Pitch Presentations

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The impact of entrepreneurs' oral 'pitch' presentation skills on business angels' initial screening investment decisions Colin Clark a a Department of Marketing, Minas Gerais, Brazil Online Publication Date: 01 July 2008

To cite this Article Clark, Colin(2008)'The impact of entrepreneurs' oral 'pitch' presentation skills on business angels' initial screening

investment decisions',Venture Capital,10:3,257 — 279 To link to this Article: DOI: 10.1080/13691060802151945 URL: http://dx.doi.org/10.1080/13691060802151945

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Venture Capital Vol. 10, No. 3, July 2008, 257–279

The impact of entrepreneurs’ oral ‘pitch’ presentation skills on business angels’ initial screening investment decisions Colin Clark* Department of Marketing, Fundac¸a˜o Dom Cabral, Nova Lima, Minas Gerais, Brazil

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(Accepted 7 April 2008) This study adds new insights to the growing body of research showing that entrepreneurs’ communication skills and personal attributes influence investor decision making. Twenty-four business angels attending a UK investor forum completed questionnaires evaluating 32 ‘presentational’ and ‘non-presentational’ aspects of three entrepreneurs’ oral pitch presentations. The business angels’ level of investor interest was significantly related to their evaluations of the quality and content of the entrepreneurs’ presentations: the higher an entrepreneur’s overall presentation score, the greater the likelihood that the business angels would be interested in pursuing that investment opportunity. Presentational factors (relating to the entrepreneurs’ style of delivery, etc.) tended to have the highest influence on the overall score an entrepreneur received as well as on business angels’ level of investment interest. However, the business angels appeared to be unaware of (or were reluctant to acknowledge) the influence presentational factors had on their investment-related decisions: the stated reasons for their post-presentation intentions were focused firmly on substance-oriented nonpresentational criteria (company, market, product, funding/finance issues, etc.). More generally, comments about the entrepreneurs’ presentations centred on presentational issues relating to clarity/understandability and structure, the level of information provided, the entrepreneurs’ personal characteristics, and their ability to sell themselves and their investment opportunity. Keywords: entrepreneurship; business presentations; communication skills

angels;

investor decision

making;

oral

Introduction One way entrepreneurs seek funding for their business ventures is by delivering an oral presentation (or ‘pitch’) of their investment opportunity to potential investors. While many of these presentations are delivered to individuals or small groups of investors/fund managers (Malmsten, Portanger, and Drazin 2002), there has been a growing trend, particularly over the past 20 years, for business angel networks and other private investor agencies to invite entrepreneurs to deliver such presentations to an audience of their members at investor forums, enterprise societies, dinner clubs and the like (May 2002; Payne and Macarty 2002; Mason and Harrison 2003). These presentations, which typically last between 15 and 30 minutes but can also take the form of one- to five-minute ‘rocket’ or ‘elevator’ pitches, are almost always delivered at an early, ‘pre-contact’ stage of the investor decision-making process – often before investors have met the entrepreneurs or

*Email: [email protected] ISSN 1369-1066 print/ISSN 1464-5343 online Ó 2008 Taylor & Francis DOI: 10.1080/13691060802151945 http://www.informaworld.com

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seen their business plan. As a result, the most common objective of these presentations is for the entrepreneurs to successfully persuade investors in their audience to ‘get their bums off their seats’ (as one pitch presentation skills consultant put it to the author), request a copy of their business plan and agree to a subsequent meeting to discuss their investment opportunity in greater detail. The economic impact of these presentations for the viability and success of an entrepreneur’s business venture can be enormous. Those entrepreneurs who are unable to convince anyone to pursue their orally presented investment opportunity are likely to seriously compromise their chances (at least with the particular investors in their audience) of reaching even the traditional first screening stage of the investor decision-making process – the evaluation of their business plan – let alone those stages where, once over these initial and major hurdles, funding decisions are most often made. This paper, which reports the results of a study of business angels’ evaluations of entrepreneurs’ real-life oral pitch presentations and the relative impact that ‘communication style’-based presentational factors and ‘substance’-based non-presentational factors had on their post-presentation screening decisions, examines a dimension of the investor decision process – the role and influence of entrepreneurs’ communication skills on investors’ funding/non-funding-related decision making – that has only rarely been explored by researchers. Studies by sociologists have shown that the verbal and non-verbal skills of presenters/speakers in a wide variety of real-life communication situations can have a decisive impact on audience members’ behaviour. Such skills have been shown to influence the level of applause political speakers receive at party conferences (Atkinson 1984; Heritage and Greatbatch 1986), the sales obtained by persons pitching goods on street markets and in TV infomercials (Clark and Pinch 1995), the memorability and success of tasks and targets delivered by managers when briefing staff teams (Clark 1999), the monetary contributions proffered by the public to street entertainers (Mulkay and Howe 1994) and the occurrence of bids at auctions (Heath and Luff 2007). Although many business and government agencies, investor forum organizers and private companies can readily be found on the internet offering advice and training courses for entrepreneurs to deliver more effective oral presentations to potential investors, the evidence for entrepreneurs’ presentation skills actually having an influence on investors’ screening and funding decisions is still largely intuitive and anecdotal. This exploratory study shows that entrepreneurs’ presentational skills had a significant impact on the business angels’ postpresentation screening decisions and, by so doing, also suggests that the communicative interface between entrepreneurs and investors is likely to be a highly consequential interface that merits greater attention from researchers. Literature review The decision by potential funders to invest in an entrepreneurial business has largely been viewed as being if not a rational process, then at least a ‘hard evidence’-oriented, ‘substance’-based process. Different kinds of funders analyse entrepreneurs’ business proposals in different ways and employ different funding criteria and place emphasis on different kinds of information when doing so (Harrison and Mason 2002; Mason and Stark 2004). However, one characteristic feature of the research conducted into investor decision making per se is that the potential risks and returns of an investment opportunity are determined by an appraisal of the financial facts and figures of an entrepreneur’s company and via other similarly tangible and verifiable factors such as the level of sales of the company’s products, evidence of marketplace acceptance and patent protection, the

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size and accessibility of the market, and the existence, strength and potential threats of the competition or business environment. (For reviews and research highlighting the importance of this type of evaluation criteria see Tyebjee and Bruno 1984; MacMillan, Siegel, and Subba Narisimha 1985; Sandberg, Schweiger, and Hofer 1988; Hall and Hofer 1993; Deakins and Hussain 1994; Fried and Hisrich 1994; Fletcher 1995; Zacharakis and Meyer 1995, 1998; Manigart et al. 1997; Shepherd and Zacharakis 1999; Manigart and Sapienza 1999; Mason and Stark 2004.) A second characteristic feature of this research is that many investors also place high levels of importance on relatively tangible and verifiable ‘human capital’ factors such as the skills, experience, track record, characteristics and composition of entrepreneurs and their management team (Tyebjee and Bruno 1984; MacMillan, Siegel, and Subba Narisimha 1985; Goslin and Barge 1986; Sandberg, Schweiger, and Hofer 1988; Hisrich and Jankowitz 1990; Hall and Hofer 1993; Zacharakis and Meyer 1995, 1998; Smart 1999; Haines, Madill, and Riding 2003; Mason and Stark 2004). However, there is a small body of research (including the research cited above) showing that other, more subjective and far less tangible, ‘human’ factors such as the personal attributes, social competencies and the communication skills of the entrepreneurs themselves also influence investors’ decisions. For instance, MacMillan, Siegel, and Subba Narisimha (1985) conducted a survey of the criteria US venture capitalists employed when evaluating new ventures. Three of the 10 criteria the VCs most frequently rated as being essential (meaning they would otherwise ‘reject the entrepreneur’s plan regardless of any other characteristics, no matter how redeeming’) related to aspects of an entrepreneur’s ‘personality’, namely ‘capable of [making a] sustained intense effort’ (the top ranked category); ‘evaluates and reacts to risks well’; and ‘articulate in discussing [their business] venture’. Fried and Hisrich (1994) note that VCs expected entrepreneurs seeking finance to display high levels of ‘personal integrity’, ‘realism’ and ‘flexibility’. In their study of Canadian business angels’ evaluations of investment opportunities, Feeney, Haines, and Riding (1999) found that attributes of the owners of the business seeking finance (e.g. their ‘openness’, ‘honesty’, ‘realism’ and ‘integrity’) tended to be valued more highly by investors than were attributes of the owner’s business (e.g. ‘proper security’ and ‘low level of perceived risk’). Haines, Madill, and Riding (2003) found that business angels look for entrepreneurs who are ‘honest’, ‘exhibit a strong work ethic’, ‘understand what it takes to make their business succeed’ and have a ‘realistic notion of how to value their business’. Entrepreneurs’ social competencies have also been shown to have an impact on investors’ decisions. Baron and Brush (1999), in a study based on evaluations of extracts from entrepreneurs’ practice pitch presentations, found that entrepreneurs’ levels of social adaptability (the ability to change their behaviour in a variety of different social situations) was a significant predictor of whether a consulting company specializing in helping entrepreneurs obtain financial backing decided to assist the entrepreneurs in obtaining financing. Other studies have indicated that entrepreneurs’ communication skills influence investors’ decisions. For instance, in the single case analysis of a VC thinking aloud while evaluating an entrepreneur’s business plan conducted by Sandberg, Schweiger, and Hofer (1988), presentational factors relating to the business plan’s content, organizational style, format and understandability featured in over 20% of the VCs’ investment decisionrelated comments. Similarly, research by Mason and Rogers (1996, 1997) of business angels’ reactions to an entrepreneur’s written business plan found that presentationrelated issues such as not providing sufficient information and failing to adequately address the concerns the business angels have when evaluating investment opportunities were key factors that resulted in the entrepreneur’s investment opportunity being rejected.

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Evaluations of, and decisions about, many of these less tangible factors are most often based not on ‘hard’ or verifiable evidence but, rather, on inferences drawn from a person’s appearance, communication and conduct (Goffman 1959). This process of inference making, which is a process altogether different from the way investors apparently prefer to evaluate investment opportunities, relies on members of a society sharing a conventionalized idiom of communicative signification. By this means a person’s appearance, communication or conduct can ordinarily be relied upon by others to indicate and predict particular things, and the person(s) from whom the inferences have been drawn can rely on their conduct, etc. to be interpreted and acted upon in a way that is consistent with the conduct, etc. they have displayed (Goffman 1959). Put simply, these social skills, which are shared by persons by virtue of being competent and experienced members of society, comprise the most fundamental of all forms of ‘human capital’ as it is these practices and resources that enable social life to be possible. One context in which entrepreneurs’ personal attributes, social competencies and, in particular, their communication skills would be expected to have a major impact on investors’ decisions are entrepreneurs’ oral pitch presentations. Given the popularity and potential economic consequence of these presentations, however, it is surprising that very little research has been conducted into this method of communicating an investment opportunity. Indeed, aside from the aforementioned research conducted by Baron and Brush (1999), the author has been able to find only one other such study, conducted in the UK by Mason and Harrison (2003). Mason and Harrison analysed the reactions of 30 business angels to a video recording of an entrepreneur’s real-life pitch presentation (delivered at a previously held investor forum) and found that the entrepreneur’s presentational skills had a decisive impact on the business angels’ post-presentation evaluations. Most of the business angels stated they would have rejected this entrepreneur’s investment opportunity and cited presentational weaknesses relating to the clarity, content and structure of the presentation as their main reasons for doing so. This study builds on Mason and Harrison’s (2003) research in three distinct and novel ways. Mason and Harrison employed two qualitative research methodologies to capture comments about the entrepreneur’s presentation that was evaluated – a real-time method where the participating business angels were invited, while watching the video recording of the entrepreneur’s presentation, to write down their remarks about that presentation, and a post-presentation focus group to provide additional information about the participants’ collective opinions of that presentation. These comments were then linked to the business angels’ decisions about whether or not they would have been interested in pursuing the entrepreneur’s investment opportunity. For the present study, however, and in addition to providing the potential investors studied with the opportunity to make real-time comments about the entrepreneurs’ presentations and to state their likely post-presentation investmentrelated intentions, a more quantitative approach was adopted: the business angels also evaluated each presentation with respect to a variety of pre-specified ‘presentational’ and ‘non-presentational’ criteria using percentage-based rating scales. By these means this study was able to more formally determine and statistically quantify two things – first, whether and to what extent the business angels’ perceptions of the general quality and content of the entrepreneurs’ presentations influenced their investment-related screening decisions, and second, what level of relative influence presentational and non-presentational factors had on their presentation evaluations and screening decisions. Thirdly, and more generally, the decision making that investors engage in when evaluating entrepreneurs’ oral presentations appears to have all the character of being a highly unsystematic, idiosyncratic and error-prone process that is the very antithesis of the

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diligent, ‘hard evidence’, ‘substance’-based appraisal process preferred by investors. In the data collected for this study the business angels’ screening decisions were reached very quickly (immediately after or, according to many of the business angels studied, even during the entrepreneurs’ 15-minute presentations) – a practice that is similar to the speed at which investors reach decisions about the merits of entrepreneurs’ written business plans – VCFMs typically spending less than six minutes (Hall and Hofer 1993) and, in another study, between 10 and 15 minutes (Sweeting 1991) and, in the case of business angels, a median time of six minutes (Mason and Rogers 1997). Moreover, the business angels’ screening decisions, like those reached after evaluating entrepreneurs’ written investment opportunities, appeared to have been based on highly subjective factors such as ‘intuition’ and ‘gut feel’ (Kahn 1987; Hall and Hofer 1993; Mason and Rogers 1996, 1997; Van Osnabrugge and Robinson 2000; Douglas and Shepherd 2002; Mason and Harrison 2003). By having analysed business angels’ reactions to three entrepreneurs’ presentations (rather than a single entrepreneur’s presentation) and having adopted a more formalized research methodology, based on a rating scale, this study was also able to quantify the level of similarity between the business angels’ evaluations of the different entrepreneurs’ presentations and begin to determine how just subjective, idiosyncratic and potentially error-prone this particular type of screening decision-making process may actually be. The rest of this paper proceeds as follows. First, the data collected are described in greater detail. Second, the business angels’ evaluations of the entrepreneurs’ presentations, and the relationship between these evaluations and their subsequent screening decisions, are reported. Third, findings from an analysis of the business angels’ comments about the entrepreneurs’ presentations are outlined. Finally, the principal implications and practical recommendations of these findings are provided. Data and methodology Three real-life oral pitch presentations delivered at a UK business angel investor forum were used as the basis for analysis. Each presentation was delivered by an individual entrepreneur who was male, the managing director of his company and a native English speaker. The first company had developed a digital printing system and was seeking funds for expansion; the second, an early stage enterprise, had produced a number of medical monitoring devices; the third company, an established computer software developer, was also seeking funds for expansion. The entrepreneurs were allowed 15 minutes to present their investment opportunity and each presentation ended within +7% (i.e. one minute) of this time. The word count of each presentation (mean ¼ 2693 words) was within +3% (i.e. 78 words) of the other presentations. An approximately five-minute audience– entrepreneur question and answer session followed each presentation. After the question and answer session for each presentation, 24 business angels independently completed a questionnaire evaluating the quality and content of that presentation. (Questionnaire booklets, each containing three questionnaires, were distributed to 30 business angels and 24 were returned completed.) These respondents, who comprised approximately 30% of the business angels present at the investor forum, were all active and experienced angel investors and had been selected by the forum organizers to participate in the study on this basis. The main part of the three identical questionnaires each business angel completed (one for each presentation) listed 32 ‘presentational’ and ‘non-presentational’ factors comprising criteria relating, respectively, to the structure, style and delivery of each presentation (n ¼ 12), and to the entrepreneur’s company, market, product(s), and

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funding/finance requirements (n ¼ 20). A list of the 32 factors evaluated is provided in Appendix A. These factors were selected from: (1) research describing the criteria investors report they take into account when evaluating the communicative quality, delivery style and content of an entrepreneur’s oral presentation (Mason and Harrison 2003) and investment opportunities more generally (Tyebjee and Bruno 1984; MacMillan, Siegel, and Subba Narisimha 1985; Sandberg, Schweiger, and Hofer 1988; Fried and Hisrich 1994; Zacharakis and Meyer 1998; Baron and Brush 1999; Mason and Stark 2004); (2) studies describing the communication skills employed by speakers when delivering short, ‘one-to-group’ oral presentations, such as business managers briefing their staff teams (Clark 1999) and police officers addressing subordinate officers (Bull 1978, 1979); (3) advice published online by business agencies and investor forum organizers for entrepreneurs preparing to deliver oral presentations to investors (‘Xe´nos’, ‘Connect Yorkshire’, ‘Springboard Enterprises’ and ‘Spoken Impact’); and (4) informal discussions between the author, business angels and pitch presentation trainers. In the questionnaires the business angels were asked to circle a number on a 21-point double-percentage scale (ranging from ‘7100%’ to ‘þ100%’) printed under each factor to be evaluated. To encourage consistency between each business angel’s responses as well as between the responses of different business angels, a seven-point word scale – ranging from ‘Terrible’ to ‘Exceptional’, with ‘0’, the mid-point of the numerical scale, being ‘Average’ – was placed above each numerical scale.1 Figure 1 reproduces the rating scale used. This rating scale enabled statistically quantifiable comparisons to be made between the evaluations provided by individual business angels (both within and between the three questionnaires they each completed) and between the evaluations provided by different business angels. Such quantification is possible because the numerical scale employed is based on common and constant intervals which have mathematical (isomorphic) meaning (Siegel and Castellan 1988) and also, by virtue of being a word-guided percentage scale, had (it was assumed) a standard and readily understandable meaning for the respondents themselves. The business angels were also invited to state what they were likely to do regarding each entrepreneur’s investment opportunity, why they had reached that particular decision and what they thought were the best and worst parts of each presentation. In addition, a blank page was left at the front of each questionnaire for the business angels to write ‘any other comments’ they had about a particular presentation. The rating scale section of this questionnaire has three particular limitations that should be borne in mind when reading the study findings. First, the 32 factors examined almost certainly comprise only a small proportion of the factors investors actually take into consideration when evaluating orally presented investment opportunities. The number of factors that were selected was the result of an attempt by the author to include as many of the potentially most important presentational and non-presentational criteria without overly disrupting the real-life setting that was studied or compromising the

Figure 1.

Rating scale used for the 32 factors evaluated.

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quality and number of responses the business angels were asked to provide. (The completion rates for the 32 factors evaluated and the response rates for the other questions in this questionnaire were, in each case, 490%.) Second, and partly as a consequence of this first limitation, the scores the business angels provided for the factors evaluated are likely to be an imperfect measure of the actual influence as well as the relative influence that the 32 factors had on their evaluations of the entrepreneurs’ presentations. Previous studies have indicated that investors tend to weight the different criteria they employ when evaluating investment opportunities (see reviews and research in Tyebjee and Bruno 1984; MacMillan, Siegel, and Subba Narisimha 1985; Zacharakis and Meyer 1995, 1998). However, the 32 factors in this study were not weighted. Such a priori weighting was thought to be an analytically premature exercise given the lack of research into entrepreneurs’ oral pitch presentations and the general absence of any mention of (let alone the relative importance of) communicative and presentational factors in the investor decision-making criteria literature. Third, another criticism that can be levelled at studies investigating the impact of communicated information in real-life settings is that it is difficult if not impossible to separate the ‘substance’ of a communicated message from the ‘style’ via which it was delivered, and thus distinguishing presentational from non-presentational factors is both an artificial and methodologically problematic distinction. However, making such a distinction did not seem to be a problem for any of the respondents in this study. There were no occasions where the business angels voiced any concerns or difficulties about evaluating the 32 factors analysed on the basis of segregated presentational/non-presentational criteria.2 Findings Relative rating of the presentations The business angels displayed a high level of agreement about which presentation was ‘best’ and ‘worst’ in terms of overall quality and content, how similar the presentations were to one another, and how they compared to an ideal presentation. By adding the 32 factor scores in each questionnaire an ‘overall presentation score’ was obtained from each business angel for each presentation. Table 1 shows the number of occasions each presentation had been placed first, second or third in this manner by the business angels. On this basis the business angels most often preferred presentation 1 (the digital printing system entrepreneur), almost unanimously least preferred presentation 2 (the medical monitoring devices entrepreneur), with presentation 3 (the computer software entrepreneur) most often being placed second. The level of agreement among the business angels about the relative quality and content of the presentations was statistically significant (Kendall’s coefficient of concordance W ¼ 0.609; p 5 0.01). Indeed, of the six possible ways these presentations could have been ranked (e.g. ‘1-2-3’, ‘2-3-1’, ‘3-1-2’), by far the most common ranking, based on overall presentation score, was a ‘1-3-2’ ranking (n ¼ 14; 58.3%). This figure comprised a 41 percentage point increase above what would have been Table 1.

Relative rating of the presentations by overall presentation score.

Presentation 1 Presentation 2 Presentation 3

Placed 1st

Placed 2nd

Placed 3rd

16 (66.7%) 0 (0.0%) 8 (33.3%)

8 (33.3%) 2 (8.3%) 14 (58.4%)

0 (0.0%) 22 (91.7%) 2 (8.3%)

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the case if the presentation rankings had been distributed randomly (i.e. n ¼ 4; 16.7% for each of the six possible relative rankings). By adding the 24 overall presentation scores for each presentation and dividing this sum by the number of business angels studied (n ¼ 24) an ‘overall mean factor score’ was obtained for each presentation. This measure comprises one way of quantifying how similar the presentations generally were perceived to be by the business angels. The overall mean factor score for presentation 1 was 32.3; for presentation 2, –6.2; and for presentation 3, 25.9. While reaffirming the general ‘1-3-2’ ranking of these presentations, these figures also indicate that presentations 1 and 3 tended to be viewed as not only being higher in quality and content but also more similar in quality and content than presentation 2. These findings were confirmed in two other ways. First, 19 (79.2%) business angels rated presentations 1 and 3 as the top two presentations in terms of overall presentation score. Second, in 18 (75.0%) of the 24 business angels’ questionnaire booklets the percentage difference between the overall presentation scores of presentations 1 and 3 was smaller than the equivalent difference between presentation 2 and both presentations 1 and 3. The overall mean factor scores also provided a general indication of how similar these presentations were perceived to be relative to an ‘ideal’ presentation – that is, a presentation where an entrepreneur would have scored the maximum possible ‘þ100’ score for all 32 of the factors evaluated. On this basis presentations 1 and 3 corresponded to points that were, respectively, just above and just below ‘Good’ on the rating scale used for this study, and presentation 2 corresponded to a point that was just below ‘Average’ – findings which suggest the three presentations tended to be viewed as being neither the best nor the worst the business angels had seen. Business angels’ post-presentation intentions For the question that invited the business angels to state what their post-presentation intentions were likely to be regarding each entrepreneur’s investment opportunity, three answer options were provided: (1) ‘Interested’ (i.e. ‘will consider this investment opportunity further’); (2) ‘Undecided’ (i.e. ‘still uncertain about what to do’); and (3) ‘Not interested’ (i.e. ‘will not consider this investment opportunity further’). Table 2 shows the number of business angels that stated they were ‘Interested’, ‘Undecided’ or ‘Not interested’ in pursuing one or more of the entrepreneurs’ investment opportunities, and the number of each type of post-presentation intention response each entrepreneur received. This table shows that the majority of the business angels treated the entrepreneurs’ presentations as an adequate enough basis to make screening judgements about the merits of pursuing the entrepreneurs’ investment opportunities. Over half of the business angels’ post-presentation intention responses were negative and 55 (76.4%) of their 72 responses took the form of firmly positive (‘Interested’) or negative (‘Not interested’) decisions.

Table 2.

Type and frequency of the business angels’ post-presentation intentions.

No. of different business angels Presentation 1 Presentation 2 Presentation 3 Total

Interested

Undecided

14 9 2 7 18

12 7 3 7 17

(58.3%) (37.5%) (8.3%) (29.2%) (25.0%)

(50.0%) (29.2%) (12.6%) (29.2%) (23.6%)

Not interested 23 8 19 10 37

(95.8%) (33.3%) (79.2%) (41.6%) (51.4%)

Total 24 24 24 72

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In addition, 23 (95.8%) business angels stated on at least one occasion that they were either ‘Interested’ or ‘Not interested’ in pursuing an entrepreneur’s investment opportunity, 14 (58.3%) business angels marked at least one of each of these two options in the three questionnaires they completed, and only one business angel stated s/he was ‘Undecided’ about all three presentations. Moreover, the business angels’ post-presentation intentions appeared to have been influenced by the perceived quality and content of the presentations. First, as can be seen in Table 2, the number of ‘Interested’ and ‘Not interested’ responses each entrepreneur received corresponded (positively and negatively respectively) with the business angels’ typical ‘1-3-2’ ranking of the presentations. Second, this relationship was also confirmed statistically: the higher the overall presentation score an entrepreneur received from a particular business angel the more likely it was that business angel would state s/he was ‘Interested’ in pursuing that entrepreneur’s investment opportunity (Spearman’s rho, hereafter ‘rs’ ¼ 0.600; p 5 0.01).3 It was also apparent that at least those business angels who stated they were ‘Interested’ in pursuing an entrepreneur’s investment opportunity tended not to require the entrepreneurs to deliver anything like a perfect presentation to be convinced about doing so. The overall presentation scores for the 18 questionnaires where the business angels (n ¼ 14) had stated they were ‘Interested’ in pursuing an entrepreneur’s investment opportunity averaged 35.3. This figure, on average 64.7 percentage points below the score an ideal presentation would receive, corresponded to a point that was only just above ‘Good’ on the rating scale used in this study. In contrast, for the 17 ‘Undecided’ questionnaires this average was 27.0, and for the 37 ‘Not interested’ questionnaires this average was 5.2 – figures that suggest there was also a cut-off point (around the ‘Average’ point of the rating scale) below which an entrepreneur’s investment opportunity tended not to be considered as being worth pursuing. The influence of presentational factors After making allowances for the unequal number of ‘presentational’ and ‘nonpresentational’ factors in each questionnaire (n ¼ 12 and 20 respectively), presentational factors tended to have the highest level of relative influence on the overall score an entrepreneur received. This can be seen in Table 3, which shows the overall mean factor scores for both presentational and non-presentational factors for each entrepreneur’s presentation. Presentation 1, which received the highest number of ‘Interested’ responses (n ¼ 9) and the lowest number of ‘Not interested’ responses (n ¼ 8) also had the highest overall mean factor score for presentational factors and the largest average difference between presentational and non-presentational overall mean factor scores (19.6 percentage points). In contrast, presentation 2, which received the lowest number of ‘Interested’ responses (n ¼ 2) and the highest number of ‘Not interested’ responses (n ¼ 19), had the

Table 3. Overall mean factor scores for ‘presentational’ and ‘non-presentational’ factors each entrepreneur received.

Presentation 1 Presentation 2 Presentation 3

Presentational factors

Non-presentational factors

44.6 711.6 32.1

25.0 72.8 21.9

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lowest overall mean factor score for presentational factors and the smallest average difference between presentational and non-presentational overall mean factor scores (8.8 percentage points). Furthermore, in 23 (95.8%) of the 24 questionnaires for presentation 1, the overall mean factor score for presentational factors was higher than the equivalent score for non-presentational factors in the same questionnaire. For presentation 3 this figure was 19/24 (79.2%). In contrast, in 17 (70.8%) of the 24 questionnaires for presentation 2, the overall mean factor score for presentation factors was lower than the equivalent score for non-presentational factors in the same questionnaire. Presentational factors also had the highest level of relative influence on the business angels’ post-presentation intentions. For instance, on 15 (83.3%) of the 18 occasions where the business angels stated they were ‘Interested’ in pursuing an entrepreneur’s investment opportunity, the overall score for presentational factors was higher than the equivalent score for non-presentational factors in the same questionnaire. This type of difference was also evident in 13 (76.5%) of the 17 questionnaires where the business angels stated they were ‘Undecided’ about a presentation and in 20 (54.1%) of the 37 questionnaires where they were ‘Not interested’. Business angels’ reasons for their post-presentation intentions The business angels were also invited to provide reasons for their stated post-presentation intentions and in 68 (94.4%) of the 72 questionnaires analysed they did so. Three distinct types of reasons were provided: (1) Non-presentational reasons. These referred exclusively to one or more of the company, market, product or funding/finance aspects of an entrepreneur’s presentation or to issues pertaining to investor fit, not to some aspect relating to how a presentation had been delivered. Examples included: ‘The competition is very well established and of a big scale – getting into this market with broadly similar technology, where prices are tumbling already, will be very difficult’; ‘Financials not realistic’; and ‘[The entrepreneur’s company] already has strong, long-term relationships and a proven, creative and production capability’.4 Examples pertaining to investor fit included: ‘Not interested in this sector’; ‘Outside my experience’; and ‘Very good proposition but not my area of knowledge’. (2) Presentational reasons. These referred exclusively to how a presentation had been delivered. Three such reasons were provided: ‘A truly dreadful presentation which failed to excite’; ‘Confusing presentation’; and ‘Poorly presented’. (3) Combined reasons. These reasons contained at least one presentational and at least one non-presentational reason. Examples included (note: the ‘presentational’ reason within each example is in bold lettering): ‘Good, well presented proposition. [The entrepreneur] has experience in [his particular] market despite changing business model’; ‘The company and product has been presented very poorly but there may be an interesting proposition underneath this’; and ‘Weaknesses in management team. Not clear about the proposition due to weak presentation’. Table 4 shows the number of times the business angels cited presentational or nonpresentational reasons for each of the three post-presentation intention options. Because of the small number of exclusively presentational reasons (n ¼ 3), the ‘Presentational reason(s)’ column includes both the ‘Combined’ and the exclusively ‘Presentational’ reasons.5 On almost all of the occasions where the business angels provided reasons for

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Type of reason(s) the business angels cited for their post-presentation intentions.

Post-presentation intention Interested Undecided Not interested

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Total

Non-presentational reason(s)

Presentational reason(s)

16 (88.9%) (33.3%) 12 (85.7%) (25.0%) 20 (55.6%) (41.7%) 48 (70.6%)

2 (11.1%) (10.0%) 2 (14.3%) (10.0%) 16 (44.4%) (80.0%) 20 (29.4%)

Total 18 (26.5%) 14 (20.6%) 36 (52.9%) 68

their post-presentation intentions these comprised non-presentational reasons or contained at least one of these reasons (n ¼ 65; 95.6%). Conversely, there were only 20 (29.4%) occasions where the reasons the business angels provided comprised either exclusively presentational reasons (n ¼ 3; 4.4%) or contained one or more of these reasons. There was a weak but nevertheless statistically significant association between the type of reason(s) the business angels cited and their level of investor interest: the more the business angels’ post-presentation intentions were positive the less likely the reason(s) they cited for their intentions contained one or more presentational factors (Pearson’s phi ¼ 0.351; p 5 0.015). Business angels’ presentation comments When invited to provide reasons for their post-presentation intentions some business angels provided more than one non-presentational reason and/or more than one combined reason. The 35 exclusively non-presentational reasons the business angels cited for being ‘Interested’ in pursuing an entrepreneur’s investment opportunity were focused on four distinct issues: (1) The strength or high quality of the entrepreneur’s management team (n ¼ 9) (e.g. ‘Well balanced management team’; ‘Strong management team’; and ‘Good team’). (2) The high potential of the entrepreneur’s business/market (n ¼ 9) (e.g. ‘Large international market’; ‘Good market potential’; and ‘Interesting space’). (3) The quality or marketability of entrepreneur’s product(s) (n ¼ 8) (e.g. ‘Global product with international potential’; ‘Strong product’; and ‘Innovative technology’). (4) The previous track record of the business, entrepreneur or management team (n ¼ 7) (e.g. ‘A going concern that has already proved itself’; ‘Experienced management team’; and ‘In business for 10 years’). The 52 exclusively non-presentational reasons cited for being ‘Not interested’ in pursuing an entrepreneur’s investment opportunity, though more diverse, were focused on five issues: (1) Lack of investor fit (n ¼ 9) (for examples see point (1) page 266). (2) Reservations about the strength or extent of the competition (n ¼ 8) (e.g. ‘Worry over the competition’; ‘Technology can easily be leapfrogged’; and ‘Market too competitive for my liking’).

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(3) Problematic or unproven business model (n ¼ 7) (e.g. ‘Not proved business model yet’; and ‘Don’t like the change in business model’). (4) Small market size or poor sales potential (n ¼ 6) (e.g. ‘Market not large enough’; ‘Worry about their ability to sell their products internationally’; and ‘Sales problems’). (5) Poor composition of or weaknesses in the management team (n ¼ 6) (e.g. ‘Team not strong enough’; ‘Poor management team’; and ‘Needs charismatic figurehead’). Other factors, cited on three or fewer occasions, included the lack of sales, the perceived high risk of investment, and criticisms about the financials, sales projections and the stated/unstated value of their company. Here, it is also worth pointing out that although the second entrepreneur’s company was at an earlier stage of development than the other two presenting companies (both of which were established businesses), only one business angel mentioned this factor, along with another presentational issue, as a reason for his/her decision not to pursue presenter 2’s investment opportunity. In fact, this early stage issue was not mentioned by any of the business angels in any other section of their questionnaires, although some business angels indicated that the previous track record of an entrepreneur’s business had been a positive factor in their screening decision(s) (see e.g. point (4) of the non-presentational reasons provided for being ‘Interested’ in an investment opportunity, p. 267). The various non-presentational reasons the business angels cited for their ‘Interested’ and ‘Not interested’ responses will provide few surprises in the light of the substanceoriented factors highlighted by investors in previous studies of investor decision making. Worthy of note, though, is the finding (again consistent with previous research) that the factors mentioned most by the business angels related to the presenting entrepreneurs or their management team – that is, the ‘human capital’ elements of their investment opportunity. Positive and negative versions of these types of comments (n ¼ 24) accounted for over one-quarter of the business angels’ non-presentational comments. With respect to the presentational reasons the business angels cited for being ‘Not interested’ in pursuing an entrepreneur’s investment opportunity, 22 (91.7%) of the 24 comments were addressed to the second (medical monitoring devices) entrepreneur. Fourteen (63.6%) of these comments referred to the lack of clarity/understandability of his presentation and four (18.2%) to his inability to sell himself and/or his investment opportunity. More generally, in their questionnaires the business angels provided a total of 382 semantically distinct comments about the presentations they evaluated (including the reasons cited for their post-presentation intentions reported above). In addition, presentational comments (n ¼ 249; 65.2%) outnumbered non-presentational comments (n ¼ 133; 34.8%) by almost two to one and did so for each of the three presentations studied. Table 5 shows the subject matter of the five most common types of presentational comments the business angels mentioned and the number of business angels that provided one or more of each type of comment. Most of the business angels’ presentational comments were negative. This can be seen in Table 6, which shows the number of positive and negative comments the business angels made for (1) the five most common types of presentational comments outlined in Table 5; and (2) for each entrepreneur. This table also shows that the number of positive and negative presentational comments each entrepreneur received corresponded (positively and inversely respectively) with the business angels’ typical ‘1-3-2’ quality and content ranking of the entrepreneur’s presentations. The lowest ranked entrepreneur (presenter 2) received the highest number of negative comments for each type of presentational

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Type and frequency of business angels’ presentational comments. Total

Subject matter Clarity/understandability Level/type of information provided Persuasiveness of presentation/entrepreneur Personal characteristics of entrepreneur Presentation structure Other presentational commentsa Total

No. of angels making one or more comment

n

(%)

95 63 28 27 16 20 249

(37.4) (24.8) (11.0) (10.6) (6.3) (9.9) (100.0)

23 21 17 15 9 12

(95.8%) (87.5%) (70.8%) (62.5%) (37.5%) (50.0%)

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Note: aThese comments included references to the quality of one or more of the entrepreneurs’ presentation slides, product demonstrations, gesturing, or to the length of their presentation.

Table 6.

Frequency of business angels’ positive and negative presentational comments. No. of negative comments

Clarity/understandability (n ¼ 95) Level/type of information provided (n ¼ 63) Persuasiveness of presentation/entrepreneur (n ¼ 28) Personal characteristics of entrepreneur (n ¼ 27) Presentation structure (n ¼ 16) Other presentational comments (n ¼ 20) Total (n ¼ 249)

Presentation 1

2

3

n

(%)

þ

–

þ

–

þ

–

60 59 21 15 8 11 174

(63.2) (93.7) (75.0) (55.6) (50.0) (55.0) (69.9)

24 2 4 4 5 5 44

6 20 2 2 2 3 35

0 1 1 3 1 1 7

50 26 15 10 4 5 110

11 1 2 5 2 3 24

4 13 4 3 2 3 29

comment. Furthermore, in every category except ‘Personal characteristics of entrepreneur’, the highest ranked entrepreneur (presenter 1) received the largest number of positive comments although, on most of these occasions, the relative difference in the number of comments each entrepreneur received was slight and not statistically significant. These presentational comments are now described in greater detail. Clarity and understandability The most common presentational comment, made by the largest number of business angels, referred to the clarity or understandability of the entrepreneurs’ presentations. Although each entrepreneur was criticized for the lack of clarity/understandability of at least one aspect of their presentation (e.g. ‘Did not clearly explain why competing products were not offering a networking capability’; ‘Didn’t understand [the entrepreneur’s] business model’; and ‘Incoherent explanations’), most of the negative comments (n ¼ 50; 83.3%) were addressed to the second (medical monitoring devices) entrepreneur who was repeatedly criticized for his persistent non-fluency and unclear speech (e.g. ‘Too much hesitation and repetition’; ‘Stuttering delivery’; and ‘Mumbled’). Nevertheless, over onethird of the clarity/understandability comments were positive (e.g. ‘Very clearly presented’; ‘Clear, concise and understandable’; and ‘Clearly explained the product and management capability’).

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Presentational structure Another category of comments relating to the clarity and understandability of the presentations were those referring to presentational structure. Before delivering their presentations the entrepreneurs received coaching provided by the investor forum organizers that emphasized the information they needed to address and the order in which this information should be delivered. Twelve general topics/issues were addressed by each entrepreneur: ‘introduction/overview’, ‘management team’, ‘product(s)’, ‘target market’, ‘competition’, ‘business/revenue model’, ‘financial forecast’, ‘funds required’, ‘purpose of requested finance’, ‘exit strategy’, ‘offer to investors’; and, as a conclusion, ‘Why invest in us?’ This is likely to have been the main reason why the general topics/ issues each entrepreneur did address were almost identical and were delivered in essentially the same order. Nevertheless, even with the advantage of a detailed and common ‘backbone’ to their presentations (Clark 1999), the business angels still perceived positive and negative differences in the quality of the structure of the presentations. Again, most of the positive comments (e.g. ‘Well laid out presentation’; ‘Opening very measured and structured’; and ‘Well focused, logical flow’) were addressed to entrepreneurs 1 and 3; negative comments (e.g. ‘Disjointed’; ‘Unfocused’; and ‘Lost momentum in the middle part’) were addressed to each entrepreneur but primarily to entrepreneur 2. Level/type of information provided The second most common presentational comment related to the level or type of information the entrepreneurs provided. Table 6 shows that almost all of these comments were negative (the business angels on each occasion citing a lack of information about some particular topic or issue) and none of the entrepreneurs escaped lightly from this criticism. Perhaps because the type and the number of general topics each entrepreneur did address were essentially the same, the vast majority of the business angels’ negative comments referred to their need to have been provided with additional detail about some issue or information that already had been mentioned (e.g. ‘Needed to provide more information about the competition’; ‘Not enough about how they will achieve sales projections’; and ‘Not much on sales pipeline’). Three types of additional detail were most commonly requested: (1) ‘How’ type detail (e.g. ‘Didn’t say how they would compete with larger competitors’; ‘Moving from [one business model to another] but did not explain how this was going to be done’; and ‘Didn’t say how [the entrepreneur’s product] worked’). (2) ‘Why’ type detail (e.g. ‘Why is [the entrepreneur’s product] important? I am at a loss’; ‘The need for [the entrepreneur’s product] was not given’; and ‘Why are they going to do [a particular type of business strategy]?’). (3) Substantiation of some claim or point of information (e.g. ‘Leap in turnover in figures unsubstantiated’; ‘Didn’t demonstrate any evidence of knowledge of distribution business’; and ‘No evidence of benefits to market of purchasing the product’). Persuasiveness of entrepreneur/presentation Comments were also made about the persuasiveness of the entrepreneurs or their presentations. All three entrepreneurs were criticized for not selling themselves or their

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investment opportunity (e.g. ‘Didn’t persuade me at all’; ‘Poor sales pitch’ and ‘Not very good at selling ‘‘the product’’’ ) although again, most of these criticisms were addressed to entrepreneur 2. Positive comments were also made (e.g. ‘Very good sales pitch’; ‘Good sales pitch’; and ‘Presenter was convincing’), most of which were addressed to entrepreneur 1.

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Personal characteristics of the entrepreneurs The business angels also made comments about the personal characteristics of the entrepreneurs. Again, positive comments (e.g. ‘Safe pair of hands’; ‘[Entrepreneur] seemed genuine’; ‘Warmth of presenter’) and negative comments (e.g. ‘There was a general lack of passion and commitment’; ‘Needed a bit more enthusiasm’; and ‘Fellow seemed a bit arrogant’) were made, with entrepreneur 2 again receiving the vast majority of negative comments. Given the general absence of any contact between the business angels and entrepreneurs before these presentations, such comments are most likely to have come from inferences the business angels had drawn from the way the entrepreneurs had presented themselves and their investment opportunity. Occasionally, this inference-drawing process appeared to have manifested itself in the business angels’ comments about the presentations. When making a presentational comment, eight (33.3%) business angels, on 14 occasions, then added another comment referring to some aspect of the presenting entrepreneur’s personal attributes, credibility or business/entrepreneurial capabilities. More specifically, this ‘other’, personal comment – by virtue of being written immediately after the presentational comment (and often in the same sentence) – suggests that the business angels had inferred the entrepreneur’s cited personal characteristic(s) from the particular presentational feature(s) they had just commented on. Positive examples (with the personal characteristic(s), etc. in bold lettering) included: . ‘Excellent, clear and logical presentation – I felt confident that this MD could sell and inspire others to do so’. . ‘[The best part of the presentation was] the obvious clarity and competence of the presenter’. . ‘Good delivery, gave confidence in the product and business’. Negative examples included: . ‘Stuttering, hesitant and repetitive delivery – did not inspire any confidence in the ability of the management team to deliver’. . ‘Bad presentation. [The entrepreneur] didn’t give an impression that he would make a good salesman, however good the idea’. . ‘Presenter too hesitant. Does he believe in what he is saying?’ Discussion and conclusion This study found a clear and statistically significant relationship between the business angels’ perceptions of the quality and content of the entrepreneurs’ presentations and their decisions whether or not to pursue an entrepreneur’s investment opportunity. Presentational (rather than non-presentational) factors also tended to have the highest impact on the overall score a presentation received as well as on business angels’ level of investment

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interest. While at least the ‘Interested’ business angels did not seem to require the entrepreneurs to deliver anything like a perfect presentation to be convinced about the merits of pursuing an investment opportunity, their presentational comments consistently revealed that the clarity, understandability and structure of a presentation, the level and type of investment-related information provided, the personal attributes of the entrepreneur, and whether the entrepreneurs had managed to sell themselves and their investment opportunity all comprised criteria that had influenced their screening decisions. Collectively, these findings indicate that the business angels’ judgements about what constituted a pursuable investment opportunity had been derived not only from the investment-related substance of the entrepreneurs’ presentations or the traditional ‘human capital’ elements of an investment opportunity, but also from the way that substance had been delivered and the perceived attributes of the entrepreneurs that had delivered it. These findings, however, should be treated with some caution. Because of the small number of entrepreneurs and business angels studied – which cannot be held to comprise anything like a representative sample of the diverse range and types of finance-seeking entrepreneurs, investors, presentational formats or settings where pitch presentations are delivered – it would be unwise to generalize the findings beyond the particular participants and investor decision-making context examined. Nevertheless, there are striking similarities between the findings reported in this paper, especially the general subject matter of the business angels’ presentational comments (see Table 5), and those reported in Mason and Harrison (2003), from a different but similarly small entrepreneur–business angel dataset. In particular, the business angels’ comments in Mason and Harrison (2003) were also focused on issues relating to clarity, understandability and presentational structure, and the entrepreneur was criticized for providing insufficient detail (about the market, product and pricing strategy) and, more generally, for not being able to sell himself or his investment opportunity. At the very least the findings reported in this paper provide further evidence showing that the ways in which an investment opportunity is presented and via which entrepreneurs communicate themselves, their company and their investment opportunities is a subject that deserves to receive much further attention from researchers. With the above caveats in mind, the rest of this paper attempts to draw out the principal implications and practical recommendations of the study findings. Perhaps the first issue that needs to be addressed is the evidence that appears to contradict the findings that the entrepreneurs’ presentation skills had a significant impact on the business angels’ screening decisions – nearly all the reasons the business angels cited for their post-presentation intentions comprised exclusively non-presentational and/or the traditional ‘human capital’, ‘substance’-oriented reasons, or contained at least one such reason. This finding was particularly surprising given the high level of unsolicited presentational comments in other sections of the business angels’ questionnaires and, in particular, that the scores for presentational factors recurrently had the highest level of impact on both the overall presentation score each entrepreneur received and on business angels’ post-presentation levels of investor interest. Two possible explanations for this discrepancy are that the business angels may have been unaware of the level of influence presentational factors had on their screening decisions, and/or they were reluctant to acknowledge this influence – even at this early and explicitly presentational stage of the investor decision-making process. Somewhat fortuitously, because of the way different elements of the post-presentation questionnaire were completed by the business angels, this study may have captured this lack of awareness and/or highlighted this form of posthoc rationalization bias. More specifically, the act of evaluating each entrepreneur’s presentation by rapidly circling a number on the rating scale for each factor evaluated

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(rather than the answer(s) to the question that explicitly invited the business angels to specify their reason(s) for their post-presentation intentions) may have captured more accurately both the tacit, gut-reaction, inference-based process entrepreneurs engage in when making screening decisions as well as the actual level of influence presentational factors had on the business angels’ screening decisions. Although it is difficult to substantiate these claims without conducting further research, discrepancies between investment-related decisions consciously made by investors and those tacitly made by investors have been found in previous research in this subject area (Shepherd and Zacharakis 1999). Similarly, post-hoc rationalization has been recognized as a potential methodological problem in other investor decision-making research (Tyebjee and Bruno 1984; Sandberg, Schweiger, and Hofer 1988; Zacharakis and Meyer 1998). At the very least, the findings that the business angels were most often in agreement about the relative ranking of the entrepreneurs’ presentations and that the overall mean factor score for presentational factors recurrently and significantly outweighed the equivalent score for non-presentational factors in the same questionnaires strongly suggest that the rapidity of the business angels’ responses did not automatically generate unconsidered or randomly produced responses. The high level of agreement among the business angels about the relative quality and merits of the entrepreneurs’ presentations also deserves further comment. Such agreement suggests that their screening decisions, though rapidly and independently reached, were not as unsystematic or idiosyncratic as the term ‘gut feel’ implies.6 But upon what grounds was this level of agreement likely to have been based? One possible explanation is that because the business angels were similar to one another in terms of being active and experienced angel investors, their prior, investment-related knowledge and experience furnished them with the same kind of ‘hard evidence’, ‘substance’-based decision-making heuristics that, in turn, resulted in their evaluations of the entrepreneurs’ presentations also being similar. Yet the evident influence of presentational factors on the business angels’ evaluations and screening decisions suggests another possible explanation: that their high level of agreement was the result of a reliance, to some significant and consequential extent, on the same kinds of everyday social knowledge, experiences and decision-making heuristics that all members of a society generally share and necessarily rely on when evaluating and making decisions involving communicated information or persons communicating information – that is, knowledge and experience obtained by inference and drawn from how the person(s) had presented themselves and the manner and style in which they had communicated information (Goffman 1959). Although determining the relative influence of these undoubtedly interrelated explanations requires further and comparative research, it is likely that presentational factors and, more generally, the communicative dimension of this ‘substance’ versus ‘style’ dichotomy is far more important and consequential than has hitherto been recognized by entrepreneurship and investor decision-making researchers. Communication is a constitutive feature – perhaps the constitutive feature – of social action (see e.g. Goffman 1959, Sacks, Schegloff, and Jefferson 1974) and therefore it is difficult to imagine how it could ever be possible for entrepreneurs to relay any of the substance of their investment opportunities without this most fundamental of all ‘human capital’ elements not having influenced the way that substance was relayed and interpreted by the potential investors. This study was not able to provide any clear-cut support for two potentially important mediating factors raised in Mason and Harrison’s study (2003) which might weaken any association between the presentational quality of an entrepreneur’s presentation and investors’ subsequent level of interest: (1) that an investor with a pre-existing knowledge of

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the entrepreneur’s industry, market or technology may be less likely to be put off by a poor presentation; and (2) that a good presentation may enable investors to better understand the key issues of the investment thereby enabling them to reject the proposal on content grounds, whereas a poorly delivered presentation that leaves an investor ‘in the dark’ would encourage him/her to reject the proposal on presentational grounds. Indeed, there were findings in this study that actually called into question these two possibilities. First, the relative impact of presentational factors tended to increase with business angels’ level of investor interest. This, however, was not a strong correlation. Second, the fact that the business angels often provided positive comments about the presentational features of the entrepreneurs’ presentations (Table 6) suggests that they not only ‘ruled out’ a presentation as a potential investment opportunity because of particular types of presentational failings but also employed positive evidence of presentational factors as a basis for ‘ruling in’ an investment opportunity as one that was worth pursuing. All of these important possibilities, however, require further research. Implications for policy and practice If the findings reported in this paper are representative of the impact that entrepreneurs’ presentational skills have on investors more generally and the role that inference-based, ‘gut feel’ reactions play in the investment-related decision process, this study has practical implications for entrepreneurs preparing to communicate their investment opportunities to potential investors and for those agencies, companies and investor forum organizers that provide advice and training to assist entrepreneurs to be more ‘investor ready’ before they do so. Briefly, the message is that entrepreneurs who do not sell themselves and the substance of their investment opportunities effectively are less likely to succeed in convincing investors to seriously consider, let alone pursue their investment opportunity. Yet how entrepreneurs could best do this, and how companies, agencies and investor forum organizers could best prepare them to do this, is still very much a matter of conjecture that requires detailed analysis of what types of information investors rely on – other than the basic requirements of substance-oriented content – when evaluating the merits of an entrepreneur and his/her presented investment opportunity. Of course, the findings relating to the business angels’ presentational and non-presentational comments indicate how the three entrepreneurs (particularly the second entrepreneur) could have delivered their presentations more effectively. But these kinds of comments do not tell us much about how a particular type of presentational skill can best be implemented by entrepreneurs and why a particular skill is likely to be influential and beneficial when employed. Indeed, the types of presentational skills entrepreneurs may benefit from employing are likely to be far more subtle, complex and consequential than many entrepreneurs and advice providers appear to presume them to be. Here are two illustrative examples from the study findings. First, each of those occasions where the business angels commented on the lack of some particular ‘how-’, ‘why-’ or ‘substantiation-’ type of detail comprised separate junctures in the entrepreneurs’ presentations where they had not succeeded in adequately addressing the needs or concerns of the business angels (Mason and Rogers 1996, 1997) and therefore could have sold themselves and their investment opportunity more effectively. Preliminary inspection of the content of the entrepreneurs’ presentations reveals that this information recurrently occurred after or went beyond a basic description of the feature(s) of some aspect of their investment opportunity and involved addressing the upshot and investment-related implications of that basic description. This additional

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information thereby comprised a particularly important means where the entrepreneurs could demonstrate they had recognized (and perhaps show they had already acted on) not only the business/investment-related benefits of some attribute, activity or opportunity pertaining to themselves, their company or their investment opportunity, but also the central motivations and concerns potential investors have when evaluating an investment opportunity – e.g. ‘Is this investment opportunity likely to make me money?’. By omitting to provide this type of information, therefore, the entrepreneurs left it to the business angels, on many occasions, to draw their own conclusions about the information that was provided – a situation that may have encouraged the business angels to draw alternative and less favourable conclusions about that information and the qualities and abilities of the entrepreneur that had delivered it. Second, even the fundamental prerequisites of successful communication, such as speaker clarity and understandability can be a vitally important means via which entrepreneurs can sell themselves and their investment opportunity. For instance, there were two types of evidence indicating that this apparently innocuous and inconsequential element of entrepreneurs’ presentations was in fact a highly consequential factor in the business angels’ evaluations and screening decisions. First, the rate of positive comments for clarity/understandability issues, which was over twice as high as the next highest number of positive presentational comments for a particular presentational category (Table 6), highlights just how much of an asset the clarity and understandability of an entrepreneur’s presentation was held to be by the business angels. Second, the ‘Clarity of Expression’ score each entrepreneur received (factor 5 in Appendix A) was presenter 1’s highest overall mean factor score (54.0), presenter 2’s lowest overall mean factor score (–35.4) and presenter 3’s second highest overall mean factor score (43.3). Indeed, for presenters 1 and 2, these scores were, respectively, the highest and lowest of all the 96 overall mean factor scores in this study. One obvious reason for the importance of this factor is that non-fluent speech – the classic compromiser of speaker clarity and understandability – can impede the intelligibility of a message (Fayer and Krasinski 1987) and have a detrimental effect on listener understanding (Fox Tree 1995) thereby preventing potential investors from being able to properly evaluate the merits of an investment opportunity. But this is just the tip of the iceberg of the negative impact that non-fluent speech can have on recipients such as investors. Non-fluent speech can irritate listeners (Fayer and Krasinski 1987), is associated with a speaker’s lack of pre-planning or rehearsal (Goldman-Eisler 1968), is treated as evidence of a speaker not being knowledgeable about what s/he is talking about (Crystal and Davy 1969), and can result in negative listener attitudes about the speaker’s competence and dynamism (Miller and Murray 1964) and credibility (McCroskey and Mehrley 1969). And such conclusions about the entrepreneurs were evidently reached by the business angels in this study. Many of the personal characteristic inferences (both positive and negative) that appeared to have been drawn from communicative features of an entrepreneur’s presentation (p. 271) occurred in tandem with comments specifically related to the clarity/understandability of that entrepreneur’s presentation. Finally, the extent to which entrepreneurs’ presentation skills influenced the business angels’ actual funding/non-funding decisions has been beyond the scope of this paper. Nevertheless, it may not be a coincidence that, during the six-month period after these three presentations had been delivered, entrepreneurs 1 and 3 (who delivered the two most favourably rated presentations) both managed to secure funds from business angels present at this investor forum. The second and lowest rated entrepreneur did not secure any such funding.

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Notes 1.

2.

3.

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4.

5. 6.

The decision to use a seven-point word scale (as opposed to, say, a word scale of three, five, 10 or even 21 points) was made on the grounds that it provided the best possible compromise between giving the respondents an explicit indication of what the various numbers on the scale represented without making the rating scale as a whole difficult to read or understand. While recognizing that ‘two wrongs do not make a right’, this issue also raises the important question that if such a distinction is difficult or impossible to make then why has the vast majority of prior investor decision-making research largely ignored or at least not explicitly addressed the communicative style dimension of this dichotomy? Because this test requires both variables to be ranked (Siegel and Castellan 1988), the overall mean factor score for each presentation from each business angel was correlated with each business angel’s stated post-presentation intention for the three presentations they evaluated. ‘Interested’ was ranked as being the most favoured response, ‘Not interested’ the least favoured. To preserve the anonymity of the study participants, in the excerpts from the business angels’ comments all features identifying the entrepreneurs, their company (and any other company mentioned), the specific nature of their product(s) and their investment opportunity have been changed or omitted. All three of the exclusively presentational reasons provided were produced in tandem with a ‘Not interested’ post-presentation decision. But whether this agreement was an accurate determination of the relative quality and content of the entrepreneurs’ presentations is, however, another issue altogether.

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Appendix A The 32 presentational and non-presentational factors analysed. Listed below, under their original section headings, are the 32 factors via which the business angels evaluated the quality and content of the entrepreneurs’ presentations. Also included (in parentheses) is the additional information occasionally provided to clarify the nature, range or scope of a particular factor. Structure of presentation (1) (2) (3) (4)

The introduction. General structure (e.g. do the individual sections/topics follow in a logical order?). The conclusion/summary. Time management (of the presentation in general and individual points within it).

Style and delivery of presentation (5) (6) (7) (8) (9) (10) (11)

Clarity of expression (general understandability; level of speaker hesitancy, etc.). Clarity of technical expression (were technical points easy to understand?). Ability to ‘sell’ the investment opportunity (general level of persuasive skills, etc.). Ability to hold audience attention. Rapport with audience. Quality and use of slides/overheads, etc. (readability; relevance; skill in using). Level of information (i.e. were key points/issues covered in sufficient depth and detail?). (12) Responsiveness to questions (NB: leave unanswered if no questions asked). Company issues (13) Company (what the company does; its background, location, age, etc.). (14) Business context (i.e. the general overview or ‘big picture’). (15) Management team (background; composition; market experience; achievements, etc.).

Venture Capital Market (16) (17) (18) (19) (20) (21)

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issues Market information/research (the size; quality; growth trends, etc.). Marketing strategy (how the product(s) will be promoted, advertised, sold, etc.). Pricing strategy (what the price of the product(s) will be and why, etc.). Customers (existing and potential). Competitors (existing and potential). Entry strategy (proposed route into the market).

Product issues

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(22) What the product is/does (description; technical details, etc.). (23) Unique selling point (benefit(s)/superiority of the product(s) for users). Funding/finance issues (24) Amount of funding sought (how much; when funds will be required, etc.). (25) Offer to investors (what investors will get for their money; percentage of company for sale, etc.). (26) Valuation (of company; justification of this valuation, etc.). (27) Financials (past results; future projected performance, etc.). (28) Expenditure (what the requested finance is going to be spent on). (29) Investor profile (number and type of investor(s) sought, etc.). (30) Skills (skills gaps within the company; skills required from potential investor(s), etc.). (31) Exit route (if, when, and how an exit route is likely to arise). (32) Type/level of investment risk.