Teasing the VC with the perfect Teaser

- Soumitra Sharma, IDG Ventures IndiaFeels great to be writing my first article of 2012 for YourStory! As we step into the New Year, what better topic than to address the first step several entrepreneurs looking to fund-raise, will be taking this year – creating the perfect Teaser for VCs.

For the uninitiated, a Teaser is a crisp summary of your venture that most VCs will ask for post the 5 min pitch at a conference or a quick phone call. It’s typically the first document that you will ever share with a professional investor, and in some ways, is also the most crucial. There is usually no formal limit to its length (except that it shouldn’t be your complete business plan). I have personally seen Teasers ranging from a couple of slides to a 15 slider. Being anywhere in this spectrum will work, provided the critical things are being covered.

Since VC’s reject a disproportionately high number of deals, the Teaser is also an ‘email elevator pitch’ for your venture. VC Investment Professionals will form a quick Drop-or-Worth Meeting view of the opportunity based on it. Also, this document will most probably be shared with a potential Lead General Partner for the deal, so it needs to be hitting all the correct buttons.

Top Mistakes in Teasers

1.      Using MS-Word Format (applies to Business Plans as well)

MS Word is possibly the most irritating format to build your Teaser in, or even your business plan. It is cumbersome to read and manage, and the key points often tend to get lost in the text. Also, its layout and format makes authors needlessly verbose, a sin given the fact that VCs anyway have severe attention-deficit.

2.      Including an Executive Summary     

It’s supposed to be a Teaser – if anything, it should be like a tactical executive summary of your complete business plan.

3.      Giving un-important details

There are certain things (in fact, most things) that VCs just don’t care about when doing a first level filter. These could be items such as customer testimonials, office pictures, long winded product descriptions etc. No point in putting them in if the reader is not interested – in fact, it might just irritate him. Remember – VC Attention Deficits!

4.      Covering too much information on market/ industry environment

VCs typically keep an eye on all sectors of interest, and have an understanding of basic business dynamics in each segment. Giving granular details about regulatory environments, policies, recent developments etc. could end up making the Teaser boring. Also, the VC would anyway diligence these aspects in great detail once you are past the first filter.

5.      Using excessivetechnical jargon

VCs are rarely experts at any sector (particular complex ones)– the more technical jargon you throw at them, the more their mind will close. Winning content is simple, crisp and designed for a layman.

6.      Mentioning valuation expectations

Valuation is something that should be negotiated, not stated. To a VC, it shows immaturity and a rigid mindset in fund-raising approach. Let’s reserve numbers for the Term Sheet discussion.

Suggested Teaser Format and Contents

Speaking from the other side of the table, here’s a suggested format for the Teaser. The order of slides is extremely important.

Business Snapshot/ Synopsis (1 Slide) – summary of the venture in one slide

• When was the company founded
• Description of what you do (2-3 bullets)
• Present status:Revenue traction (1 line)
• Number of customers/ users (1 line)
• Names of key marquee customers (1 line)
• Key awards/ recognitions (1 line)
• Market size (1 line)
• Planned fundraising amount

Team (2-3 slides) – YES, THIS SHOULD BE THE SECOND SLIDE

• This is the single most important reason why deals get done so needs to be put up front
• I would even devote 1 slide to each founder, describing in detail their education, work experience, prior entrepreneurial background, awards and accomplishments etc.
• Important to mention Advisory Board and any existing angel investors
• The more detailed, the better

Market Opportunity/ Idea (1-2 slides)

• Needs to be engaging – use charts, graphs
• Key 2-3 points about the market need, size, growth (no verbose descriptions)

Description of Product/ Service/ Business Model (2-3 Slides)

• Describe the offering and value propositionusing images/ flow charts and crisp bullets
• Technical jargon needs to be avoided – write it for a layman

Competition/ Key Differentiators/ USPs (1 slide)

• Pictorially depict the competitive landscape and 2-3 crisp bullets about your uniqueness/ entry barrier/ competitive advantage
• Briefly mention any IP created

Revenue Traction (1 slide)

• Mention current revenue traction (m-o-m, q-o-q, y-o-y, whichever is relevant) – show using graphs with values indicated within them
• Customer pilots are important and should be mentioned
• Logos of key paying customers should be included
• Extremely important to include revenue visibility – order book built/ leads/ prospects

Financial Projections (1 slide)

• Put a tabular snapshot of P&L projections, at least for next 3 years
• Ideally devote top half of table for projections of key operating metrics (inputs for your financials) and bottom half for actual financials
• Mention select key items (Rev, GM, EBITDA etc.) rather than detailed line items

Fundraising Plan (1 slide)

• Mention the fundraising amount
• Important to include the deployment plan – amounts categorized into at least 3-4 broad heads (hiring, R&D, product development etc.)
• Optional – amount of money already gone in to the company, shareholding pattern etc.

The above format should lead to a 10-15 slide Teaser, a healthy volume of information for a first look by the VC. Entrepreneurs should definitely add their personal touch to the Teaser. The idea of giving this flow is to highlight key points that VCs will look for in your first deck – the more easy and appealing it is, the lesser the resistance while evaluating.

Disclaimer

The views and opinions expressed in this column are strictly personal, and not those of any organization/institution the author is or has been a part of, nor is made in any official capacity of such organization/institution, unless explicitly stated otherwise. None of the information, views and opinions in the column should be construed as business or legal advice.