It is 5 p.m. on Thursday evening. You and four other top entrepreneurs are competing for the attention and money from nine venture capital firms (each VC firm has in excess of $100 million in its fund). The five competing companies have been screened by a panel and were selected as the top prospects for funding. The VC firms are anxious to make a deal.
Due to the contracted time line, the competitive situation among the firms and the requirement to make a selection within 40 hours, each of the nine VC firms has sent five of its partners to collaborate on the final decision.
Your schedule is as follows: Deliver your business plan along with the four other submitting companies to the VC partners on Thursday evening. The investors will read the plans, conduct some outstanding due diligence and meet with you on Friday to listen to your final pitch. You will present to all nine VC firms at one time, and then you will meet with them individually for the question-and-answer session later that afternoon.
The VC firms submit a term sheet and investment memorandum outlining proposed funding arrangements to one of the five companies by noon on Saturday. The VCs then meet individually with all of their partners to secure final approval on funding one of the companies.
Although the above seems improbable, it happened this past week during the International Finals of the Venture Capital Investment Competition. More than 50 top business schools from around the world have been competing for three months to determine which nine schools would compete in the final international round.
The top three student VC teams were selected from the final field of schools based upon their ability to pick the best entrepreneurial company and whether they were able to structure a deal that professional VCs would agree is reasonable. Twenty venture capital firms judged the event and developed their own term sheet based upon their pick of the best company to fund.
With 20 VC firms and nine student teams attempting to reach a consensus on the best deal to fund, it seemed like an opportune time to see what all of these "professionals" viewed as the key elements or characteristics of the winning presentations. What won them over, and therefore, what would be the principles that could be passed on to the readers of this column?
Following is a summary of their presentation recommendations:
A business model that gives investor and entrepreneur a chance for a "home run" deal.
A quality management team that understands the market and the competition.
A team with whom the investor would enjoy working.
Use of funds: targeted uses for the money are identified in a way that makes sense.
Product: the team at least has a prototype in place.
Realistic financials: not afraid to say that you will not be profitable for five to 10 years.
Understand the weaknesses in your product, marketing and management team. Willing to openly communicate these issues to investors.
Not afraid to ask the investor for help. Your investor wants you to succeed. If you need help, ask for it.
Dress up for the occasion. Wear a suit or nice business casual.
There are other components of a winning presentation, but I found it interesting that the judges utilized these points to help differentiate among five competitive deals.
By the way, congratulations to the BYU team of Justin Jory, Dan Hemmert, Rachael Hawkins, Michael Anderson and Adam Robertson, who joined teams from MIT and Virginia in being named the top three international schools in the 2007 Venture Capital Investment Competition (www.vcic.org).
Gary Williams is affiliated with the BYU Center for Entrepreneurship. He can be reached via e-mail at cfe@byu.edu.