If you’re following along with our series of posts on the venture capital fundraising process, the next step in the process is to prepare a business plan and/or executive summary.
The Executive Summary is the short, non-confidential version of the business plan. It is usually the first document that is sent to prospective investors to attract initial interest in a management presentation. A private placement memorandum (PPM) is a fancy way of saying “business plan.” PPMs are generally prepared as part of a private placement using an agent.
Basically, your company needs to put together a plan for how it plans to make money; what it plans to use the money being raised for, and how it plans to return capital to its investors. Generally these documents are shared under confidentiality agreements, depending on the interest level of the investors and the sector being investigated. Life science companies generally require a CDA/NDA (Confidential Disclosure Agreement/Non-Disclosure Agreement) prior to sharing confidential data, but tech companies do not use this as frequently.
The management presentation is usually a Microsoft PowerPoint® slideshow that management presents to investors. It is usually safe to assume that an entrepreneur will have about an hour for each meeting and that the presentation will be frequently interrupted during the pitch. As such, the presenter’s prepared remarks should last no more than 40 minutes. You should also have an alternate, 20-minute version of your presentation with you in case only half an hour is available for some meetings.
As you prepare for the fundraising presentation, part of the process should be to practice in front of a friendly audience to get pointers and to help revise the message as appropriate. This “friends and family pitch” can be a big help in refining the story.
The management presentation should support the story but the presenter should not simply read from the slides. Visually, the presentation should contain plenty of white space.
The right business plan, well presented, can have a huge impact on your odds of getting funded, so doing this step well is very important.