Thursday, July 14, 2005

Commandment #5: Create the "Aha" Early

Commandment #5: Create the "Aha" Early

A long time ago (“last century”, as my teenage kids delight in saying), I took the California Bar exam -- along with 3,000 – 4,000 other applicants (as a probably not very good sign, last year over 8,000 applicants took it). While studying for the Bar Exam, I received a helpful piece of advice that I offer up as the 6th Commandment.

On the final day of preparations, my professor told a very nervous classroom:

“…remember the following as you start to write: (1) your answer will be graded by a very busy practicing lawyer who makes about $3 per answer that they grade, (2) your answer will be graded on the bus, train or plane, or late at night in front of the TV, or when the grader is tired, and (3) your answer will be the 150th answer to the exact same question that the grader has read in the past couple of days.”

“What does that grader want from you when your answer book comes off the unread pile and is opened?”

“Get to the point -- FAST!”

Having been on both sides of the table over the past 25 years, I can tell you that failure to heed this bit of advice is one of the leading causes of short, unproductive meetings between entrepreneurs and VC’s.

NOTE #1: As I’ve posted numerous times (though some readers seem not to have noticed), this is NOT a defense or apology for VC behavior. Having witnessed it from both sides, I know that VC behavior in meetings can be good (occasionally), bad (often) or ugly (sometimes). That said, the goal of these 10 Commandments is to offer up some frank advice to entrepreneurs to help them do the best job they can when raising money from VC’s.

NOTE #2: Having represented entrepreneurs for ~20 years, I know that they pour their hearts and souls into their business plans and presentations.

NOTE #3: I am not, myself, a good presenter.

Now, back to the action…

If you read Commandment #3, you know that the goal of the first meeting is to get the second meeting. You probably also know that much of what VC’s do for a living is sit through presentations – lots of them. Because of this, no matter how hard one tries, it’s easy -- just like the Bar Exam grader on their 150th answer -- to lose interest in a presentation if it doesn’t get to the point – FAST. This may be good, bad or ugly, but it’s a brute fact of life that entrepreneurs who want to optimize their chances for success should keep in mind.

When I practiced law, I used to tell my clients that, by the second slide, the VC should know what “it” is that their company is going to do. “It” will be different for each startup, obviously, but the goal of the presentation should be to provoke an “aha” in the VC as early as possible in the presentation. I know from my own experience that if I don’t understand what “it” is early, I get “stuck” trying to figure that out, and don’t pay close attention to the ongoing presentation. This is not just me – it’s true for all VC’s. Some of us are just more polite than others.

So, how does one do this?

Having sat through my share of presentations, I can say there are lots of good ways. In the next paragraph, I’m going to make a (not brilliantly original) suggestion, but the most important thing in a presentation is that it be in the presenters “voice”, not mine or anyone else’s. So, find a way that’s comfortable for you, but DO find a way.

When sitting through a presentation, I find it quite helpful to have “it” explained as the answer to some variant of the following question: “What problem is my startup solving?”

So to maximize your chance for a second meeting, do something that I know is really, really hard: concisely and clearly answer that question.

You’ll be glad you did.