The private equity space is famous for getting “buried in the paper” with due diligence reports often running hundreds of pages. Yet a little-known fact is that Pareto’s Law (the 80/20 rule) is alive and well in our space, and 80% of angel investors will likely read less than 20% of your material before deciding to invest or to pass. How do you sink a hook into an investor in order to have them seriously consider funding your startup? You create a compelling Executive Summary (ES) that entices us to want to read more.
An exceptional Executive Summary should deliver the compelling business case much in the same way your presentation deck does when you pitch to investors. It covers all the reasons we should want to invest by fleshing out the content we see in your slides, taking no more than 2-3 paragraphs to cover each of the slides. If the Executive Summary grows beyond 4-6 pages, the 80-20 rule will kick back in and you will lose the investor’s attention.
I know that there are hundreds of suggested pitch deck templates out there, and you likely have already picked one. When asked, I recommend the 10:20:30 rule from Guy Kawasaki because it builds on the 80/20 rule that I live by and if you implement the suggestions that I recommend in this article, you can develop an exceptional executive summary that will grab investor attention.
Trust me – an Executive Summary that follows your pitch deck will resonate well with angel investors. If the slides did their job then the ES will be a reminder that we will think back on and remember as we pursue the deal. So your Executive Summary will present a well-rounded summary of your INVESTMENT OPPORTUNITY in a way that engages the reader and serves to sell your value proposition. Assuming that your presentation generated lots of interest by focusing on the investor audience then your Executive Summary will go a long way to getting investors interested if it follows the deck.
Your Executive Summary is an opportunity to continue telling your story. The story should not be overly comprehensive, but it has to cover all the bases. The investor will most likely be skimming the content to decide if they need to know more. Therefore, the first sentence must be brilliant, attention-getting, and demonstrate your unique investment opportunity. The first sentence should open the door to the problem you are going to solve and why it’s a critical need. The rest should flow from there.
A second possible opening sentence might hinge around why you started your business in the first place. Many entrepreneurs start or get involved with a startup because they have a personal connection to the solution being developed. Perhaps it is a pharmaceutical or medical device that solves a problem experienced by a family member or maybe it’s a software solution that fills a gap in the market, a good place to start your Executive Summary is to share that personal motivation or discovery. A way to engage the reader is to have them understand your connection and passion for achieving success. This sentence is the Founder’s reason for investing time, money, and effort. To derive the desired outcome from your reader, they must connect with this reason.
The Executive Summary should then flesh out the bullets that you speak to in your slide presentation. As suggested in the Kawasaki model, this means following with sections on the Value Proposition, your Secret Sauce, the Company Business Model, your Go-to-Market Strategy, a small piece of the Competitive Analysis, your Management Team, Financial Projections, the current Status-Use Funds, and the Timeline to the investors ROI.
Based on experience, I know most of you reading this article will have used a variety of pitch deck templates. The Executive Summary that you lead with MUST be tailored to the deck that will be used in your presentation. If the story told in your ES does not match the pitch, it will not work.
It is your job to provide context for the reader to understand the environment. Make sure to reference factual information. Avoid making sweeping generalizations about market size. Your reader will disqualify your claim if it is too vague. As you describe the opportunity, be mindful of who will be reading your document – granted lots of people will read it, not just investors, but ask yourself who is the real target? Dedicate your focus there. If you want my attention and possible investment, then focus the Executive Summary on INVESTORS. I believe that most, if not all the other readers will be able to follow along.
Some of you are asking if you must limit each section to just 2-3 paragraphs, and the answer is no. If you have already been awarded Intellectual Property for your secret sauce, for example, then embellishing that section to make sure the reader gets and stays hooked is perfectly acceptable. IP creates a barrier to entry for the competition and is a compelling investment decision factor. But work hard to keep the Executive Summary brief knowing that if you did your job and “hooked” me that I will continue to read the rest of your investment materials.
Let’s take a minute to focus on language. Do not use superlatives that cannot be substantiated, like cutting-edge, ground-breaking, or world-class. Preferably present real points of differentiation like patents issued and/or pending, personal entrepreneurial experience, qualifications of the leadership team and advisory teams, the status of clinical trials, or if the Company already has sales revenue. These are factual considerations that could not or would be very difficult for a competitor to duplicate.
Your paragraphs on financial projections will, in most cases, force the investor to continue, but only if the numbers tell an equally compelling ROI story. How far will this investment take you, will you need more money to get to profitability, when will I see my Return on Investment, and how much could that return be? Understand that while we would like all of our investments to return 10X+, we live in the real world. Research on angel investing tells us that our overall portfolio will return 2.5x on a 27% IRR. Do not hesitate to say to me that you are pre-revenue but will be generating revenue by the ‘x’ month after completing this funding round. If already generating revenue, make sure to tell me how this raise will get you to cash flow positive, to profitability, or through your next clinical trial. No matter where you stand in development, this is the section that investors pay the most attention to, so make sure you nail it.
Don’t forget to save the last few paragraphs to build on why we need to consider investing in you and your Company. Share how “our win” together will make a part of the world a better place while allowing us all to make money.
Finally, You may have heard the riddle, ‘How do you get to Carnegie Hall?’. The answer is practice, practice, practice. Do not think that writing your Executive Summary is one and done.
You should refine the summary based on feedback and Company developments. You never get a second chance to make a first impression. Please don’t waste it.
If you are interested in the pitch deck template that I referenced, you can find it at https://keiretsuforum-midatlantic.com/the-only-10-slides-you-need-in-a-pitch.html .
Howard Lubert is Co-Founder of Keiretsu Forum Mid-Atlantic and Founder of Keiretsu Forum South East, private angel investment groups with Chapters peppered throughout the eastern seaboard. Howard is a seasoned angel investor and preeminent architect in valuations and term sheet packages. For more information on Keiretsu Forum and to contact Howard Lubert, please visit KeiretsuForum-midatlantic.com