Dec 112009

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Dr. Earl R. Smith II


All investors are bombarded with requests for meetings. Entrepreneurs put a lot of effort into networking and building relationships that will allow them to make a presentation to a possible source of funding. They have honed their elevator speech and given it many times. Mostly the results of these contacts are non-committal or an outright expression of no interest. All investors say no or maybe much more frequently than they say yes. But, there are the times when you say yes and a meeting is scheduled. Here are a few thoughts on how to handle that meeting.

Request an Advance Package: It is a very good idea to require an advance package; something considerably more extensive than the executive summary. This will allow you to go through the preliminary materials, request any additional materials or clarifications and do some diligence yourself. One of the ways to make this initial meeting more productive is to get very familiar with the details of what is going to be presented. This will also give you a chance to research the competition and prepare a series of questions or talking points. Providing some, or all, of these questions well prior to the meeting can go a long way towards making it more productive.

Set Expectations: Make sure that you let the entrepreneurs know how you would like the meeting to go. If it is scheduled for an hour, set the expectations for how that hour should be used. Their initial presentation should take up no more than half the time. This will give both you and them a change to discuss any issues or questions that come up. Setting expectations will also help them focus on providing the level of information that is appropriate. One of the faults of many presentations is that it is too detailed for an initial meeting. I have seen stacks of twenty five to thirty slides. You need to let them know what information you want to see presented. It is a good idea to contextualize the meeting in a broader process. Let them know what your procedures are following the initial presentation.

Avoid Redundancies: You have probably already heard the elevator speech and seen an executive summary. If the meeting is going to be productive, it should focus on new information. Some of these new requirements may not be covered in the package that they have put together. For instance, if you are particularly interested in their success developing paying clients or their advantages over the competition, a prior request will help make the meeting more productive. Make sure that you communicate your needs early in the planning process. You want to avoid simply going over materials that have been presented in prior, less formal conversations.

Outline an Extended Process: Many entrepreneurs get very excited when an initial meeting is agreed to. They approach it as if one clean swtroke will result in their getting funded. Most investors I work with take between six and twelve months to make a final investment decision. The presenters should know that this is the first step on an extended journey. It is a good idea that, as a condition of taking the first meeting, your normal schedule is clearly understood. In some ways this will help the presenting team. Many entrepreneurs get very nervous that they will ‘blow their chance’. You should make it clear that the initial meeting is only a prelude to an extended process. The likely outcome will be a decision to go the next step.

Watch the Team in Action: The initial meeting will be your first chance to see their team in action. Are they well prepared? Have they anticipated important questions? How do they deal with hard or unexpected questions? Do they understand your perspective? You can begin to assess the strengths and weaknesses which will determine the probability of their success or failure.

The first meeting should be a team presentation. It is a very good idea to open a file on each team member and keep notes on their performance. You will also be able to see holes in the team. Many entrepreneurs put together teams from the ‘choir’. They avoid bringing skill sets onboard that are not directly focused on the technology. Often, when there are ‘outsiders’, they tend to be weak and unlikely able to meet their responsibilities. Three critical areas are business management, financial management and sales. Remember that you are assessing the team as well as their value proposition. One result of the meeting may be a set of recommendations for strengthening the team and an invitation to return once those recommendations are implemented.

Put them on the Spot: You need to know how the team and critical members will respond under pressure. They will certainly experience a lot during the period following funding. It is a very good idea to put them to the test very early in the game. Nobody comes to such meetings having all the answers to every question which will be raised. One of the things you should be looking for is the ability to say ‘I don’t know but will find out’. You need to weed out those who tend to try to bluff their way through such situations. Look for tensions within the team. Do they disagree without an apparent ability to resolve the disagreements? Teams that have figured out how to work productively together have a greater chance of succeeding. Remember, it is one thing if the team is well prepared for the presentation; it is another if they are prepared to build a business.

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