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Dec 01, 2016

Practical tips for your investor presentations

Top tips based on the author’s favourite Shark Tank pitch

Shark Tank is America’s version of Dragons’ Den, the popular reality TV show from Japan that spread around the world. The show features entrepreneurs who pitch their business ideas to a panel of investors, who decide whether or not to invest in exchange for equity. The entrepreneur will leave the Tank with the investment originally sought, leave with nothing, or negotiate a deal with the Sharks, typically around the amount of equity. 

My favourite pitch was by Bubba Baker, a retired NFL player. His investment proposition? Bubba’s Boneless Ribs. To be clear, it’s not the best product ever presented in the Shark Tank, nor was it the best ever investment opportunity. But Baker delivered a great pitch, getting everything just right! 

Here are three tips from Baker’s Shark Tank pitch that might help improve your own investor presentations.

Tip number one: Support every important element of your presentation with three points.

Baker explained to investors the uniqueness of his product (de-boned ribs) with three selling points:

1. No mess. ‘You can eat them with cutlery’
2. Fast. ‘You can heat them in a microwave in two minutes’
3. Taste. ‘They come in three delicious flavours.’ 

Three clear selling points presented inside a minute.

IR takeaway: Three is the magic number: three bold points are easy to remember for both the presenter (you) and your potential investor. You can give more detail to support each point later in your pitch, but make sure you build three compelling reasons to support your proposition early in the presentation. Let’s say your company introduces a new production line as part of your CAPEX programme, the three points could be: 

1. Lower costs
2. Improved reliability
3. Wider product range. 

It goes without saying of course that you have in your head the underlying data to support all three points.

Back to the Shark Tank. Even after a flawless start a pitch can go downhill, so remember:

Tip number two: Don’t reveal all your positive information straight away. 

After describing the ribs and having investors taste them, Baker was ready for the questions he knew would come. One of the investors questioned the concept itself, arguing that some think ribs taste better on the bone. Baker replied that his unique procedure removes the bones after the ribs have cooked, so there’s no loss of taste. Issue resolved.

The second investor asked how Baker would counter competition, especially from large food retailers that can price-out a small entrepreneur once they recognize the viability of the product. And here came the highlight of the pitch: what the investor thought was the weak point of the proposition turned out to be the strongest point. Baker presented two granted patents, one for the product and another for the process of de-boning the ribs after cooking. The pitch didn’t lose momentum, rather it gained speed. Investor appetite was whetted.

IR takeaway: Keep some triumphs up your sleeve, but don’t exaggerate or oversell. There is always a handful of questions you know will come so make sure you leave some positive facts for your Q&A session. As a listed company you are bound to full disclosure, but remember there are always positive peer comparisons, statistics and examples that can be kept for later communication. If you include every positive in your primary communication, you’ll be left facing the ‘negative’ questions.

There are always weak points and risks to any investment, and successful investors will dig deep to find and asses them. Cleverly, Baker didn’t wait for weak points to be discovered.

Tip number three: Be prepared! Never turn defensive when asked about setbacks or risks. 

Baker admitted a 19-year gap from idea to realisation. That could concern investors. Rather he took this potentially negative fact and turned it into a positive story: he came close to dropping the idea, but in order to motivate his daughter and lead by example he decided to pursue the idea with force and focus. This is what I really liked about his pitch. While I’m sure he rehearsed the answer, he sounded 100 percent genuine because, well, it was genuine.

IR takeaway: Acknowledge every investor concern. Remember it’s their money or their clients’ money that you are seeking, they have every right to ask difficult questions. It’s important not to take any question personally and to stay cool-headed. Investors don’t look for argument, they look for risk. And they will always quiz your ability. Be prepared, listen, and turn failure or disappointment into opportunity or a lesson learned. 

So how did Baker do? He valued his company on 13 times his current revenues, asking investors for $300,000 in exchange for 15 percent of the firm. The valuation was steep but not unreasonable (given the unique patent), and importantly he had room for negotiation. He walked away with one strategic investor who took a 30 percent equity stake for the money invested and Baker was able to take the company to the next level and licence his technology to large meat producers. 

Radek Nemecek is investor relations director at IR and PR firm Cook Communications

This is an edited version of an article that first appeared on the IR Society blog