Entrepreneurs Approaching Potential Investors - Part 1

A month ago, I left the Utah Fund of Funds. Overall it was a great experience and compliments nicely my finance analyst and auditor experiences of the past. While at the Fund of Funds, I was heavily involved with entrepreneurs as well as with venture capitalists and other private equity groups. I sat in on or met with over 80 entrepreneurs to hear their pitches. I also met with over 80 private equity investment groups. I personally introduced 25 – 30 companies to potential investors. A few nuggets of wisdom I gained from my experience:

The Entrepreneur / Company should:

Have an executive summary. It needs to be short, concise, and effective. The shorter the better. Anything over a page long is too much. You need to grab the attention of the investor. They just don’t have time to read more than a page. Three-fourths of a page is even better.

Have a business plan. A finished and polished business plan in PDF form ready to distribute is important. From my experience, investors will ask for additional information if sufficient interest is gained from the executive summary. They will almost never read a business plan without first looking at the executive summary. And even then, they may skip the business plan and seek an in-person pitch.

Follow-up. If an email introduction or phone call introduction is made on your behalf from any source, give the investor a day or two to contact you. If they don’t contact you, then you need to follow-up yourself and make contact. Remember that any given investment group is screening hundreds or even thousands of deals each year. If they don’t follow-up, it may be due to them just not getting around to it. You should follow-up.

Know the investor has many options to choose from. You may have the coolest business idea and revenue model out there. Just remember, that every other entrepreneur thinks the same way about their own business as you do about yours. Also, many entrepreneurs pitch similar businesses and ideas without knowing that the investors have seen similar pitches already. I saw this scenario play out multiple times at the Utah Fund of Funds, when companies would pitch us. I also saw this same attitude manifest itself in many VCs who were pitching the Fund of Funds for money (The Utah Fund of Funds is an LP in 26 VC/PE funds). Some funds thought that their approach was unique and different without realizing that we had already seen many other funds with similar strategies.

Bryce Hansen, CPA