Your start-up company’s executive summary is typically the first document potential venture investors review when considering your start-up company as an investment opportunity. The quality of this document therefore sets the tone for these same venture investors (e.g. individual angels, angel groups and venture capitalists). A quality executive summary may be the difference between securing a meeting in front of potential venture investors or not receiving a call back. Therefore, by considering the executive summary as their “door opener”, entrepreneurs need to focus on developing an “investor quality” document to put their best foot forward when introducing themselves and their start-up company to potential venture investors. This article outlines some of the things that entrepreneurs need to consider before they provide their start-up company’s executive summary to their potential venture investors.
Does Your Executive Summary Have the Appropriate Content?
The executive summary is a key element of the road show process. This document is used as the “entry” vehicle to secure the attention of venture investors. A well-written executive summary is necessary to securing a follow-up phone call and subsequent meetings with the venture investment community. The executive summary provides a two- to three-page overview of the company’s business plan. This document is to include an overview of the company, its technology, product, or service offering, as well as its management team and the financial requirements and expected return on investment. The executive summary must be a well-written, succinct document that describes all the essential points that are of interest to venture investors. Content to be included in an executive summary includes the following:
- Company Overview
- Background and Milestone
- The Problem/Value Proposition
- The Technology, Product, or Service Offering
- Target Customers
- Market Size
- Market Strategy, Tactics and Execution
- Competition Summary
- Financial Projections
- Management Overview
- Funds Requirements and Use of Funds
- Exit Strategy
It should be noted that an “investor-quality” executive summary is very difficult to write and takes many hours of work by the whole management team of your start-up company. But, given the importance of this document to securing your first meeting with potential investors, it is well worth the effort.
Is Your Executive Summary Succinctly Written?
It needs to be emphasized that a considerable amount of time and effort should be spent by the management team of your start-up company to develop an “investor-quality” executive summary. This often requires that the management team to write, and then rewrite and rework the executive summary document many times, in different formats or layouts to get a succinctly written document having the proper flow, content, and message.
As previously mentioned, this document sets the tone by providing the proper introduction of your start-up company and its technology, product, or service offering that will determine whether you receive a call back and are able to arrange a first meeting with venture investors. So, the importance of this document can not be underestimated. Your executive summary is the document that will make the difference between receiving and not receiving a call back.
To ease the process of developing an “investor-quality” executive summary, there are several items to adhere to during the development of your start-up company’s executive summary, including:
- Length: 2-3 pages – The ideal length of an executive summary is two pages. Often, executive summaries are three to five pages in length. It should be noted that venture capitalists have a limited amount of time to review your executive summary and, as such, the shorter the better and the more likely it will be read.
- Font: 10 point or larger – Typical font size for an executive summary is 10 to 12 font. Anything smaller is not readable and will generally deter your target audience from reading your executive summary.
- Sub-heading and bullets – The use sub-headings and bullet points to enhance the story is recommended in the development and presentation of your executive summary. This does two things: 1) It provides the reader with a format that is easy to read; and 2) It allows the venture investor to identify the “key” elements of interest in an executive summary at a simple glance.
Therefore, having a succinctly written, executive summary, based on the tenants outlined above, and at the same time providing the appropriate content and message is a big step toward receiving a call back from potential venture investors.
Does Your Executive Summary Contain Financial Pro Forma Statements?
Many times I receive executive summaries from start-up companies that do not contain any financial pro forma information. This is like buying a car without a steering wheel and an engine. Without providing the appropriate financial pro forma statements in your start-up company’s executive summary, investors will not know where you are going or how fast you will get there. Since your potential venture investors are financial managers, they are primarily reviewing your start-up company based on the potential return on investment it can provide them in a reasonable time frame. They are not really concerned on how “cool” your technology is or by how “neat” of a product offering you are developing for your target customers. Potential investors, first and foremost, review your start-up company based upon its projected financial performance. Therefore, you must spend a considerable amount of time putting together financial projections that are:
- Have the appropriate back up details, and
- Reflect industry standard financial statements.
By not providing financial pro forma projections or by providing financial statements (e.g., income statements, balance sheet cash flow statements) that are inaccurate, un-defendable, or do not reflect typical industry financial standards, your executive summary is by definition an incomplete document. Therefore, it is very important to include financial projections in your executive summary to ensure that you receive a call back from potential venture investors.
Have Your Executive Summary Reviewed By Third Parties.
All start-up companies should have their executive summaries reviewed by independent third parties that have experience securing funding from the venture funding community. This review process will ensure you do not miss something and will provide the appropriate type of critique that will add value and quality to your executive summary. You should have several colleagues review your executive summary. This will allow you to consider multiple input sources and at the same time provide you with many difference perspectives on this summary document. Remember having originally generated your executive summary, you are too “close” to it and need an unemotional third party to review your document from an objective point of view. This will enhance the quality of your start-up company’s executive summary and often, at the same time, improve the end product.
Have You Done Your Due Diligence On Your Investors?
Many entrepreneurs do not spend the any time doing due diligence on their potential venture investors. This is important, as you want to target only those investors that will have an interest in your start-up company and its technology, product or service offering. Therefore, doing the appropriate level of due diligence will ensure that you are targeting the appropriate investors for your start-up company and its technology product or service. Several items to consider when doing your due diligence on your potential venture investors include the following:
- Geographic focus,
- Stage of development focus,
- Capital required,
- Industry specialization, and
- Deal leadership.
All of these items will affect whether a given venture investor will consider your start-up company as a potential investment opportunity. So, before you approach any venture investor, you should research their background, their past investments, as well as their strengths and weaknesses. This will more likely insure a positive experience with your target venture investors.
Developing your executive summary is the important first step in securing a meeting with potential venture investors. The quality of your executive summary sets the tone with your potential venture investors and can be the difference between securing your first investor meeting or not receiving a call back. It is important as an entrepreneur to understand the importance of your executive summary and create an “investor quality” document with the appropriate flow, content, and message to get your potential venture investor’s attention. By spending the appropriate amount of time an effort creating your start-up company’s executive summary you can ensure that you will get the attention of the venture funding community.