Writing a Compelling Executive Summary

By Garage Technology Ventures

By now, you｡ｦve probably already read several articles, web pages｡Xeven books｡Xabout writing the perfect executive summary. Most of them offer a wealth of well-intended suggestions about all the stuff you need to include in the executive summary. They provide a helpful list of the forty-two critical items you should cover｡Xany entrepreneur worth his or her salt should be able to address these points in less than 100 pages｡Xand then they tell you to be concise.

Most guides to writing an executive summary miss the key point: The job of the executive summary is to sell, not to describe. The executive summary is often your initial face to a potential investor, so it is critically important that you create the right first impression. Contrary to the advice in articles on the topic, you do not need to explain the entire business plan in 250 words.

You need to convey its essence, and its energy. You have about 30 seconds to grab an investor｡ｦs interest. You want to be clear and compelling. Forget what everyone else has been telling you. Here are the key components that should be part of your executive summary:

1. The Grab: You should lead with the most compelling statement of why you have
a really big idea. This sentence (or two) sets the tone for the rest of the executive
summary. Usually, this is a concise statement of the unique solution you have
developed to a big problem. It should be direct and specific, not abstract and
conceptual. If you can drop some impressive names in the first paragraph you
should｡Xworld-class advisors, companies you are already working with, a brand
name founding investor. Don｡ｦt expect an investor to discover that you have two
Nobel laureates on your advisory board six paragraphs later. He or she may never
get that far.

2. The Problem: You need to make it clear that there is a big, important problem
(current or emerging) that you are going to solve. In this context you are
establishing your Value Proposition｡Xthere is enormous pain out there, and you
are going to increase revenues, reduce costs, increase speed, expand reach,
eliminate inefficiency, increase effectiveness, whatever. Don｡ｦt confuse your
statement of the problem with the size of the opportunity (see below).

3. The Solution: What specifically are you offering to whom? Software, hardware,
service, combination? Use commonly used terms to state concretely what you
have, or what you do, that solves the problem you｡ｦve identified. Avoid acronyms
and don｡ｦt try to use this opportunity to create and trademark a bunch of terms that
won｡ｦt mean anything to most people. You might need to clarify where you fit in the value chain or distribution channels｡Xwho do you work with in the ecosystem
of your sector, and why will they be eager to work with you. If you have
customers and revenues, make it clear. If not, tell the investor when you will.

4. The Opportunity: Spend a few more sentences providing the basic market
segmentation, size, growth and dynamics｡Xhow many people or companies, how
many dollars, how fast the growth, and what is driving the segment. You will be
better off targeting a meaningful percentage of a well-defined, growing market
than claiming a microscopic percentage of a huge, mature market. Don｡ｦt claim
you are addressing the $24 billion widget market, when you are really addressing
the $85 million market for specialized arc-widgets used in the emerging wocket
sector.

5. Your Competitive Advantage: No matter what you might think, you have
competition. At a minimum, you compete with the current way of doing business.
Most likely, there is a near competitor, or a direct competitor that is about to
emerge (are you sufficiently paranoid yet??). So, understand what your real,
sustainable competitive advantage is, and state it clearly. Do not try to convince
investors that your only competitive asset is your ｡ｧfirst mover advantage.｡ｨ Here is
where you can articulate your unique benefits and advantages. Believe it or not, in
most cases, you should be able to make this point in one or two sentences.

6. The Model: How specifically are you going to generate revenues, and from
whom? Why is your model leverageable and scaleable? Why will it be capital
efficient? What are the critical metrics on which you will be
evaluated｡Xcustomers, licenses, units, revenues, margin? Whatever it is, what
impressive levels will you reach within three to five years?

7. The Team: Why is your team uniquely qualified to win? Don｡ｦt tell us you have 48
combined years of expertise in widget development; tell us your CTO was the
lead widget developer for Intel, and she was on the original IEEE standards
committee for arc-widgets. Don｡ｦt just regurgitate a shortened form of each
founder｡ｦs resume; explain why the background of each team member fits. If you
can, state the names of brand name companies your team has worked for. Don｡ｦt
drop a name if it｡ｦs an unknown name, and don｡ｦt drop a name if you aren｡ｦt happy
to give the contact as a reference at a later date.

8. The Promise ($$): When you are pitching to investors, your fundamental promise
is that you are going to make them a boatload of money. The only way you can do
that is if you can achieve a level of success that far exceeds the capital required to
do that. Your Summary Financial Projections should clearly show that. But if they
are not believable, then all of your work is for naught. You should show five
years of revenues, expenses, losses/profits, cash and headcount. It might also
make sense to show a key driver, such as number of customers or units shipped.

9. The Ask: This is the amount of funding you are asking for now. This should
generally be the minimum amount of equity you need to reach the next major
milestone. You can always take more if investors are willing to make more
available, but it is hard to take less. If you expect to be raising another round of financing later, make that clear, and state the expected amount.

You should be able to do all this in six to eight paragraphs, possibly a few more if there is a particular point that needs emphasis. You should be able to make each point in just two or three simple, clear, specific sentences.

This means your executive summary should be about two pages, maybe three. Some people say it should be one page. They｡ｦre wrong. (The only reason investors ask for one page summaries is that they are usually so bad the investors just want the suffering to be over sooner.) Most investors find that there is not enough information in one page to understand and evaluate a company.

Please remember that the outline above should not be applied rigidly or religiously. There is no template that fits all companies, but make sure you touch in each key issue. You need to think through what points are most important in your particular case, what points are irrelevant, what points need emphasis, and what points require no elaboration.

Some other general points:

• Do not lead with broad, sweeping statements about the market opportunity. What matters is not market size, but rather compelling pain. Investors would rather invest in
  a company solving a desperate problem for a small growing market, than a company providing an incremental improvement for a large established market.
  
• ハDon｡ｦt acronym your own name. Sun Microsystems did not build its brand by calling
  itself ｡ｧSMI.｡ｨ (Of course, if you know where the name Sun came from, you
  understand this is an inside joke.)
  
• Drop names, if they are real; don｡ｦt drop names if they are smoke. If you have a real
  partnership with a brand name company, don｡ｦt hide your lantern under a bushel basket. If you consulted for Cisco｡ｦs HR department one week, don｡ｦt say you worked for Cisco.
  
• ハAvoid purple farts｡Xadjectives that sound impressive but carry no substance. ｡ｧNext
  generation｡ｨ and ｡ｧdynamic｡ｨ probably don｡ｦt mean anything to your readers (unless you
  are talking about DRAM). Everybody thinks their software is ｡ｧintelligent｡ｨ and ｡ｧeasyto-
  use,｡ｨ and everyone thinks their financial projections are ｡ｧconservative.｡ｨ Explain your company the way you would to a friend at a cocktail party (after one drink, not
  five).
  
• ハState your value proposition and competitive advantage in positive terms, not
  negative terms. It is what you can do that is important, not what others cannot do.
  
• With the one or two most obvious competitors, however, you may need to be very
  explicit: ｡ｧUnlike Cisco｡ｦs firewall solution, our software can operate ｡K.｡ｨ
  
• ハUse simple sentences, not multi-tiered compound sentences.
  
• ハUse analogs, as long as you are clarifying rather than hyping. You can say you are
  using the Google model for generating revenues, as long as you don｡ｦt say you expect
  to be the next Google.
  
• ハWhen you are done, go back and reread each sentence: Is it clear, concise and
  compelling?

Finally, one of the most important sentences you write will not even be in the executive
summary｡Xit is the sentence that introduces your company in the email that you or a
friend uses to send the executive summary. Your summary might not even get read if this
sentence is not well-crafted. Again, it should be specific and compelling. It should sell
your company, not just describe it.

If you have any questions about writing a compelling executive summary, feel free to
write Bill Reichert, Managing Director of Garage Technology Ventures, at

reichert@garage.com.

Garage Technology Ventures

3300 Hillview Avenue, Suite 150

Palo Alto, CA 94304

Visit us at http://www.garage.com

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