A single PowerPoint slide, elegantly designed and articulated, can stop a high-growth company cold. Dwell too long on a single slide in the presentation deck, over-answer a simple question, or read the text on that slide word-for-word can mean a quicker “exit” than the entrepreneur intended.
In his 2005 book Blink, Malcolm Gladwell introduced the concept of “thin-slicing” our ability to gauge what is really important from a very narrow period of experience.
In the context of high-growth companies attempting to raise risk capital, investors often “thin slice” their decision in the first minute of a venture pitch meeting. It happens that fast.
Having advised and coached over 800 start-up technology and service companies over the past 20 years, and funding a few of them with seed money to develop prototypes, I can instantly tell whether an entrepreneur understands what’s at stake in a pitch meeting. Nascent entrepreneurs are focused on the tangibles: product development, patents, product features, competition, financial projections, or type of corporate entity. They typically over-emphasize information.
Investors are looking for the intangibles and relationships. Investors want passionate collaborators who can lead a team, not conservative controllers, researchers or managers. An entrepreneur lingering too long with his/her thumb on the clicker for the presentation title slide risks an immediate thumbs-down from the investors: over and out. If the entrepreneur arrives late, includes too many slides, reads every word on a slide or runs as little as 30 seconds over on the allotted presentation time, the investors shut down. The question-and-answer period that follows is a dead zone or lackluster. I’ve seen investors turn away from the presenter, look out the window, tap a pen absentmindedly, check email or they move on and review notes from previous presentations.
Those investors don’t want to deal with that entrepreneur, ever.
Echoing Malcolm Gladwell, let’s call this investor phenomenon “risk-slicing.” Here’s the thinking. If an entrepreneur runs long on the allotted time or includes too many slides, the investor instantly assumes the entrepreneur will consistently be running over-budget and behind schedule on much more complicated matters such as building a prototype, market validation, obtaining regulatory approval, signing up strategic partners or putting a national sales team in place.
It’s not the money that is scarce for investors; it’s time. Investors want to be able to maximize time and attention placed on the promising deals and companies already in the portfolio. For investors, it’s really not about the technology, the invention or the innovation level. This is commonly called betting on the jockey, not the racehorse. The thinking is that an “A”-grade jockey (entrepreneur) can always get a “C” horse (company) into a win-place-or-show finish. The “C” jockey will only harm an “A” grade horse, struggle to finish with a “B” horse and will have no chance getting a “C” horse past the first turn on the track.
Whenever an entrepreneur walks into the pitch meeting and greets the due diligence panel of investors, or when an entrepreneur gives an “elevator pitch” impromptu to a single investor at an airport lounge or in the lobby of a hotel, investors make a very quick judgment from basic human instincts we all share:
– Do I like this individual enough that I will want to deal with his/her personality, quirks and habits, and his/her energy level over 36 to 60 months of my life?
– Will this individual stay the extra two hours on a Friday evening to add the small detail that supports the task at hand? Will they drag me into a problem when they didn’t really need me?
– At a trade convention, will this individual book the offered resort room, opt for a cheaper room or consider less expensive lodging nearby? Will they know to make seven other appointments with prospects, suppliers and potential hires in surrounding area where the convention is held?
– When this new company is thrown for a loop, caught up in a nuisance infringement lawsuit, has a product fail in testing or baseline market research proven false, does this individual have the fortitude and fierceness to persevere but still be pleasant on a personal level?
You could say that an investor’s decision to fund is made when the door to the room opens. The entrepreneur either exudes the mannerisms of someone who knows innately how to navigate the road ahead, with passion, perseverance and a sense of humor, or has no clue at all.
Risk-slicing can reduce The Next Big Thing to an un-fundable Nothing at All in no time flat.