If anyone knows anything about roadshows and investor presentations, it’s Mark Cuban. The Shark Tank star has listened to many entrepreneurs pitch their business ideas, both on and off the show.
But the billionaire businessman wasn’t always on the investor side of the table; he spent a good amount of time in the entrepreneurial hot seat, pitching his business to bigger players. From this experience, Cuban shares lessons for executives preparing for financial roadshows.
In 1990, Cuban sold his tech company MicroSolutions to CompuServe.
In 1998, he took Broadcast.com public at $18 per share and closed at $62.75 per share, a gain of almost 250%, setting what was at the time a one-day record for IPOs.
So what can executives hoping to successfully pitch investors glean from Cuban’s success?
In one of his blog posts, aptly titled The Stock Market, Cuban explains the Broadcast.com pre-IPO roadshow experience, his very first one. Embedded within this story are key lessons that any entrepreneur and executive can apply to their own financial roadshows.
Cuban’s Shock
“Part of the process of taking a new company public is something called a roadshow,” Cuban writes in his blog. “The roadshow is just that. A company getting ready to sell shares visits the big mutual funds, hedge funds, pension funds – anyone who can buy millions of dollars of stock in a single order. It’s a sales tour. 7 days, 63 presentations.”
In preparation for the roadshow, Cuban and his team “put together an amazing presentation†about Broadcast.com.
He hired consultants to help, debated about what his team should and shouldn’t say, and requested people to fire off every possible question they could think of, which was intended to simulate every possible scenario they would encounter when they “sat in front of these savvy investors.”
But to Cuban’s shock, the investors with whom he met were anything but savvy.
“Out of the 63 companies and 400-plus participants we visited, I would be exaggerating if I said we got 10 good questions about our business and how it worked,” he writes. “The vast majority of people in the meetings had no clue who we were or what we did. They just knew that there were a lot of people talking about the company and they should be there.”
What Most Investors Really Care About
After the Broadcast.com IPO made Cuban a billionaire, he made the transition to playing the investor role, getting “asked every day to invest in private companies,†he writes.
So what makes some presentations stand out more than others?
Cuban says he always asks the same two questions:
How soon until I get my money back?
How much cash can I make from the investment?
“I never ask what the PE ratio will be, what the Price to Sales ratio will be,†he writes. “Most private investors are the same way. Heck, In Junior Achievement we were taught to return money to our investors.”
4 Key Takeaways:
Don’t Assume Investors Will Be “Savvy
There’s no quicker way to lose investors’ attention than by speaking a foreign language. If your presentation stuffed with industry jargon, your message may get lost on your audience.
The roadshow is a chance to tell your company’s story, to engage people emotionally and get them to believe in your business and ideas.
Lose your audience and you’ll hurt your chances of a successful IPO.
Clear communication is key to achieving investor buy in, so you need to be ready to distill your pitch for an audience of non-industry members.
Don’t Assume Investors Will Be Dumb, Either
On the flipside, it’s critical to prepare the presentation for an audience of industry experts. There are still many savvy investors who do their homework.
If you find yourself outgunned during a data firefight, you may lose investor confidence and lose the sale (because, as Cuban mentioned in his blog, a roadshow is essentially a sales tour).
If you focus your presentation on information investors already know, you may not grab their attention.
The only way to get serious investors to listen to you is by showing them you’re an expert in your field.
How to Tell Who Your Audience Is
The first thing any executive should do during an investor presentation is determine if the audience is clueless or full of industry experts.
A simple solution is to ask your audience members they are familiar with your company and industry, and if they have read the prospectus.
If they answer yes, you can bypass that information, focus on a few important tidbits, and get to the Q&A. The Q&A is one of the most important parts of any investor presentation.
Know Your Core Message
The key to being able to adapt your presentation to different audiences is by understanding and internalizing your core message.
Once you’ve discovered your core message, build an engaging story around it with proof points such as case studies and testimonials. Depending on the audience, these elements can be shifted, reduced, or increased to support the core message, which must always remain consistent.
What It All Comes Down To
Once you’ve refined your messaged, make sure your presentation can answer Cuban’s key questions:
- How soon until investors get their money back
- How much cash can they make on their investment
If you can refine your message, tell an engaging story, and answer these two questions, you will have a great chance of seeing a successful financial roadshow experience.
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