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I spend a fair amount of time talking to CEOs of mid-market companies. They generally have two major frustrations. The first is the challenge of getting business development to work. The second, and the focus of this piece, is the heavy lifting of arranging for sufficient financial resources. Most CEOs of startups and mid-market companies feel at home in the space that their company occupies. But, when they venture into the world of angel investor and venture capitalists, the leave their comfort zone and encounter all sorts of different challenges. One of the most frequent is that they are ignored – they just can’t seem to get an investors attention. Oh, they can generally get an initial audience by arm waving. But, then things start to go south. After the elevator speech is delivered, nothing.
I regularly mentor teams which are facing this problem – and preferably well before they face it. In order to get them over the hump, I need to teach them an whole new language and way of looking at the world. Even summarizing what I have learned is beyond the scope of this piece but I want to start with one of the most basic questions, “How do I get them to take me seriously?” Here is just one of the ways:
There are many ‘types’ that investors routinely avoid. Angel investors and venture capitalists sit through a lot of presentations in the course of a year and see almost every kind of founder that they want to avoid. Of course, there is a complication. Sometimes the presenters unwittingly give the impression that they fall into one or another of these categories. It is never a tragedy when one of the bad apples is identified and avoided. But it is a tragedy when a legitimate proposal from a competent team is dismissed because they carelessly tagged themselves as one. Investors have to make lots of decisions in relatively short order. It is important not to give the wrong impression in these early meetings. A bit of creative preparation goes a long way towards avoiding such an outcome.
One of the best way to assure that a presentation is taken seriously is to red-team it. This is a proven method for improving the chances of success. It is not rocket science nor is it very difficult. It is a straightforward and logical approach to a recurring challenge. If you are out to win, read-teaming has to be one of the tools in your toolbox. The process is designed to make sure 1) that the proposal correctly addresses concerns of the investors; 2) that the information offered would meet their needs; 3) that key questions are answered and superfluous ones avoided; and 4) that the team presents and defends in a highly professional, well informed and effective manner.
A red team review is arguably the most important step in the entire cycle of preparing for and delivering a presentation to potential investors. This approach which will improve chances for getting funded. The core of the process is a group of people who will evaluate your request for funding, and your company, from the investor’s perspective.
Red team members read your materials as if they were evaluating it for funding. This means that they will not be advocates for your company. Quite the opposite; if your presentation has serious problems or if they don’t get what you’re trying to say, it will more likely be, “This is not making sense as an investment!”
That in itself is more than a lot of VCs will do. They are in the business of finding opportunities and making investments; not critiquing your presentation. Many times all you will get is “Thanks for coming in – we will get back to you if we are interested.” But a red team goes the extra step; its purpose is to help you improve your chances of getting funded. In that role they play hardball; team members can be very critical, step on your toes if necessary, and pull no punches. A red team member who holds back honest and incisive criticism because of a fear of hurting someone’s feelings is not helping the effort.
Tough Love: Red teaming can be a very unsettling experience for some founders but the goal of each and every member of the team is to help improve the presentation, value proposition, business plan and chances of getting funded. Remember, to make a success you occasionally have to break a few egos!
I organize red teams and facilitate review sessions. I make sure that the panel is made up of highly competent and committed experts with experience relevant to the space the company is occupying. Here are some guidelines that I follow when organizing and running a red team review:
- Because of their experience, members of my red teams need to be able to emulate the process and mindset of the VCs that the company is going to present to.
- I pick at least three people to serve on the team.
- They need to be knowledgeable in the company’s space.
- Team members must have no prior connection with the company that is presenting.
- They must agree to commit the necessary time and attention to the process.
- I insist that members are given at least two weeks to read the materials to be used in the presentation and do a bit of personal research.
- Red team members must be committed to helping improve a company’s chances of getting funded.
- But, most importantly, they must be dedicated to tcalling as they see it.
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