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In August of 2011, I had the fortune to be invited to meet and pitch Carlos Slim, who was the richest man in the world at the time.
The meeting was a favor to Carlos’s friend Eduardo Verastegui, who is best known as a Mexican Telenovela star and is a true gentleman. Eduardo and I had struck up a relationship through our mutual friend, entrepreneur and venture capitalist Dan Peate. Eduardo suggested that one of my portfolio companies might be of interest to the Slim family, so Eduardo, Dan, and I flew to Mexico City to pitch the opportunity.
Dan and I are investors together in the company, but as the lead investor and executive chairman, I was responsible for making the pitch. As we walked into Carlos’s office around 7:30pm, he informed me through his translator that we had 15 minutes.
As a venture capitalist, I am always preaching the ability to convey what is important quickly, clearly, and crisply. Here was my opportunity to put that into practice on one of the highest pressure (yet private) stages in the world.
At the end of my pitch and his questions, Carlos smiled and without the assistance of his translator said, “Thank you. That was very executive.” I understood immediately that he was thanking me for getting right to the point and for not wasting his time. He indicated that the deal was probably not a fit as their strategy had recently changed, but that he enjoyed hearing about the deal and wanted to follow up. In the end, he passed on the deal in an extremely professional manner.
The rest of the evening, which included being electrocuted at dinner with Miss Venezuela and riding to our hotel in the back of a police car, is probably a story for another blog. But what stood out to me the most from the evening was that compliment from Carlos Slim. I came to recognize, more than ever, the need for busy executives to hear only what is most important to help them make decisions: approve or deny, continue or stop, invest or decline. Regarding my portfolio company, I held hours worth of potential discussion in my head — but my task was to distill that information into what was specifically relevant to Carlos Slim and could be conveyed in 15 minutes, including time for translation between English and Spanish.
This insight is critical to how we practice venture capital and corporate innovation in general: the job of anyone presenting to senior decision makers is to be an editor, not just a writer. When we learn something, and then reduce what we communicate to what is essential, we can capture attention, allow better decisions, and generate valuable insight.
In effect, the entire job of a venture capitalist is to edit a deal flow funnel from everything that is seen (the total number of leads reviewed by the firm, which may be in the thousands per year) down to what is most important (the deals that are appropriate for investment, which may be in the single digits, or less than 1% of what is seen). Especially at the top of the funnel, analysts and associates serve as the “front line” of the firm, reviewing business submissions and taking first calls and meetings. The same concept applies to business development professionals and M&A teams.
At the bottom of the funnel, innovation professionals must distill what is learned in what could be hundreds of hours of due diligence into an investment memorandum or presentation, as noted by investor Sarah Cone. While Parker Conrad, the founder of Zenefits, is promoting the idea that entrepreneurs should use investment memos instead of pitch decks to accommodate lazy VCs, the entire industry has gone in the opposite direction over the course of the last two decades.
Conrad’s idea of an investment memo is essentially a written business plan. But because VCs didn’t want to read full business plans, entrepreneurs began using pitch decks instead. It’s true that it’s more difficult for pitch decks to stand on their own, but Conrad admits that he used a pitch deck too. Although his track record is controversial, Conrad is a known commodity and he might be able to raise capital with no plan at all. But the typical entrepreneur needs to break through the noise, and a lengthy written document probably won’t suffice. Many VCs that I know have replaced their written investment memo with — you guessed it — a pitch deck for internal decision makers, because brevity matters.
VCs also prepare reports to distill what we know about a portfolio company into a useful summary that can help Limited Partners (the investors who provide funding to venture capitalists) quickly understand the status and prospects for individual deals and even an entire portfolio. These reports are often one-page summaries for each company that condense what is learned in hours of board meeting presentations and extensive financial statements.
This editing ability is especially essential for young venture capitalists reporting to senior fund professionals, or to any innovation professionals reporting to your boss or to senior leadership. In this role, you are the eyes and ears of the firm, and the firm’s senior executives do not want the experience of re-living all of your interactions or diligence work. That is why they have hired you. The skill of distilling what you have learned to what is most important is what makes you valuable to your company.
