When standing in front of an investor, founders tend to make a slick speech with every cliché they could find. Then the moment of truth comes, the investor surprisingly shows interest and it’s time to show how knowledgeable and prepared you, the founder, actually are. So now it’s do-or-die, all promises and big words aside, this is the time to show the investor you mean business, you are smart, prepared, and the best in this new field. How should you do it? This article is exactly for that, to teach you how to utilize your everyday management tools in order to wow any investor.
Your time to shine finally comes, it’s important to show how everything you claimed is strongly based on knowledge. Impressive as you may be on the personal level, a great impression includes your ability to show every aspect is already well thought out, especially the company’s financial future. How to accomplish that? Here are some methods that you can instantly apply:
1. Scenario modeling
Start with going to the place all your equity is organized - your cap table, think and create a model for every significant outcome the other side might ask, and make a hard copy of it. Just think of an investor trying to hamper you with a “what if your company will…” and you just have the answer in your folder, already fully calculated and ready well thought out.
When considering which are the best scenarios to model, try walking in the investor's shoes a bit, and tackle your own company from every angle. For example, the investor will probably consider what will be his final dilution (as a result of the stock pool set for your employees combined with far-future funding rounds). Instantly showing results, with prepared charts, breaking down exactly how it will affect every shareholder at any given moment is a true power play.
Here comes the tricky part: if you still use a spreadsheet version of a cap table, scenario modeling is a bit complicated for you, think of a single strong case and ask a professional to assemble it for you. The process of creating a well thought future scenario with a spreadsheet is no joke and might take a few weeks to create.
If you use an automated cap tale, you do have the high ground Obi-Wan, scenario modeling should be effortless and with a click of a button. So make as many variants as you can, any scenario you can think of, make it ready in a portfolio, and show how perfectly ready you can be.
2. Show off your data room
A digital data room is a great documentation management method that is commonly used by all major companies, correctly using a digital data room can easily create a wow effect. Organize every document in your company in the data room, everything should be there, from your 409As, grant letters, bank approvals, and so on. Now think of any document the investor will probably ask for in order to start the process of due diligence. If you worked up until now with a decent data room, all you will have to do is grant access to the investor. If not, fear not, you can start right now and be ready on time, any time.
Prepare authorization for the investor to the information he’ll probably require, so when asked, just send them the link and say ‘done!’. There's no better way to send the message you got everything under control than handing out, and completing any requirements the second they are asked. If you don’t know what information is usually asked in due diligence, we got you covered on that part as well, just click here.
3. Know your worth
Do you know your company’s estimated worth? What about your stock’s value? Can you show change/growth over time? Answering these questions to yourself before sitting with an investor will base your business persona strongly. To find out the answers simply go through a company valuation or more precisely a 409A valuation. Doing a 409A for each year that the company exists will provide value over time for itself and the common stock. This might not be the common stock price that will define this investment but it will provide a strong indication to build from.
From this information, you can prepare and know what stock price you wish to negotiate, show the founder you already thought everything out, and can talk business. Any person you are bound to do business with will be encouraged to see that you both speak the same language in every aspect, especially when it comes to the investment itself.
Now it’s up to you
Hopefully, up to this moment, you learned a thing or two about making your presentation better and more appealing. Don’t forget to start any preparation with thorough research, then apply the information to your cap table, data room, and company information you hold, and be the best you can at the informal level. Then back it up by preparing for every scenario, any question, or any assessment.
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