I was invited to speak tonight at the MIT 100K Web/IT track mixer but, unfortunately, I’m sick (which wouldn’t have necessarily prevented me from going) and have lost my voice (which would have made going to the event pointless). So, in exchange, here are some thoughts on the topic we were going to discuss at the event–the dreaded executive summary. I invite the 100Kers to comment liberally and we’ll get a discussion going.
Plenty has been written on how to write good exec summaries. The best article I’ve found is the one that Garage Ventures did. There is not much I can add about what needs to be in a good exec summary but I can share some “secrets” of how most VCs engage with exec summaries. Keep in mind that this is real world advice, which is not necessarily what you need to win in the BPC but then you are trying to build real startups as opposed to startups that win competitions, right?
VCs have a love/hate relationship with executive summaries. Actually, most VCs either love or hate them. Personally, I hate them. Most, even the ones by good teams, are terribly written so, statistically speaking, it’s a waste of my time to read them. If I was making an initial decline or investigate further decision on exec summaries alone, I wouldn’t have engaged with some of the great startups I know. Therefore, I prefer to look at a presentation and skip the exec summary.
Exec summaries are rarely read. They are skimmed, typically with the purpose of making a quick decline decision. Choose your words carefully. Don’t have extraneous content. Highlight key points. Use a graph or diagram, provided it would be self-explanatory to someone who knows nothing about your business. Use simple analogies that relate your technology or business model to successful companies. Be humble when you do that–VCs don’t want to see another startup which thinks its approach is analogous to Microsoft’s or Google’s or Facebook’s.
Be conscious of your goal. It is to get to the next level, ideally a face-to-face meeting. You need to sell enough to get there but no more. Don’t over-educate or over-sell. It will lead to a wordy and heavy exec summary. Avoid the common hyperbole such as “this is a $56B market” or “we have no competition.” Statements like these only make you look immature.
Be explicit about your team building goals. This advice is especially important for teams with fewer “done it before” execs. I think it would be fair to put MIT $100K team in this broad category. As a judge in previous years, I’ve been disappointed to see founding teams with too many chiefs (CEO, CFO, CTO, CSO, CMO, CPO, etc.) none of whom would be hired in those positions if the funded company were to do an executive search. VCs want to know that the founding team knows its limitations.
Tune your exec summaries for the investors you are talking to. Who said you should have only one version of the exec summary? Typically, a very early stage startup has a lot of options and its future will in some way be influenced by its investors. How you pitch to an angel group for a $500K seed investment is not how you’d pitch a VC with a $1B fund. The angel group and the large VC have different business models. They want to invest in different companies. In some cases, your company could be a fit for both, as long as you are flexible and open to the options, but your story needs to be different.
Under-promise and over-deliver. Do not make big claims in your exec summary, especially about the near future, unless you are absolutely certain you can deliver on them. For example, don’t say you’ll have a distribution deal with Large Vendor X negotiated in the next 90 days if the probability is less than 90%. You’ll likely be talking to VCs for many weeks or months. Your credibility depends on making promises and keeping them.
As a writer of business plans, and frequent judge for these b-plan competitions, I can agree completely that most exec summaries too often are bloated, beyond belief and burdened with a “management” team that’s barely two steps away from being a barista.
My advice to many of these plan writers: Burn it. And then begin again, this time telling the truth instead of overselling.
This is a great post. One question, should the exec summary focus more on the product, or should there be other concerns that are primarily addressed? I know that the current incarnation of our executive summary focuses mainly on the product, and why we believe it will provide value for our potential users.
Shane, the exec summary should cover everything briefly.
Sim, thanks for your reply. I think we will take Wanless’ approach now 🙂
in the end, the writing of business plans and exec summaries by the founders and management of start-up ventures ultimately benefits them the most, by having them go through many possible growth scenarios and get a better sense of the execution path and resources required to succeed and/or survive!
Spot on, Eduardo. The main problem is that most teams end up drinking their own kool-aid and don’t benefit from the exercise. The documents end up being over-the-top sales pitches as opposed to credible, thoughtful representations of that the startup is about.
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I have an experienced CFO who is working on spec because he believes he will make a fair amount of money creating a successful private equity plan. Personally, I believe that we are just as likely to sell our platform to a large competitor selling in the same space. Should I mention either of these potential outcomes in our ES or would it appear that the leadership isn’t clear on a single focus?
For the record, selling the product, not the company is the real focus.
Troy, I wouldn’t put this in the ES because the purpose of the ES is to help you raise money. As long as this is a valid option you are pursuing, also considering an acquisition is quite alright.
The thing to be careful about is not leading either potential investors or the acquirers down a path with false promises. Deciding when to communicate about alternative paths is hard and depends on the situation and relationships you have developed.
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