble; jump on the ball; that guy's got money. Well, but you're out of sequence; do you see what I mean? So who was the first investor in your business? You. And you will continue to be that. If you haven't put some skin in the game, even 25 grand that you scrape together because you gave up every subscription you have; you gave up cable; you did everything you could, and you saved it; that's meaningful to first investors. You have some cash; use saved, and you put skin in the game. So it's you. Then there's F&F; that stands for friends and family, and it really should be friends and family that have money to lose because you're asking them to make a single high-risk investment in an early-stage on startup, meaning you. But they've got love, relationship, and trust that's built in, so you got to protect each other. When you do friends and family, they're going to come back to you and ask, "Hey, when is that business going to be profitable so you can give me some of the money back because your niece, that's her college money." You're like, "Whoops!" Make sure it's money to lose; that there's understanding there. Finally, there's angels. Angels are investors are usually independent that come in during that stage, and then you get to VCs after you've crossed out of here, the valley of death. And so who's most responsible for the Valley of Death? You. You have to walk over the hot coals and make your successes and get to your points like every other startup has had to do. Then you get to VCs who can carry you along for many different phases, and then CVC, that stands for corporate venture capital. Google has a group called G Ventures that is corporate venture capital, and they invest just like an investor would, but it's corporate, and maybe you get some benefits of working with Google; maybe you don't, but it's their own investment, so it's similar to venture capital. The venture capital is usually agnostic; corporate venture capital within companies. Finally, way over here, you get PE firms. PE firms are usually exit investors or people that want to pay you for a majority of your business, and be careful; it may also come with you sticking around for three years and getting a new boss and finding out you're being rolled up and merged with other things. But PE firms use the exit investors. So when I gave the example of the three guys from Syracuse, get it? I'm saying, "Wait a minute, so you know somebody, PE guy?" Well, unless maybe one of the gentlemen or women at the PE firm is an independent investor in startups and might be doing that personally, okay, different story. You see that makes them an angel. So you have to be in sequence where you're going to do it. And finally, strategics; those are large companies in your industry that may invest in you, and that would be Google putting Google money, not G Ventures, but Google money in to be maybe 50% of your business and then buy the other 50% later. And by the way, if you ever looked it up, be astonished at the number of acquisitions Google does; they acquire like three small companies a week; they're not all headlines. And by the way, so does IBM; so does people like Oracle; it's really amazing. So know the investor landscape. Well, gosh, Biz doc, how do I find this out? Look at their webpage; they will tell you what stage they invest; they will tell you what sectors they invest in; they will tell you their check size and whether they make minority investments early on or they make a majority investment like a PE firm; want to own you later. Here's a quick website from TCP; they're in Dallas, Texas; I just found it because I thought it was so nicely laid out. This is our investment criteria; we happen to like to invest in Texas so we can keep an eye on the things we invest in; we are specialty management buyouts. If you have a partner that wants to leave or an idiot brother you'd like to buy out, there are those, then that's what we do, and we have deep experience in health care services and SaaS software. So if you're not any of this, don't call them. But if this is who you are, you're like, "Wow, they're going to be very interested in speaking to me." So it's usually easy to find the harmony if you just kind of look; you look long enough. Okay. Now, the use of capital: what isn't, isn't bankable. Investors invest in only three things: people, product, and time, in that order. People is that you are a bankable CEO and you've got a team around you, and a product that's working in the market, or you need time. So when you think about that, people say, "What do you use the money for?" "I need to get a CTO; expand my tech team; invest for a year so that the next version of my software that I built with engineers as an MVP will be ready." Got it. So you're building this to go scale, and that's what you're using the investment to: yes, time, product, and people in some combination. I hope that makes sense because many of you talk about, "I need to hire five more sales people." Okay, well, wouldn't sales people pay for themselves by selling something? Well, the first three kind of are kind of art, but I need more. It's like, "Wait a minute, then you need to really get your sales, you know, together." There is a great example that came recently, and some of you may be in this room, so I won't name the company name, and they were like, "Hey, we need some investment capital and some advice on how to do it because we want to buy a small competitor that's got a really good sales force and a really good customer list, and together we think we do fantastic in this industry." Wonderful. "Why do you want to buy sales people if you've got the better product?" Then optimize your sales organization. And we begin to talk about it and ask some probing questions and are like, "You know what, you're right; I'm thinking about this wrong." And what if you bought that other company and those sales people didn't like you; they really wanted their mommy, their old boss, and she was wonderful, and they loved her, and then they slowly leave the company after you buy it? Well, now you went out, got all this money, bought this company, merging them together like The Brady Bunch didn't quite work, and some of the children left home; that's a disaster. Instead, they sat back and looked at it and said, "You know, you're right; what we need to invest in is optimizing our sales team." So often, looking through the use of capital kind of tests your assumptions about what you're doing with the business and how you're investing in it.
Okay, let's get to the fun stuff: pitching; three tools; a great presentation of your company and two scrubs: a clear and concise elevator pitch; that's your hook. You quickly, concisely, with enthusiasm, explain to people the problem you're solving; what you're doing; 10 to 15 slides; concise; and then a nice verbal narrative that goes along with the slides because, generally speaking, you've thought ahead and sent the presentation in the same language that the person speaks, so you don't call them and read it to them. I've had folks that we do Zooms and are just reading this to me, and I said, "Hey, you sent it to me a day ago; I read it on each slide here; fill in the blanks for me; I want to hear your heart; I want to hear your passion; I want to hear the story behind the story; I can read the slide." So the elevator pitch: why is it important to have it? It forces you to focus, and some of the things that you've seen here already here at Vault is communication and focus; you know, six ways to focus; six ways to hold accountability; things like that; you need to put that to yourself too; focusing. And it also doesn't require the listener to overly focus and try to decode because you're focused, and they can just hear what you're doing, and it calls them the answer. And in your elevator pitch, you cover your problem, differentiator, your solution, some numbers, organizing your thoughts. Have you met a person where you said, "Hey," maybe you met him in the hallway here; you said, "Hey, tell me about your business," and 10 minutes later you really have to go to the bathroom because you've been delaying that, and you still don't understand? Have you been through that? I've been through situations after 20 minutes; the beer is warm; the pizza's cold; and I still don't understand the core differentiators of their business, but I'm sitting there being polite and listening. How many people have done that? I did that early on. Have you ever done that to somebody? Okay, it's a rite of passage. So great pitches read all over your pitches; answer this question: why? Why did you do this? Why is it interesting? The customer; why are they buying? And the right story with the right examples will get the investors excited along the way in doing that; know those differentiators. People say, "Why? Why isn't it invented yet? Why you? Why today? You know, why didn't Doordash do it?" What customers love about you the most; do you know? Let's play a game called Name That Company. Okay, I'm gonna give you… I'm reciting pretty much from memory because I've read it over and over; an actual… this is an actual elevator pitch that a company did, I think in its 2008, maybe 2009. Are you ready? Okay, hope you're not asleep. It says, "Hi, my name is Brian. Do you have a minute? Yeah. Okay, um, this will only take me two minutes, I promise. I notice you're here at the um conference, and your badge says investor; you invest in early-stage companies? Yes, I do. May I take two minutes? Yes, but make it two minutes; I need to step aside; make a call before we go back in. Great. I'm in the hospitality space; my partners and I believe that we have a solution that brings two needed things together. There's a company called Couchsurfing that did a survey that found that 30% of Americans would be willing to rent out a room of their house or their house itself for a day or two when they're out of town. It's also been found that you have, for people 25 to 40, the most difficult, challenging budget for any trip is usually the lodging; airfares usually can get something cheap, but the lodging is usually the most expensive part and the most difficult part when you're trying to put a trip together. Well, guess what? We help get these two sides together; we've made what is basically an eBay where someone could put their house up for two days of rental, and someone could find that; we make 15% in the middle; that's our business. Before you think I'm crazy, we've already done three thousand nights in six months here in San Francisco, so we think it's working. I appreciate you listening; could we trade phone numbers; maybe I talk to you sometime about it?" Name that company? Exactly right. You see that research showed; we have done three thousand nights; we make money; 15% in the middle. So if you're an investor, you're like, "Well, you know what, this is sort of a service product; so an Airbnb for hotels; yeah, you know what, let's talk." Get it? Any company can boil it down; anyone can boil it down. So then you get to the pitch deck itself: the story in detail, because now they've agreed to give you a meeting; fantastic. You want them to be hooked; you want the… that elevator pitch to be so clear they can't ignore it; they're like, "Wow, that was really interesting." And what did you also just teach them about yourself? You can answer the question with passion, quickly and beautifully, and now they're thinking about how you might talk to customers; win customers; talk to your team. There's a lot of…
Evaluation that goes on in that two minutes? Well, I really haven't talked about this. You dance around a little bit. Now you're a dancing CEO. You don't want that. You want that first date to be sharp. You know, they have one chance to make that impression. So let's go through the pitch deck and say, Tom, how is it that I can get all this into 15 slides? I can't. Let me tell you, I've seen decks. People say, "Let me send you a deck on my company," or "a quick deck," and I get 45 pages. The entire whiteboard in your office doesn't have to end up on PowerPoint. How many have done that to somebody? If you got any feedback on that that says, "My gosh, what have you sent me here?" This is all you need.
Section one is problem, solution, and timing—four slides. What is the problem you're solving? Why does the customer think it's a problem? Why do you think it's a problem for the customer? What's the magic that you're solving? Airbnb problem: it's expensive to have a short-term trip, maybe just to see a ball game. Lodging is expensive. Maybe I could just stay at somebody's condo for two nights for less than what the Marriott Courtyard will cost me. Bingo. What's the magic? It's an app. It's easy. You could find that house quickly. What makes it special? We only take 15 in the middle, so we're making money on it. Then the business model: how you make money, wholesale play, selling subscriptions. And then, why do it now? So what's the problem? What's your magic? What's your business model? How you make money? And why do it now? Problem, section, timing—that's all you need.
Then you go into, okay, are there enough dogs to eat your dog food? What market are you serving? How many people are there? Is that number growing? You know, "Well, we're, you know, we sell things to young mothers." Okay, that market's growing. What's your competition? Competition is funny. How many people got in business and at first thought that maybe had no competition? "We're so different, we have no competition." Come on, there you go. Okay, honesty prevails. Yep, we did it too. Jammed that mobile; we made games for mobile phones. We boldly went into some of the largest venture capitalists in Silicon Valley. And on the competition side, we said, "We compete with boredom." They reacted just like that. They're like, "Okay, okay, guys, yeah, you do have a competitor; you just don't realize it. It's the Game Boy that's in the backpack," and you're talking phones. So you can't be clever with it; you have to be honest about what the competition is. Yes, there will always be competition. And who are they? Then the timeline: what is your history? What traction do you have? What milestones? "I got my friend from college to join me. I got two engineers have been with me. We've got three thousand nights. We've already sold here in San Francisco." Um, market, competition, timeline. Finally, who's running this? Are you making money? And what are you asking for? Here's my team. Here's the details of the people that have joined us. We got a good little team now. Here's the results we have to date. Meager they may be; we're losing money at the moment, but at the end of six months we won't be. But here's our financial results. And finally, here's the ask. Here's how much we'll need, and here's how long we think it's going to last. Because we're raising money now, then we're going to raise money here, and then we're going to be off to the races. Or we think this is the only money we'll raise. We'll break even here, and then we're off to the races. This is it. That's the whole deck, and it packs into 10 to 15 slides at most.
And then the narrative: you don't read the deck on every slide. You passionately make a point and add it so they can see your passion, feel your drive, see how you think. Use the opportunity to let them read your deck, and then you add the color so that they get the feeling for you as a person from end to end and stay within your personality. I've had some really fun Zooms for the person on the other end was performing their presentation, not making a presentation. Do you understand what I mean? Like they've done it this way; they watch Steve Jobs or they watch a video over here with the guys from Google or something, and they're really kind of performing, and it's kind of fake. You know, you can fake it and try to be Steve Jobs or Elizabeth Holmes. Remember, she tried to be like Steve Jobs. The throttle scroll, and now she's going to jail. Don't fake it, because if somebody tries to fake it, it's almost like Elvis singing Nirvana. You're listening to it, and it makes no sense, right? You'll come as you are, as you were, as I want you to be. You're listening like, "Wait, wait, wait, wait, wait, wait, what was that? My brain is so confused." You know what that's what you're gonna do to your listeners? That's exactly what you're going to do. Be yourself. Let your style come out. Let your passion come out. Let everything come out.
So you know, I may only raise money once. Why do I need to have a pitch deck? I'll tell you why: your pitch deck is part of your strategic planning process because it always helps you focus. Second, it helps you recruit key team members. And it's not just when you're starting. Five years into it, your critical person may be a VP of sales, and you're this big, and they're at a company this big, and you're trying to get them to jump. How many people have had the issue of trying to get a person you absolutely want to have your company jump? Yeah, look at that, a lot of you. How do I get them to come here? It's part of it. Speaking to friends and family, whether you're raising money or just communicating what you're doing, especially if that happens to be your spouse and she says, "I just don't know what you're doing," or he's like, "I don't understand what it is you're up to." Engaging a bank: you'll go to a bank for a credit line, asset-based financing. They need to hear it, and you come in there, and they're evaluating you, and they're going to look at your numbers, sure, but they're also going to be underwriting who they think you are as a dependable leader to deliver the outcome. And then, of course, speaking to investors. And also, when it's time to sell the business. When you sell the business, the always the first answer is, "I don't need to sell the business. I could continue because here's what we're doing. Here's where I'm going. And by the way, let me let me show—I'll give you my 15-page that I'll explain it. I know where I'm going. I know what my next next moves are. If you want to buy it, maybe we talk." But always have it because the best position if someone's coming to buy your business is being able to say no. "We'll keep driving. Thanks. Appreciate you coming. Appreciate this."
So your pitch deck should be part of your strategic planning process. You always know it. Check your compass stock, and it will infect all of the people in your organization because they know where you're going. It's part of the compass that you're setting along with your culture, your accountability, and what you will and won't accept at the business. So here's my keys for success on this: know your differentiators—that's number one for me. Know why you're in business. Know why people love you. Know the truth of all that and have an elevator pitch—sorry for the word—but have that down for you. Speak to anybody: people here, people you're trying to recruit, the whole list I've given you. Then that crisp pitch deck: it's part of your strategic plan and your compass and a compelling narrative that goes along with the pitch deck. What's very interesting, and you should do this: go take a look at some of the presentations Steve Jobs made where there was only a chart or an image on this on the on the screen, and he just narrated through it. It's one of the best examples I've ever seen of really emotionally tying to an audience and putting it together. Now don't try to be Steve Jobs, but look at the example of how the spoken word compelled you and the graphic and the chart backed it up. So I hope I've left you better than I found you with this, and this is what Valuetainment is here to do: also leave you better than you found you. Everything we do aligns with that, whether it's the monthly Mastermind webinar, Elite masterminds, one-on-ones with Pat himself, sales Leadership Summit, The Vault here, business planning, online digital courses, business strategy, sales system, art of public speaking. We've got these resources here to equip you. And part of this presentation was to kind of underline where and how you can be so much better equipped, you know, preparing to look for investors, or even if you're never looking for investors, preparing someday to acquire a competitor or to sell your business. I assume that's everybody's plan at some point. And I have a course that mirrors this called Pitch Deck PhD that walks you all the way through. So with those, we have a little time for Q&A, and I think that's where we're going to go now. But my name is Tom Ellsworth, the Biz Doc, and on the core part of this presentation, I hope I left you better than anything. Make some noise. [Music]