The Investor Presentation: Making the Perfect Pitch

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It’s 9:00 a.m. Monday morning. An analyst and two investment bankers in tailored blue suits sit impatiently at your boardroom table. The PowerPoint projector bursts to life and your heart starts racing. It’s show time! You have 20 minutes to convince them that your company is worthy of their time and investment.

Competition for capital among private and public companies has made courting investors an integral part of building a successful biotech company. Of all the communication channels available, the investor presentation stands out as one of the most direct and effective ways to get on a money manager’s radar screen.

“A presentation is typically the first introduction by a company to investors,” notes Kelly Holman, managing director of Genesys Capital Partners Inc. (Toronto, ON), one of Canada’s largest venture capital firms specializing in life sciences. “And first impressions are important.”

You must persuade investors in a very short time that your company has the potential to develop innovative products for a ready market. While a flawless presentation alone will not open the purse strings, a poor one will certainly limit your chances of securing a second meeting or a cash infusion.

Venture capitalists, retail investors, analysts, portfolio managers and fund managers all have different information requirements and varying degrees of knowledge of the life sciences sector. A fund manager who specializes in biotechnology will naturally require a higher-level briefing than a fund manager who includes biotech companies as one component of a larger portfolio. Know what will interest your audience and tailor the pitch accordingly.

Successful execution of any presentation hinges on preparation and practice. Lack of preparation usually goes hand in hand with lack of spontaneity, which reflects poorly on management, the company and its prospects. Rehearse the presentation beforehand, particularly if other members of the management team will be speaking. Use the presentation to demonstrate the company’s team dynamic. Research prospective investors before you pitch to them. Identify their investment style and criteria, portfolio of companies, stage and focus of investment. Before any meeting, work with your investor relations professional to draw up a list of questions that could arise during the presentation and develop some well-thought-out, credible answers.

The presentation should flow seamlessly, using clear and assertive words that tell a compelling story to capture and maintain investor interest. The key is to simplify the story, limiting each slide to one take-away point, paring down excessive verbiage on slides and adding visuals to illustrate important points. Be sure to maintain a consistent level of disclosure and tone down any blatant promotion. Investors prefer less hype and more facts.

“Convince me of the investment opportunity,” Holman says. “I want it to be really simple. I think that’s where people lose their audience. They get bogged down in too much detail or become lost in the science.”

Brevity Counts

Limit your presentation to less than 20 minutes — that’s 20 to 25 slides, maximum — and allow an additional 10 minutes for questions. Some venture capitalists targeting seed-stage companies may allocate an hour for the presentation, but most investors like the story conveyed clearly, quickly and succinctly.

The two most important parts of any presentation are the first 30 seconds and the last 15 seconds. Arouse interest immediately by hooking the audience. Investors make money when your business makes money; so you must convince them that the company’s science, intellectual property and management have what it takes to bring products to market that will generate high returns. Start off with your elevator pitch — a clear, 30-second description of the company and its investment attributes — along with a noteworthy accomplishment or milestone that establishes credibility at the outset.

Design your presentation so it’s easy to follow. Choose key investment strengths and reinforce them throughout the presentation. Succinctly explain your business, products and technology. Outline the size of the market. Specify your competitive advantage and the company’s business strategy for completing clinical trials and for securing regulatory approvals and partnerships. Provide details on the clinical trial design, completed and upcoming milestones. Describe the management team’s expertise and track record and conclude with financials and a strong, confident close.

The Target Market

Define the market opportunity in realistic terms. Investors want to know that you understand the compound or technology’s true market potential. Describe the market’s size, characteristics, growth potential and trends.

“One common mistake I see in a lot of investor presentations is that companies often include a slide showing the multi-billion-dollar international market they’re targeting without identifying what part of that larger market they can realistically capture,” says Karen Boodram, biotechnology analyst with Pacific International Securities Inc. in Vancouver, B.C. “It’s too much of a disconnect to really understand the tangible applications of their technology and the potential revenue they could generate at the end of the day.”

Be specific about the overall market segment the company is targeting and your strategy for penetrating that market.

Technological Innovation

All investors are looking for undiscovered companies with leading science and intellectual property that addresses an unmet medical need. Explain the technology in very simple terms that are easily understood by the layman. Where possible, use analogies to drive the point home. Focus on the novelty of the technology, how it works, proof of concept, its mechanism of action and the company’s product-development plan.

“A big pitfall for a lot of biotech companies is they don’t think about what the current standard of care is,” says Nancy Harrison, senior vice-president of Ventures West Management Inc., a leading Vancouver, B.C.-based venture capital company. To put a technology in perspective, presenters need to provide meaningful benchmarks.

“To me, it all comes down to risk,” says David Dean, health sciences analyst with Sprott Securities Inc. (Toronto, ON). “It would help me if management explained clearly why their company is a lower risk than other companies in this space. A lot of companies are doing really good drug development in a lower-risk way than the market may anticipate. Tell me why you’re lower-risk. Don’t make me have to work it through and figure it out myself.”

Competitive Advantage

Investors want to know that senior executives have a good understanding of the market and their competition. Anticipate the inevitable questions: Who else is pursuing this market? What, in particular, is unique about this technology? Always be prepared to diplomatically explain who your competitors are and your sustainable competitive advantage. Describe your ownership of any patents, proprietary process or technology, exclusive licences or agreements. Discuss core competencies that would be prohibitive for the competition to develop.

“Comparables are important to understand where a company is in the product-development cycle in relation to their peers,” says Normand Balthazard, president and CEO of BioCapital Mutual Fund Management Inc. in Montreal, Que., and manager of the BioCapital Biotechnology and Healthcare Fund. To be relevant, he adds, any peer comparisons should ideally target the same disease category, using similar technology in the same stage of clinical development.

Business Strategy

Most successful biotech companies take a novel compound as far along the clinical trial process as possible before licensing or partnering with a large pharmaceutical company. Seasoned biotech investors have heard it all before and expect a more detailed explanation of the design of each clinical trial phase, plans to obtain regulatory approval, and steps taken to secure alliances or partnerships. “I’d like to see a lot more emphasis on the design and structure of clinical trials in presentations,” Balthazard says. “Properly describe the structure and strategy of the various clinical trial phases, the end points, and competitive advantage of how the trial is designed compared to others.”

Management Expertise

Ideally, venture capitalists and portfolio managers like management teams with experience in taking products through the clinical trial and regulatory processes, in forming partnerships and alliances, and in raising capital.

Briefly highlight management’s track record and expertise by pointing out relevant past accomplishments. Don’t just rattle off credentials — be specific. How exactly did you help your former company be more successful?

“For a VC like me, it’s important to quickly and succinctly describe who’s on the management and scientific teams as well as the people you want to hire,” Harrison says. “Who you are missing is almost as important to me as who you have. In particular, that helps me get some sense of whether the existing management team is realistic about how they’re going to build the business.”

“It’s important to see how committed and integrated management is in a company,” Boodram adds. “What gives me comfort is knowing that senior management has ownership in the company beyond stock options.” Most biotech companies routinely showcase their scientific advisory boards in investor presentations. The advisory board can be a useful adjunct to the management team provided it plays an active role, but a “name-brand” board that rarely meets will quickly be discounted.

Financials and Milestones

Because few biotech companies are profitable, conventional valuation guidelines such as price/earnings ratios rarely apply. Instead, biotech valuation revolves around discovery, information and innovation. Investors pay close attention to the progress of clinical trials, associated news flow, regulatory approvals and, in particular, the amount of cash a company has available compared with its annual expenditure.

“When I look at a company’s cash position or use of proceeds from a proposed financing, I want to know where that money is going to get us and what are the inherent risks in getting there,” Holman says.

The presentation should carefully detail development, clinical and business milestones, and timelines — along with the money required to reach these goals. Above all, be realistic about any projections.

Professional investors don’t like surprises. “There’s nothing worse in my mind than having programs change under my nose,” Dean says. Make sure details of your clinical trial protocols and financials are nailed down before you pitch to investors. If you’re looking for financing, specify how much you need in this round and how it will be used. Drive home your value-enhancing milestones and recap the company’s prevailing investment merits.

Be sure to provide investors with a hard copy of the presentation so they can take notes. Depending on your audience, you may want to hand out an investor package providing more detail on the technology, clinical trial program or the market opportunity. Investors can refer to this if an applicable question comes up. It’s always a good idea to follow up with investors after a presentation. Feedback surveys or a followup call from an independent third party will likely elicit more candid responses from investors on what they thought of the company, its management and the presentation.

At the very least, send the investor a letter or handwritten note, as opposed to an e-mail. The personal touch will leave a more lasting impression, which can help keep the lines of communication open.

Martin Livingston is principal of Living Communications Inc., a Vancouver, B.C.-based consulting firm specializing in corporate communications and investor relations. He can be reached at 604-222-1200 or martinl@telus.net.

IT’S ALL IN THE DELIVERY

Show Your Passion — A good presentation excites and engages an audience. Your passion to succeed must come across. If you don’t look and sound excited about the company’s prospects, no one else will be. Be Spontaneous — The less text in a presentation the better. You want to demonstrate that you know the business strategy inside-out. Reading from the screen or rigidly following the presentation will put the audience off. Entrepreneurs who can think on their feet are much better at convincing investors that they have thought through their business plans. Engage the Audience — Answer questions when they’re asked. If an investor poses a question, don’t respond with “Let me go through my presentation, and I think it will answer your question.” You’ll come across as evasive and unsure of yourself. Investors prefer their questions answered directly.

Talk in Specifics — Avoid industry buzzwords and acronyms. They just alienate the people who don’t understand them. Make Slides Readable — Type size should be large enough to be read at a reasonable distance. Use a type colour that stands out from the background to further increase readability. Light type on a dark background, such as lemon yellow on midnight blue, works well, as does dark type on a light background.

Use Visuals Selectively — Images and graphics can help simplify and explain complex technology and aid retention, but don’t overdo it. Pictures of buildings and smiling employees don’t score points with investors. Similarly, detailed flow charts, organizational charts and financial spreadsheets in a presentation are hard to read and impossible to understand. Keep it simple and straightforward.