Christopher Mirabile

Advanced Pitching Skills: Avoid the 9 Worst Thin Spots

Adapted from a piece that originally appeared on The Seraf Compass.


By CHRISTOPHER MIRACLE
@cmirabile

If you want to get through a demo day or pick up a few seed investors, you can do it by covering the basics. But if you want to raise serious money, you are going to have to dig deeper into your bag of tricks and address some of the advanced issues. These are the critical areas where pitches are almost always too shallow. Knowing which are the trouble spots and how to make sure they are covered is essential advice. Let’s go through them one at a time.

Explaining The Market Moment

To be credible, a pitch must answer the “why you, why now?” questions that provide context for the business. What has changed in the universe that makes this business suddenly not only possible, but a great idea? An entrepreneur must explain why they are the gal or guy to do it.

Detailing The Go-To-Market

An entrepreneur has to be specific about how they are going to crack their market. Selling is really hard, especially to certain types of customers. They are going to need to convince investors that they have a very specific and detailed plan or business model innovation that is going to allow them to acquire their intended customers affordably (relative to their lifetime value).

Assuming Fast Consumer Behavior Change

Making assumptions about how target customers’ behavior is magically going to change has been referred to as “delusional economics.” After the few early adopters, mainstream customers have incredible inertia. The power of the status quo can be immense. The arrival of the internet/wireless/mobile is not going to suspend the laws of physics and gravity in an entrepreneur’s industry. It is not safe to assume that if they build a more efficient clearinghouse / marketplace / trading platform / matching service, everyone’s behavior will instantly and automatically change. Convincing customers to buy from them is going to be hard and expensive. They need to explain what secret sauce makes it less hard.

Paying Insufficient Attention to Buying Priorities

Certainly someone will want an entrepreneur’s product. Unfortunately, their immediate addressable market is limited to the people for whom buying their product is a top priority. How many of them are there? Although a lot of businesses identify a real, legitimate problem for customers, they still fail because other higher priority problems gobble up customer wallet share.

Omitting Marketing Skills

When talking about their go-to-market, entrepreneurs either need to convince investors that they have the marketing experience on the team, OR that they know they don’t and they plan to go get it. Everyone thinks they know how to market. Most don’t. Entrepreneurs need to identify the marketers who can help them.

Building a Realistic Model

Most entrepreneurs totally underestimate what it will cost to achieve success. Investors have seen and experienced many business models and know it is always harder, takes longer and costs more than anticipated. It is crucial to really think through the necessary people, time and financial resources required, and to come prepared with a realistic plan. Entrepreneurs should use both a bottom-up and a top-down approach. Then sanity check it against benchmarks. Underestimating costs and showing an improbably fast time to big revenue and profitability doesn’t impress people with the model – it highlights the naivety.

Assuming It Will Translate

Even if an entrepreneur can paint a credible case for their initial target market, don’t assume that the next vertical, next geography or next customer segment will be as easy. Logic dictates that they are starting in the easiest place. By definition, any expansion will be harder and farther out of their comfort zone and experience base. They must be realistic about their expansion assumptions. Yes, their brand and momentum will help a little, but nowhere near as much as they think (see Build a Realistic Model).

Engineering a Sustainable Competitive Advantage

Even if a company can fight to win a segment, if it cannot make any money at it over the long haul, they’ve still lost. Too many entrepreneurs talk as if their market is standing still, when, in fact, any market worth tackling will always be evolving and growing more competitive. It is critical to talk about how they will defend their position, their pricing, and their margins against the inevitable competitive reactions. It might be intellectual property, it might be some kind of tolerable customer lock-in or switching cost, it might be a product roadmap that keeps their value prop more compelling over time. Whatever it is, they need to explain it, and the explanation needs to be believable.

Failing to Think Exit Scenarios Through

Most entrepreneurs don’t think through their exit strategy adequately. If they succeed, who buys them? Ultimately this is the bottom line for investors. Equity from investors is like a loan that the buyer of their company pays back. They need to talk in detail about the different classes of buyers, why they would buy the company, what they would value it for, what kinds of multiples they might be expected to receive, and what milestones they will need to hit to command those prices.

It is not easy for an entrepreneur to step back and look at their story objectively enough to spot where it is thin. But there are a few critical big-picture elements they simply cannot afford to blow past. Their job is to make sure to cover the above topics adequately—this is the key to convincing investors that the company and team is one that just might reach exit velocity and escape rather than fall back out of orbit and burn up on the way down.


Seraf Co-Founder Christopher Mirabile is the chair of the Angel Capital Association and also Co- Managing Director of Launchpad Venture Group. He has personally invested in more than 50 startup companies and is a limited partner in four specialized angel funds. Mirabile is a frequent panelist and speaker on entrepreneurship and angel-related topics and serves as an adjunct lecturer in entrepreneurship in the MBA program at Babson.

12 Angel Investor Tips for First-Time Entrepreneurs


Adapted from a piece that originally appeared on The Seraf Compass.


By CHRISTOPHER MIRABILE

I was speaking with Jim Connor of Sand Hill Angels in Silicon Valley and Catherine Mott of BlueTree Allied Angels in Pittsburgh and the subject of fundraising advice for first time entrepreneurs came up. I took the opportunity to jot down answers to 12 questions every fundraising entrepreneur should think through. Here’s an edited transcript of the discussion.

If you could give one piece of fundraising advice to a first-time entrepreneur, what would it be?

Mott: Be prepared; Do your research and also surround yourself with knowledgeable team members who can compensate for your weaknesses.

Connor: It depends on the entrepreneur’s weaknesses or blind spots. Most suffer from a lack of experience in launching a new product or a company –  most managed some aspect of operations in a larger company, but might not understand the infrastructure support that made their jobs easier that what they are about to undertake.

Mirabile: I agree – building a great founding team is a critical first step; I tell students that the first real market test is whether you can attract co-founders.

How important is the slide deck?

Connor: In my opinion, a slide deck provides a logical discussion and the ability to practice that discussion in a logical manner, regardless of where you have to start.

Mott: Yes, it allows you to lay out the key points in an organized way and tell the story in a comprehensible flow.

Mirabile: It can also be efficient – a picture is worth a thousand words, but there are traps for the unwary; complex or unappealing decks can confuse, show cloudy thinking and even reveal poor communication skills.

Connor: When a deck is good, it is great; when it is poor, it is a disaster.

What is the single biggest mistake a first-time entrepreneur can make when raising money?

Mott: Expecting all angel investors to be “dumb money” and not recognizing the value that can come from finding great investors.

Connor: Assuming that investors will accept the valuation offered because social friends of the founders all said it is what the company should be worth.

Mirabile: Failing to network and use connections and context for first approach has to be up there, too?

Both: Yes.

Is it risky for an entrepreneur to just email in their plan or submit it cold via the web?

Connor: Cold submissions are almost always a complete waste of time. It’s analogous to trying to meet people though CraigsList. You have to do a little networking.

Mott: Exactly. You need to provide some context; everyone is busy and they are much more likely to spend some time with your plan if it is referred by someone at least remotely connected to them.

Should companies in “stealth” insist on NDAs?

Connor: Only if they do not wish to engage with investors.

Mott: Given the number of plans in a year, we cannot take on that responsibility. File a provisional patent before engaging with investors if need be.

So what are the worst slide deck mistakes?

Connor: There are so many possible deal killers, probably the first is being a complete clone of another funded and fully deployed company and not being aware of this fact.

Mott: One of the worst mistakes is to focus too much on the technology and not enough on the business opportunity.

How important are first impressions with investors and what are they based on?

Mott: Very important—you must keep investors engaged in order to have them hear you out.

Connor: It’s more a question of whether you can recover from a bad first impression; generally it’s very tough when there is negativity to overcome.

Mirabile: Right—when the person you are dealing with is in triage mode, sifting through similar deals, your first impression needs to be pretty strong and very positive.

Both: If you let your potential investors disengage, expect that it will be impossible to get them to re-engage.

How much personality should an entrepreneur show when raising money? What constitutes too much?

Connor: If passion is personality, then show what you have as long as it is authentic, credible and realistic.

Mott: Jim is right, keep it authentic and real; show your passion, but remain credible and don’t go over the top.

What is the best way to present financials?

Connor: Know thy financials, know thy assumptions, be able to discuss the assumptions, recognize and admit that they are a “best guess” with the information you have at hand.

Mott: Be ready to explain them.

Mirabile: It is more about showing how you think and why you think it, than it is about convincing investors that your forecast guestimates are spot-on.

Connor: Like a discussion or collaboration.

What is the best response you’ve ever heard from someone who didn’t know the answer to the question?

Connor: ‘Let me be sure I understand your question, you are asking if …’ ( redefine the question into something you can answer), then answer it.

Mott: After you rephrase the question, admit you are not sure and promise to get back with and answer by X date.

Mirabile: I am a fan of: ‘Great question. I don’t know, but here is how I think about this issue … here is what I think the answer will be … and here is why.  But I agree we should dig into this further.’

What is the most common rookie mistake when pitching a company?

Connor: Not knowing the challenges of the market, not understanding the importance of building a strong team.

Mott: Exactly; not understanding the importance of building a “balanced” team.

Mirabile: Lacking the humility to realize you don’t yet know what you don’t know.

What is the difference between confidence and arrogance?

Connor: Confidence is “I am confident that if you give me your time, money and participation, we can, with your help, build a great company,” versus just give me your money and I will show you that we can dominate the world.

Mirabile: To me, arrogance is: I am going to kill this and it will be a piece of cake; confidence is: There are going to be bumps and challenges, but I know we will keep at it until we succeed.

Mott: Exactly!


Seraf Co-Founder Christopher Mirabile is the chairman of the Angel Capital Association and also co- managing director of Launchpad Venture Group. He has personally invested in more than 50 start-up companies and is a limited partner in four specialized angel funds. Mirabile is a frequent panelist and speaker on entrepreneurship and angel-related topics and serves as an adjunct lecturer on entrepreneurship in the MBA program at Babson

Angels: Your network is everything

By SHELAGH BRALEY

BOSTON—If you’re an entrepreneur, some days are easy. And then there are days when you could really use an angel.

Meeting some was as simple as attending Gesmer Updegrove’s angel funding event at WeWork South Station Wednesday night. The panel met an audience of more than 100 attendees, the bulk of whom (by show of hands) had teams of at least two, as well as working products.

“Not too many had revenues, but there were certainly some,” Gesmer partner Bill Contente said in an interview. “Most had taken in friends and family money, but only a handful had angel or VC money. They were exactly the people who needed this information.”

Gesmer-Angels4

Gesmer’s Lynne Riquelme, far right, welcomes the panel of angel investors: (from left) Christopher Mirabile, Joe DeMartino, Barbara Clarke and Catherine White, with moderator and Gesmer partner Bill Contente.

Contente led the evening’s conversation, designed to deepen understanding of the investment process—something he said requires a lot of nurturing. “We have lots of incubators and collaborative work spaces popping up all over Boston. Bringing the people around who actually invest, to teach new companies what (angels are) looking for is something we thought was a good way to keep them on good trajectories,” he said.

Catherine White of Golden Seeds said working with angels should fundamentally bring value. “Of the different angel groups, and I’ve counted 31, you have to decide which one is going to be the most helpful. Do the research on them but try not to make too many assumptions. If they just want to talk: ‘Back in 1930, you know what I did…’ ” she joked, “that’s probably not the right angel.

“You want someone who wants to work with you the way you want to work,” she said. “And you should ask them how they think they would like to work with you. You need to ask yourself: Is it worth putting up with what I’m getting.”

But make that assessment early—before any money is exchanged. “Often we say taking angel money is like getting married but you can’t get divorced. We have a stake in your success,” said entrepreneur-turned-investor Barbara Clarke of Astia.

“Ideally they’ve had a few startups of their own, have seen success, and in large part want to give back,” said Joe DeMartino, managing director and head of deal flow for the Angel Investor Forum. “You want people who are willing to give you advice and have the expertise that will help you. An introduction goes a long way.”

But please don’t try selling angels on your product. They far prefer to know about you. “What criteria do we use to evaluate? The single most important thing is the team, the founder. And we look for coachability, someone who is willing to listen, someone that isn’t a know-it-all,” said Christopher Mirabile of Launchpad Venture Group.

Gesmer-Angels3

“You have to understand, it’s a different message than you tell your customers. It’s a sales process so understand what we are looking for. It’s team, market and product. For me, that’s the order, product comes third,” DeMartino said.

“Start very early to have a diverse team. You’ll make better decisions and you’ll be a better company. Research shows companies with women on the team do better. Don’t waste time being a monoculture company,” Clarke said.

But don’t expect funding before you’re ready—which generally starts with staying rooted in reality and finding customers.

“Do a sanity check on your model,” Mirabile said. “Benchmark the key assumptions in your model.”

Of course, money you’re booking speaks louder than any other signs of readiness. “If you’ve got a working prototype or software beta, nothing says success quite as loudly as the reality of revenues,” White said. “We’re like, wow, you actually have customers and it’s not your aunt and uncle?” she joked to the laughing audience. “We really like to see that.”

“You need to get into the heads of the people sitting up here,” Clarke said. “Try to see the world through their eyes. You have to see what they’re seeing in order to figure out how to get to a yes. You should never go into these meetings clueless. A fellow entrepreneur will be happy to tell you what’s it like. What are they into?”

“VCs invest about $25 to $35 billion a year in businesses,” Mirabile said. “A lot of people are surprised to find out that the angel market is roughly the same size, about $20 to $25 billion a year. VCs make about 5,000 deals a year. Angels make about 70,000.”

Angel investment is up across the country, according to the Angel Resource Institute’s Q3 report for 2015, with median round sizes more than doubling since 2014. The report also showed New England coming in second on the list of regions to invest the most angel capital, at 15.5 percent. California tops that list at 19.7 percent.

Would that margin of investment—or any investment—be reason enough to move west? According to Mirabile, just the specter of funding isn’t enough, because raising money is about tapping into personal connections.

“If you really don’t care where you live and you have a line on money, then go ahead and move. But you have to know your personal network is going to be more valuable than an entire metropolitan area,” he said.

“I think it’s pretty much possible to get any kind of business funded anywhere. You ask the three questions: ‘What do you think?’ (of my company, product, etc.), ‘Is there anyone I should talk to?’ and ‘Would you be willing to introduce me?’ That is easier to do where you know some folks,” he said.

He went on to address the draw of Silicon Valley. “There are very young angels with a lot of money around, in their 20s and 30s. Sure. The flip side is it’s brutal to find talent, the cost of living is high, and really, there’s just a lot of hype going on,” Mirabile said.

“For my money, Boston is the best place in the country to build a company.”

The panelists offered a warning, too: “Beware the fake angels,” Clarke said. “They like the lifestyle but don’t really like to actually invest a lot of money. You have to know the difference,” she cautioned.

DeMartino said the best way to source out an angel’s validity is to come right out and ask. “Ask them how many investments they’ve made, and what kind of companies they’ve invested in.”

“Every time!” said Clarke. “And you shouldn’t be buying them coffee.”


The next event in the Gesmer Updegrove Fundraising Series, featuring insight on venture capital, will be held April 6. Follow @gesmer on Twitter for more information.

 

Above board: SheStarts experts on choosing advisors

By SHELAGH BRALEY

BOSTON—As a founder, where do you turn when you need advice? If you’re truly innovating, there isn’t a single source—often you have to collect expertise from multiple sources to patch together a plan. If you’re lucky, those handpicked experts can become your advisory board, according to the SheStarts panelists who shared their thoughts Monday night.

Christopher Mirabile of Launchpad Venture Group, entrepreneurs Joyce Lonergan (CEO and co-founder of Mellitus LLC) and Helen Adeosun (CEO and founder of Care Academy) joined serial entrepreneur/moderator Tina Weber at WeWork South Station to share advice on choosing an advisory board. Here are the 5Ws you should know, plus a little extra:

SheStarts co-founder Nancy Cremins introduces the panelists at Building and Using an Advisory Board.

SheStarts co-founder Nancy Cremins introduces the panelists at Building and Using an Advisory Board.

WHO should be an advisor:

“Your advisory board is a group you’ve collected who are focused on helping you,” said Mirabile. “It’s people you can rely on … an industry expert, someone who might be in your slide deck. That’s on the more formal name-dropping spectrum.”

“They’re supposed to make your load lighter. You don’t want to bring on anyone that will make more work for you,” Lonergan said.

WHAT is the best way to work with an advisor:

“You say, ‘Here’s what I’m thinking, does that work for you?’ Then put them to work, give them homework, let them know that’s what you expect. Calling them up, saying ‘What do I do?’ is not the way to go, to give them confidence in you as a leader. Be explicit about whether they’re OK with you using their name, and make sure they know your story,” Mirabile said.

“There has to be enough connection, you don’t want to be forgotten. Each call has to be a transaction. And then ask yourself, ‘Did I get what I needed?’ It’s up to me to bring them along, their time is valuable,” Lonergan said.

“It happens organically. We like each other and how each other thinks,” said Weber. “Just don’t question yourself too much. Lay it out there, lay out your ideas.”

“Call them, but not to the point where it keeps you from moving your company forward. If I ask a question and they come back asking, ‘How did that go,” I latch on. It doesn’t have to feel so boisterous and sales-y. See who is really into it,” Adeosun said.

WHEN should you choose an advisor:

“If you need advice, you’re ready,” said Mirabile. “Do it as soon as you can use one.”

“If you need advice, you’re ready,” said Mirabile. “Do it as soon as you can use one.”

“You listen better if you create something first, and you get better feedback,” said Adeosun. “(One of my advisors) picked apart my crap like I don’t know what, but it was great. She’s now a valuable member of my advisory.”

WHERE can you find qualified advisors:

“I ask myself all the time, ‘Who do I know who does that? Sometimes it comes from LinkedIn, who does my group know? Through partnering and outside vendors, I’m always trying to find a thread of commonality,” said Lonergan.

“A lot of times I’m already working with someone, and they say, ‘Do you mind if I list you (on my slide deck).’ It starts out with networking, asking for advice, and good chemistry. (The entrepreneur says:) I’m picking your brain, you give me good answers, and then say, would you like to take this to the next level,” Mirabile said.

WHY choose to work with an advisory board:

“We are showing our customers, these are the people advising us every day, we’re being pushed forward,” said Adeosun. “And it keeps you accountable, right? You don’t want to mess up those relationships, so you work even harder.”

HOW should you work out compensation:

“As an entrepreneur, I never have enough money or time. I try to do everything as low cost as possible. But I’ve learned not to skimp when I need smarts,” Lonergan said. “If you can get the magic of your idea across, sometimes you can get them to help beyond a paycheck.”

“If you can get the magic of your idea across, sometimes you can get them to help beyond a paycheck.”

“If they’re putting in a ton of time, making intros or lending you a name with the halo of recognition, that could be a quarter of a percent to half,” said Mirabile, “or in exceptional circumstance, up to 1 percent of common stock options.”

Mirabile had special advice about this, and also covers it in his blog, “You can outgrow expertise early, so give them less (stock) maybe, but let it vest early so they aren’t hanging around when you don’t need them. Shoot for less stock and faster vesting.”

Adeosun referred to a resource that she has found valuable, a founder/advisor standard template: “The Founders Institute lays out the process by experience and cache, setting expectations, this work is worth x-amount.”

Best traits to look for in a quality advisor:

CM: Availability, willingness to help and super-networked is a key feature. A lot of people are hard to schedule with, they give you shallow answers.

JL: Master of their craft, give you great depth of answers, and trust is so important, for what I ask to be held in confidence and not twisted.

HA: Their ability to connect and work with people in our industry. Whenever I consider an advisor, I ask in passing, ‘What do you think of this person?’ People admire them for how much they are willing to give, and I look at how much people love them within the industry.

And Nancy Cremins, SheStarts co-founder and attorney with Gesmer Updegrove gave the final word: “When you do put together your advisory, make sure everyone doesn’t look the same or you won’t get that good diversity of thought.”

Good advice across the board.