How To Properly Prepare For An Investor Meeting — From a 10-yr Business Consultant.

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How To Properly Prepare For An Investor Meeting — From a 10-yr Business Consultant.
How To Properly Prepare For An Investor Meeting — From a 10-yr Business Consultant.
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Investor: “Alright, I don’t have a lot of time. Show me your coco-banana expense report.”

Entrepreneur: “My what?”

Investor: “Your coco-banana expense report? Do not tell me you got me all the way here without having a coco-banana expense report!”

Entrepreneur: “Of course I have it. Let me just call my financial guy to send it to me.”

*Calling*

Entrepreneur: “Al, can you prepare a coco-banana expense report in 10 minutes?”

Al: “Not really.”

Entrepreneur: “Why not? It’s important to the investor!”

Al: “Firstly, you should’ve been more prepared. Secondly, there is no such thing as a coco-banana expense report.”

The coco-expense banana report symbolizes what any entrepreneur is going to go through. There will be an investor meeting. There will be a word that is not understood, especially for new entrepreneurs (like the coco-banana expense report.)

An entrepreneur’s job is not to know everything about investing. So a perfect response in the above scenario would’ve been, “Oh, I don’t have a coco-banana expense report, but I have a financial model with my expenses. Would that work?”

Most of the time, entrepreneurs come to me for advice on fundraising and getting an investment. Usually, they believe they have a fantastic product and have been looking for an investment for a while. Additionally, there is the fact that they’ve been spending a lot of time and money on the project.

This leads to one thing — “They are becoming desperate for an investment.”

This gives the investors the edge in any investor meeting. Yet, in reality, that’s not who intelligent investors would want to deal with. Instead, they want to be desperate to invest in a product that will have a great ROI (return on investment).

I’ve been approached by an investor once who was plainly desperate to invest in a crypto exchange in the middle east. However, I asked him, “what are you bringing to the table?”

He said, “Money…”

The problem is they did not need him as others offered more than money. They were smart enough to build momentum for their startup and get investors lined up.

If you intend to get an investment, here are five things you should prepare.

Even if your financials are five minutes away from bleeding to death, you have to show otherwise. Be what the investor dreams of.

Hence, you must be prepared to leave the room anytime. You have to be pushy and ask questions about that investor. You have to showcase that you are very much willing to reject their investment.

Now that your mind is prepared and ready to play the investment game, show me your documents.

Imagine if you traveled back in time to the old age where there were knights and swords. You then see a knight with no sword and ask this knight, “Why are you not carrying a sword?”

He then says, “I fight my wars with love.”

You need to know two things.

  1. This person is intriguing and should get you interested.
  2. This person will probably die in the first upcoming war.

Your numbers are your sword, and you are entering into war. It doesn’t matter whether you have the best sword. What matters is that you know how to use it.

Similarly, you need to have your financial model ready. It does not have to be a ten-year financial model in excel with twenty sheets mentioning all the variables in the world (the one you probably downloaded online.)

Better have two or three sheets that you understand every bit of a number of it than sophisticated projections you are unaware of.

Do not throw a $500 offer to a financial analyst and tell them to prepare a super robust and convincing model, then await your victory. This is the recipe for ultimate failure. The question will come from the investor, for example, “How is your churn rate so high?”

Then you will have no idea and try to navigate through the model with that investor till admitting that there is something you do not quite understand.

You have two approaches.

  1. Understand the whole thing and be ready to be asked about it as if it were your name.
  2. Get a CFO to be part of your time who would do that for you (You will still need to understand everything from an overview. Yet, but the CFO would know all specific details.)

Now that you showcased your financial model, it’s quite essential to explain your future plans.

Entrepreneur, “In ten years, we will be doing $50 million of ARR (Annual Recurring Revenue).”

Investor: “Okay, looks legit. How? Will you do the same thing you are doing now for ten years?”

Entrepreneur: “Of course not, do you think we’re stupid?”

Investor: “So?”

Entrepreneur: “Umm… Oh, A.I., we will integrate everything in artificial intelligence.”

Investor: “…”

You need to have a clear plan for the future backed by the golden ticket.

You: “The golden ticket?”

Me: “Yes, the undebatable killer — Market Research.

For example, you’d better say, “Based on our market research, we will be focusing our marketing channels on video-on-demand as it will keep on growing for the upcoming ten years, as well as influencer marketing. Using those two, we are predicting a modest growth, as seen in this chart, to reach $50 million. Additionally, the market size of our industry has been and will keep growing as per the market research.”

Of course, the translation of this to an investor would be that this person has done their homework and that other experts believe that this industry will keep on growing based on facts. Will they be right? Maybe, but at least there are some facts to back up the claims.

This is one of the things that is usually a meeting killer. It’s generally very unexpected — The investor does not like you as a person. Their impression of you is that you are arrogant, shy, hesitant, dependent, or any other feature they are not looking for in an investment.

Those investors invest in you before they invest in your business. You are not just a pilot of a plane. You are the pilot of a plane that has never been in the air, and you are asking the investor to join you. The least the investor could do is get to know the pilot and decide based on how comfortable they feel with your personality.

One ought to be human during these meetings. Talk about some other things. The world is not only about money.

Here is a bright scenario to explain this.

*Before Meeting*

Entrepreneur to self: “Okay, I am heading to this meeting. I need at least $5 million of investment to survive.”

Investor to self: “Okay, I am heading to this meeting. I only have $500k to invest.”

*Meeting Starts*

Investor: “Let me know more about your business!”

Entrepreneur: “Bla Bla”

Investor: “Bla Bla?”

*Two Weeks Later*

Investor: “I have decided to invest! How much are you looking for?”

Entrepreneur: “Perfect! Right on time. I am looking for around $7.5 million”

Investor: “What? My maximum investment will be $500k”

Entrepreneur: “What? Why didn’t you tell me?”

Investor: “Why didn’t you tell me?!”

Entrepreneur: “…”

Investor: “…”

Do you know what the most valuable asset of your startup journey is?

It’s not traction, revenue, valuation, or impact. It’s your time. The above scenario, while unrealistic, wasted a couple of weeks for two people.

Be as clear as if you are ordering a burger from McDonald’s — I need to raise $X to do the following with this amount, and no, I do not want any fries.

Go to Publisher:

Entrepreneur's Handbook – Medium


Author: Al Anany