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Sunday, May 20, 2007

Planning the Perfect Pitch

First impressions really count when you present to investors, but even well-established companies can struggle to get their message across. Every entrepreneur out there wants to make sure they have the perfect investor pitch deck with which to impress investors.

One of Gateway 2 Investment's first clients is typical of the paradox many start-ups face when they look for finance. The company, which helps media organisations communicate with their clients across different channels and counts Mercedes, Channel Five, Endemol and The Guardian as customers, says: 'It's a complex environment. Our customers understand what we do, but investors didn't. What they wanted was the elevator pitch, but it always seemed to take us 22 minutes to do the one-minute pitch. That was the problem.'

Here was a company that has proven technology and a solid customer base, and yet it couldn't get the ear of investors. G2I helped by bringing investors to the table who were prepared to listen to a more complex proposition, and the company now has agreements in place for a considerable investment to follow: 'It allowed us to engage with investors for a longer period of time and in a way that suited us, so we could explain our business better and its benefits.'

It's not uncommon for smaller organisations to struggle with the presentation of a business idea. In fact, the government-backed Access 2 Finance scheme was set up in response to research backed by the London Development Agency, which found that the key reason businesses failed to raise finance was the way they presented themselves to investors. 'You want investors to ask questions,' says Richard Ellis, a business advisor with Business Link 4 London. 'But you don't want them to have reams and reams of questions. The business plan should cover off most of what they need to know.'

In many cases, however, poor presentation is a symptom of deeper running problems, and many start-ups struggle with more fundamental issues than merely explaining their idea. Geoff Sankey, managing director of The Capital Fund, says a surprising number of companies neglect the basics of sales, product and management - out of some 40 opportunities he receives every month, 'quite a number' are purely conceptual. 'People say they have an idea - and would we like to invest in it?'

Doug Richard, chairman of Library House, has had plenty of experience of entrepreneurs with great ideas but little perception of their market potential. As well as providing an on-line investment readiness test at Library House, Richard is a panellist on the 'Dragon's Den' TV programme, for which he spent 180 hours listening to pitches from 82 companies. 'I know what it's like when things don't exist to make entrepreneurs investment-ready,' he says, adding: 'But it's not rocket science - if it was then companies like Microsoft wouldn't exist. It's a matter of step-by-step planning and approaching that in a logical fashion.'

Richard says many entrepreneurs get so caught up in their idea that they ignore core issues such as whether there's a market for their product. 'I call them Hamlet investments [after the cigar adverts] - fantastic opportunities that are fatally flawed.' Richard agrees what entrepreneurs need is 'to be put in a position where they can get an honest answer, to understand what investors think about, what they look for and how to approach them.' Advisors may be able to help pick holes in a presentation and present the company in a more favourable light. 'Sometimes the business is ready, but it needs to fix or consolidate a few things, then come back in six months,' says Ellis. 'It's a clich�, but you'll never get a second chance to make a first impression.'

One of the key pieces of advice any professional adviser will offer is to give the process enough time and effort. Companies need to be prepare upfront for the fact that it can take six to nine months to hone a business plan, present to investors and get money in. 'If you go into this half-baked, you'll get a half-baked outcome,' says John Blowers, managing director of equity funding exchange AngelBourse. 'But if you can get together enough funds to spend on the right advisor and raise enough finance to extend the runway sufficiently, then it's worth the effort.'

By David Longworth