Introduction and Swedish connection
Interestingly, although Bill Powell spoke in Swedish at the start of the webinar, it turns out he’s not Swedish himself. However, he has a Swedish wife and has been speaking Swedish daily with his family for many years. Daniel Windoff, on the other hand, was born and raised in Sweden. He moved to the U.S. for college and has since traveled back and forth between Europe and the United States, and now resides in Colorado.
Evaluating a Startup
- In your opinion, what defines an investable company? What do you look for when evaluating a company to invest in?
Bill Powell maintains that there are two primary aspects of finance: the qualitative side and the quantitative side. He focuses on the ultimate and qualitative side, which typically relates to early-stage companies. For these companies, Bill highlighted three key ingredients that make a company investable. The people – It's not just about domain expertise but also their integrity and values. He looks at how individuals define right and wrong, and who they are as people. Technological fit – He evaluated how the company's technology fits into the current technological landscape and whether it anticipates future shifts or advances. Impact on people – The importance of creating a product that genuinely improves the human condition, rather than something trivial. Daniel has a similar approach, creating the right environment helps companies retain talent and compound knowledge within an organization. A company with a strong management track record is essential, and he looks for a balance of quantitative and qualitative traits. A solid plan that is consistently delivered, increases a company's value over time.
Preparing to pitch
- What are the most important things to have in place before you start talking to investors and begin fundraising?
Bill usually spends less than 37 seconds reviewing a pitch deck. His advice: "You must go home and do your homework about the industry and all the external factors that influence the business,". Additionally, Bill stresses the importance of identifying competitors and encourages entrepreneurs to research others.
Daniel has seen numerous pitch decks over the years, particularly within the life sciences sector. He highlighted the fascinating science and talented scientists involved in this field but pointed out that it is crucial to articulate the real-world impact of the idea. Daniel would typically spend a bit longer than Bill's 37 seconds reviewing a pitch deck—perhaps a few extra minutes. The biggest red flag for Daniel is when a company has a lack of clarity regarding market opportunity and positioning.
Building relationships with investors
- Does this mean that a scientist with big dreams needs to understand all the financial and technological aspects?
Bill's answer is clear, individuals are always selling and must advocate for their work. In the early stages, it's crucial to have a clear understanding of market predictions and sales goals for the product. Daniel sometimes encounters presentations focusing on a particular molecule or technology, which is intriguing. However, the presentation will not fill it’s purpose without clarity on the market needs that this molecule or technology address. Investors need to understand the unique value proposition of their pitch before delving deeper into the scientific details. In the early stages, knowing the market and having clear sales goals is critical. Daniel, who tends to invest at later stages, agrees but leans more on analyzing financial data. Whether early or late-stage, both investors emphasize the importance of a clear, concise summary of the opportunity.
- What is the best way to reach an investor like you, Daniel, or you, Bill?
Daniel explains that in the later stages of a company, investment tends to be fairly institutionalized, occurring through fairs, conferences, and brokers who connect with investors. However, some companies do reach out directly. “It’s all about market research,” Daniel emphasized. “If I’m not the right fit for a particular company, perhaps Bill or someone else is.”
Bill encourages entrepreneurs not to be afraid to reach out. “Finding someone’s email is not that hard; you can always take a guess,” he advised. He emphasized the value of showing investors even works in progress, sharing what has been successful and what hasn’t. He reinforced his message: “Don’t be afraid to contact us!”
- When should one start asking for money?
To Bill it is essential to define what kind of capital is needed. He pointed out the importance of due diligence for the entrepreneur and the investor, stressing that it’s a two-way street. Companies should articulate their dreams, outline their financial needs, and share their future plans with potential investors. “Once you give up equity, it’s nearly impossible to regain it,” if companies decide to take in capital, they should ensure it truly counts.
Daniel believes that sometimes it’s beneficial to explore ways to avoid taking on investments. While most companies will likely need investment eventually, the right investors are crucial. The understanding of why investors want to invest and their timeframe is crucial. “At the end of the day, once you sell your equity, you are working for someone else.”
How to create the perfect pitch deck
- What are your top tips for a compelling pitch deck?
To Bill it's important to consider the perspective of the viewer in front of you. He recommends using only a handful of images—around five, if possible—to illustrate your points and utilizing AI tools to help simplify complex topics. “Squint down to the essence of what you are trying to say,” he advised. “Don’t overwhelm people!” Once you’ve done your homework, you can better understand the lens through which your audience is viewing your presentation.
Bill believes there is a time for an in-depth company pitch deck, but it often lacks the opportunity for a Q&A session at the end. For Daniel, a pitch deck should quickly capture attention. “A good summary with bullet points, a story, and maybe six charts,”. This structure allows you to grasp the essentials of the topic before diving deeper. It is important to send the pitch deck to investors in advance, giving them ample time to prepare their questions. Finally, the importance of preparing and practicing your pitch in front of not only friends but also critics, to ensure you are fully prepared.
- Who will be paying for your product? He wanted to understand how this factor influences pitching.
To Bill, companies should secure grants as revenue to demonstrate if someone is already interested in paying for their product. This potential revenue stream can be a strong point in a pitch. Daniel concurs with Bill, on the importance of understanding pricing in relation to competitors. “What is the value at the pricing?”. He stresses the necessity of building a solid case for whatever revenue streams can be identified, such insights are highly beneficial in the early stages of a company’s development.
- How early should a company consider an exit strategy?
According to Daniel there are two competing frameworks: one focused on exiting and making money, and the other on building a sustainable company over time. He argues that prioritizing the latter will naturally lead to financial success, emphasizing a vision and focus on execution is crucial. Bill agrees with Daniel, that this mindset applies at all stages of a company's development. "If you're solely focused on the exit from the beginning, that seems incongruent with my value system." Some may have different motivations, but hard work will ultimately yield financial rewards.
- What should companies look for in an investor, particularly regarding red and green flags?
Bill means that by seeking references and insights, companies can identify potential red and green flags. For Daniel, grasping an investor's timeline and motives is critical. He encourages companies to understand the investors motives and timelines, and encourages to discuss the investor's past mistakes. Learning from these experiences can provide valuable insights. Underscoring the significance of personal dynamics, where functioning collaborations can be powerful, while a misaligned partnership can become a significant challenge.
As you continue on your investment journey, good luck!
