How to Figure Out if You Want to Invest

Board Meetings for venture-backed companies are built around powerpoint presentations. In the very early stages of any investment cycle these presentations are filled with a lot of information about product development, market positioning, new initiatives, etc. It is a very wide range of information and it seems like every Company (no matter which one) likes to prepare a presentation with about forty pages. Creation of these slide decks must be very time consuming on their authors. Investors listen patiently as each page is reviewed.

As time passes, one of two things generally happens: (a) the presentations seem to stay around forty pages or (b) they shrink to around eleven pages. What is going on? What does this represent?

Several yeas ago I was attending graduation ceremonies of a prominent Virginia University. We were outdoors at a post-ceremony picnic and I was standing among several academics. A young girl with a bread basket offered bread sticks to attendees and each of us declined. She took on a very sad facial expression. In reaction, I had a puzzled look on my face which prompted one of the academics to comment (he was an economics professor)…”In a capitalist society we pride ourselves on our ability to sell…she is sad because she had no takers…” This young lady was about 8 years old and had already been infected with the trappings of the US version of the free market system…..yikes. This obviously stayed with me.

Once sales start to take off at an early-stage company…the slide deck starts to shrink…sales is all we (venture investors) want to talk about. If you show me a forty-page Board presentation (and hide the sales figures) I have a pretty good idea of where this company stands. If you tell me how many forty-page presentations in a row the Board has seen…I have a good sense of what my anxiety level should be given the current length of my investment…I start to get queasy when I see too many of these.…...We all want the eleven-page presentation that rarely speaks of anything other than current bookings, pipeline, sales process, territorial expansion, new customers, new markets, etc. This type of Board meeting lasts about forty-five minutes.

So next time you are trying to figure out if you are wanting to invest in a venture fund…ask the general partner what the average number of pages is in Board Presentations across his existing portfolio…this should tell you how he is doing…if the average is “thirty-eight” and the fund is several years old…run away…