How (Not) to Woo Venture Capital Investment

An article in June’s Journal of Accountancy recommends a design of a classic CFO presentation to venture capitalists. Here is the suggested outline of the presentation.

(1) overview; (2) management team; (3) why you exist; (4) competition and barriers to success; (5) achievements to date; (6) road map for the future; and (7) financials

Lest you wonder if maybe the topic headings are so broad the presentation might still cover “intangibles,” they aren’t and they don't.  The article provides detail for each of these areas, and the word “intangibles” is nowhere to be found.  Intellectual property is not discussed in any form, let alone its valuation.  Where is the discussion of R&D and innovation that would attract VC investors? (Note to JoA: Dusting off an article spouting 1980s realities may not serve your audience well.)

Even from the metaphorical 30,000 feet, the value of intangibles is taking center stage.  Witness Monday’s conference in Washington, DC, where Federal Reserve Chairman Ben Bernanke delivered an important policy speech on  measurement and valuation of IP and intangibles, asking, among other things, “if you can value intangibles better, how does that affect R&D [investment] and debt?” Bernanke’s conclusion: innovation and intangible capital are central to understanding how economic growth can be sustained in the long run.

We were impressed with Bernacke’s take, and we’ll take a more in-depth look at it in the inaugural issue of BVR’s IP Value Wire, coming out this month. (If you want to receive a copy, drop me a note.)

In this case, JoA, what’s good for the Macro is good for the Micro. Analysts are now saying companies’ asset values are approaching 80% / 20%, favoring intangibles.  A presentation without a detailed discussion of intangibles’ value is like a joke without a punch line, and, as the Fed Chair might say, CFO’s need to comprehend and come to grips with intangible asset value before they can convincingly report on R&D and plans for sustainable growth.