Writing an Effective Executive Summary to Get Noticed by Investors

1. How to Write an Executive Summary (one that gets read) June 15, 2011

2. Executive Summaries • Last week we talked about a VC firm in SF that gets 6,000 executive summaries per year • They fund six companies a year • They interview about 100 firms for every one they fund • Therefore they toss 5,400 summaries a year • Larger firms have similar ratios, toss more summaries • Firms can’t read all of every summary they receive • 1,000 pages a month for a small firm, more for larger ones • So what do they do?

3. Let’s Find Out • We will do some role playing • You have just joined a VC firm • But you are not a VC – you are an associate

4. What to Look For • Do they describe their customers? • Is it a large, or a growing market? • Do they describe the customers pain, or opportunity? • Do they describe how they solve the pain, or exploit the opportunity? • Are their number projections credible? • If ‘No’ to any of the above – Toss

5. Executive Summary Exercise • You have 30 minutes to evaluate today’s batch of executive summaries • Find two or three that you would recommend to senior partners to be brought in to pitch • If there are none, that’s OK • If there are more than three, be prepared to justify your selections – you’re probably too lenient • Do not start until told to

6. Did You Do What They Do? • Scan the first paragraph? • Does it make the company look interesting? • Does it make a credible business case? • Does it explain who its customers are? • How they are benefited? • How the company makes money ? • Does it tell you something you didn’t know? • Does it tell you something that excites you? • IF real VCs were interested at that point, they may scan a couple of other paragraphs • If they continue to be interested, the company gets invited in • Otherwise they toss the executive summary

7. How Do You Fight The Odds? • How do you get your executive summary read, let alone to be one of the six that gets funded, or at least the 5% that get invited back? • How do you do this in two pages or less? • What is your objective?

8. Executive Summary Overview • First Paragraph • The most important one • The one that determines if the rest will be read • Other Paragraphs • Explain the business • Market, pain (opportunity), solution (benefit), technology, team, IP, business model, etc. • Financial Projections • Remember, you are pitching your company, not your technology • Why is your company a good thing to invest in? • How will the investor (and you) get very, very rich?

9. Side Bar • Value Statement • Most important preparation for finding funding • Many, many uses • Used in • Elevator Statement • Add how much money you are looking for now • Executive Summaries • Forms the core of the first paragraph • Investor Pitches • First slide • Social Settings • Omit the crass parts about money

10. First Paragraph • Summary of the Executive Summary • Recapitulation of your value statement • What you do/are (what do you make or do)? • Who are your customers? • How do they benefit from buying your thing or service? • How much do they save? • What pain do you alleviate? • How do you make money (if not obvious)? • How big is the opportunity (if not obvious)? • How much money are you looking for? • Anything else that truly sets you apart, or is exciting • Anything that will get the investor to read on

11. Other Paragraphs • Paragraph 2: Market & Customers • Describe simply (Gen Yers, consumers with a home network, small business owners, etc.) • Explain their pain (or the opportunity they represent) • Market definition (if not covered above) • Market size (if not obvious) • Paragraph 3: Your Solution • How you solve the problem, alleviate the pain, cure the illness

12. Other Paragraphs • Paragraph 4: Technology • Stay at 10,000 feet • Don’t reveal your “secret sauce” • Don’t kiss on the first date • Explain briefly what you have and how it works • Paragraph 4½: IP • Can be part of Technology paragraph • Describe licenses, patents, know-how

13. Other Paragraphs • Paragraph 5: Competition • Who else does something similar? • What are customers doing now? • Why won’t they keep doing it? • Why is your sauce better? • Remember, everybody has competition • Paragraph 6: Business Model • How you make money (may not need if you are building and selling a gadget) • Include your selling and distribution channels and partners, if any and if necessary

14. Other Paragraphs • Paragraph 7: Market Entry • How do you get your first N customers? • Paragraph 8: Marketing -- growth • How do you grow to your first N2 customers? • What partners do you need (if not covered in previous paragraph) • Paragraph 9: Team • Short bios of actual team members • Describe relevant experience of each • Don’t include board or advisory board members unless so impressive

15. Final Paragraph: Financial • Generally a table and text • Table • Starting from funding, show annual revenue for 5 years plus costs, money from unusual sources, and year-end cash • Show assumed financings • Show headcount (you want to show headcount & revenue don’t have to grow at the same rate) • Text • Summarize the data in the graph • Point out when cash flow turns positive, subsequent financings and anything else noteworthy • Mention how much money you are looking for now, and in next round(s)

16. Final Stuff • Add your contact information • Make sure the whole thing is about 2 pages long for a VC (if it spills over onto a third page, it’s OK) • For an angel a different layout and a single page are used (and it has to fit onto just one page) • You can find detailed instructions at www.angelsoft.com • Or talk to me

17. Contact • Ralph Patterson • CEO, Bay Area Entrepreneurs Workshop • ralph@baeworkshop.com • 925-200-1895