By JULIE WEED
Debra Reisenthel, chief executive at Palo Alto Health Sciences, has been trying to raise money from investors for the last four months. The goal is to finance the development and production of a biofeedback device that measures carbon dioxide output and trains people to breathe in a way that helps them manage anxiety disorders.
Along the way, Ms. Reisenthel said, she has learned some important lessons about pitching to investors. “We used to start meetings with a story about our founder, the problem we were addressing, its cost to society and the scientific research that led to our business idea,” she said, “but investors wanted to know right away, ‘What exactly are you selling and who is going to buy it?’ ”
As a result, Ms. Reisenthel learned to get to the point, immediately. Whether they are pitching to venture capitalists, angel investors or friends and family, entrepreneurs who have been through the process stress the importance of making a crisp presentation, sizing up competitors and knowing what kind of information the potential investors require.
KNOW YOUR AUDIENCE Angel investors and venture capitalists come to the process at different times with different needs and goals. “The angel investors we met with during our idea stage were interested in the zeitgeist of the project,” Ms. Reisenthel said. “They were excited to be part of what we were trying to achieve, and they were O.K. with unanswered questions. They didn’t need a detailed five-year plan, and understood their investment would be diluted in value when we took on additional funding.”
She said the venture capitalists, by contrast, are generally willing to invest more money but they want to know when the company expects to be profitable. “V.C.’s are more about the details — market size, business model, cash flow plans, sales break-even point and how the company will find customers,” Ms. Reisenthel said. They were more likely to want to be involved in strategic decisions, expected regular updates and often wanted a seat on the board of directors. “They were also less willing to accept risk than angel investors.”
KEEP IT CONCISE Pete Higgins, a founding partner at the venture capital groupSecond Avenue Partners in Seattle, has heard hundreds of pitches over the last five years and has financed about 7 percent of them. He said a concise presentation was telling because entrepreneurs who can explain a complicated set of technologies or a new product show they are smart, that they have …
1) Reid Hoffman reviews what worked and what didn’t in a pitch he made to investors in 2004 for LinkedIn.
2) Brian S. Cohen, of New York Angels, has written a book called “What Every Angel Investor Wants You to Know.”
3) David S. Rose, venture capitalist, gives a TED talk on what you should know before pitching venture capitalists.