Perfect pitch

Entrepreneur, March, 1998 by David R. Evanson, Art Beroff

Though they started their company just eight years ago while still enrolled at Temple University in Philadelphia, Future Graph Inc. founders Bob Blitshtein and Steve Boymel are now software industry veterans. The company started life with a single software product, titled f(g) Scholar, to help students with math and science. Today, Southampton, Pennsylvania-based Future Graph is an emerging publisher and developer of math and science educational software aggressively sold in retail stores.

On the path from obscurity in a college dorm to entrepreneurial success, the pair became experts in another discipline, as well: raising money. According to Blitshtein, since the founding of Future Graph, he and partner Boymel have raised approximately $2 million in more than a dozen separate financings, ranging from grants to loans to equity investments by high-networth angels and venture capital firms alike. The partners credit much of their money-raising success to their winning presentation. "There's no doubt about it," says Blitshtein. "We've made our presentation to investors hundreds of times over the years."

A leading authority on investor presentations is Jeffery Adduci, president of the Regional Investment Bankers Association (RIBA) in Charleston, South Carolina. RIBA is a trade association that, among other activities, hosts five investment banking presentations each year for companies seeking an investment banker, selling an IPO or developing market support. During his tenure with the group, Adduci has run 50 investing conferences and, as a result, has heard some 1,600 presentations by companies trying to raise money.

"By far, the companies that are the most successful at raising money are those in which management is effective at presenting themselves," says Adduci. Here are his observations on areas where entrepreneurs frequently go wrong in pitching to investors, plus comments from Blitshtein about how that advice helped him succeed at raising capital for Future Graph.

* Suspicious numbers. Many times, entrepreneurs present profit histories that, upon further - and perhaps more conservative - examination, might actually show a loss. Others present growth curves that look like a hockey stick. "When outrageous numbers show up on the overheads," says Adduci, "investors leave the room."

Blitshtein says a company's projected financial performance is perhaps the most challenging aspect of presenting to investors. "With so many exciting opportunities in the marketplace," he says, "you've got to walk a very fine line between numbers that are exciting enough to attract investors and those that will turn them off because they're simply unrealistic."

Early on, when Blitshtein and Boymel presented numbers showing projected revenues of $2.5 million - a fivefold increase at the time - Blitshtein says the response from most investors was something akin to "big whoop." "Investors said it wasn't just that the company had to make a lot of money to be interesting," he recalls. "It was that if the company wasn't positioned for significant market penetration, it would probably fail."

Blitshtein advises presenting a compelling scenario - but only if you can point to concrete events that will get you there.

* Droning on about technology. "Entrepreneurs who are scientists or engineers are prone to making this error," says Adduci. "And once you lose an investor's attention, it can be hard to get it back." Yes, the technical aspects of your company's product or service are important - inasmuch as they deliver competitive advantages, open new markets or change the balance of power in an existing market - but to investors, technology is not important in and of itself.

"Initially, this was a problem," recalls Blitshtein. "People's eyes glazed over; [they even] fell asleep." He says the problem was solved when, painful as it was, the partners de-emphasized the technical aspects of their products and focused on how the investors' capital would make money for them.

Adduci's advice: Spend no more than three to five minutes discussing technology. "Any more time spent on science is less time devoted to selling the deal," he warns.

* Lack of audio/visual support. Making a presentation with no visual support is difficult for all but the most gifted of speakers. "Without a visual outline, if investors get distracted for even a moment, they may lose the context of the speaker's remarks," says Adduci.

The most effective presentations are accompanied by 10 to 15 slides, overhead projections or handouts that punctuate your remarks and give the listener a constant source of context. Don't get too obsessed with visual aids, however. Blitshtein says that while slides or handouts provide the basic outline for an investor presentation, entrepreneurs must be prepared to deviate from the script when necessary. "Investors want a chief executive who is fast on his or her feet and not fled to a piece of paper. You've got to show you can dance."

Finally, Aducci warns against long, flowery corporate videos. "It's a mistake to let a corporate video run for more than five minutes," he says. "After that amount of time, it starts to give investors the impression that management is trying to hide something [or has nothing important to say.]"