Why Conveying a Clear Vision for Your Startup Is Important

2/14/13Follow @hopbos

Can you see the forest for the trees? If you can’t, and you’re an entrepreneur seeking out seed money for your business, it’s likely you won’t succeed.

Recently, an investor friend of mine approached me and asked that I review a company slide deck for him. He said he was considering an investment in the company, but wanted my perspective on the business plan and whether or not I thought it had legs.

The business was interesting and provided a unique solution to a problem that exists in the home healthcare space. The company had made good headway and had already passed many of the milestones that are the hallmark of future success: a proprietary technology, a big market, and strong, established strategic partnerships. In addition, the company had won a university-affiliated business plan competition, which had resulted in a small award of cash and free services.

The company had developed a beta version of its technology solution and was beginning to test it. My friend asked me to review the deck and, if I thought it appropriate, pass it on to one of the local angel groups.

Dutifully, I reviewed the deck. It was well-conceived and covered all of the necessary bases. The financial projections seemed reasonable based on the assumptions that had been made, and the proposed pathway to a timely exit seemed plausible. The slide deck even had streaming video embedded into it to further drive home the company’s message. I was a bit disappointed that the company was offering a convertible note. However, my interest had been peaked, and after I finished my review, I wanted to learn more about the company.

The next day, I called the founder and CEO. We spoke for approximately forty-five minutes, and I was eager to learn about the founder’s vision for executing his business plan. If only that’s what we had discussed, I would have been very excited about this company.

Instead, I’ll be advising my investor friend to take a pass on the company.

What went wrong? Here are three things that jumped right out.

1. Inability to convey vision. The call with the founder/CEO represented a golden opportunity for him to convey his vision of the company to me and demonstrate that its business model made sense. This was more than a mere elevator pitch, since I had already reviewed the company’s deck and wanted to learn more. In my opinion, the CEO blew it. I came away from our conversation only remembering that he had complaints about administrative process and procedure, and was unable to see the big picture.

2. Substituting industry knowledge for business leadership doesn’t work. The CEO is clearly an expert in his field and he has the university degrees to prove it. However, the problem he encountered with me, and will no doubt encounter with others, is that he is not a leader. He understands his technology, but doesn’t understand people and what to talk about when speaking to a prospective investor. The right person to lead a company understands the business plan, is able to explain it in plain terms, and is comfortable asking for money (and help) when needed. That person is willing to make tough decisions and see beyond the details to advance the company to its next stage of development. The CEO in our case didn’t have these qualities.

3. Inflexible business plan. When I told the CEO about a particular angel group’s aversion to convertible debt investments, he decided to debate me on the merits of convertible debt and why it was the right offering for his company. I told him that I was “only the messenger” and that I didn’t believe that the rule against convertible debt investments applied in all cases. The CEO couldn’t pick up on any nuance, and I had to tell him that if he wanted to present to the group, he should go in with an open mind and listen to any suggestions if they were offered to him. The CEO was reluctant to do this since he was not prepared to talk about valuation of the company. His approach and his business plan are too rigid. He will encounter strong pushback if this is how he intends to proceed.

Before having your CEO pick up the phone and begin dialing for dollars, make sure that he or she is well-suited for the task. Failing to contemplate or articulate important aspects of your business plan in a compelling and coherent manner can be the death knell for your company. The vision thing matters.

Jim Coffey is a partner at Nutter McClennen & Fish LLP, and a member of Boston Harbor Angels. Follow @hopbos

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  • Nic Carroll

    It all starts with a solid lucid clear VISION. Open your doors without one is like building your home on sand.

  • Paul Scheurer

    In the case discussed, could he be
    the right CIO but the wrong CEO?
    My patent lawyer keeps telling me to
    “find a Suit.” Is there a Men’s Warehouse
    for “Suits”?

  • http://twitter.com/iNalysis Drew Hession-Kunz

    Sad that the wrong person is in the seat. Doubles the problem- first, don’t have the right person to pull together the resources needed, and second, have to get someone out of that role, which is difficult and often very disruptive. People often don’t know what it is they don’t know.
    Saw comments from a partner at Onset Ventures, that in these circumstances they ask the team to do certain market strategy tasks, they struggle, come back to the potential investors, get help and new tasks to do, struggle, come back for help, and at that point the founders suggest they find someone to join the team to help with the strategy – the partner says “sure, we would call that person a CEO”.