business startups

How to pitch VC’s and Angels

How to pitch VC investors and Angels

Startups often have just a few seconds to grab the attention of an investor and make a memorable impression. I’ve seen hundreds of pitch decks from startups and most are missing the critical elements needed to make their pitch stand out.

The most important thing for a startup, getting ready to pitch is preparation. If you’re planned ahead and rehearsed you’ll already be ahead of the crowd. The best pitches and presentations require a lot of preparation and rehearsal. You often have just a few minutes to make a great impression so every minute of presentation may require several hours of rehearsal and preparation.

Most pitches are forgettable, they lack energy and they lack soul. What I mean is that they describe a business problem and a solution but they don’t make me care. Great pitches should convey the founders’ character, they should tell a story, connect with listeners emotionally, and be memorable.

When I’m listening to a pitch. I’m asking a couple questions:

  • Why you? – What makes you unique, what makes you as an entrepreneur special and why would I be excited to work with you?
  • Why this? – Most ideas and successful companies capitalize on unique ideas, timed with when the world needed them.
  • What makes this special? How will you compete with other entrepreneurs, what will make your business stand out in a crowded field of so many other companies?

Many entrepreneurs make the mistake that investors are interested in novel ideas or clever inventions. Nope. Investors are looking for great people and great businesses that have huge potential to grow. Your idea is a part of that but a great idea, without a great business and without a great founder, isn’t going to go anywhere.

If you’re putting together a pitch. There are lots of templates but the key things you need to include are pretty universal. Sequoia Capital even put together a business plan outline of the things that they like to see:

  • Problem Describe the pain of your customer. How is this addressed today and what are the shortcomings to current solutions. Make me really feel the problem.
  • Solution Explain your aha! moment. Why is it unique and compelling? Why is your solution better?
  • Why now? The best companies almost always have a clear why now? Timing is as important as the idea. Why hasn’t this been done before?
  • Market potential Identify your customer and your market. How big is the market and how will you capture it?
  • Competition / alternatives Who are your direct and indirect competitors. Show that you have a plan to win.
  • Business model How do you intend to thrive and grow?
  • Team Tell the story of your founders and key team members. Most investors don’t want to invest in solo-founders so tell the story of your team and how you work together.
  • Financials What are the financial models that support your story/vision. Don’t skimp on this, really knowing your financials helps investors trust you with their money.
  • Vision  – And lastly, and perhaps most importantly. If all goes well, what will you have built in five years? What’s the vision of the company? Paint a picture of how you get there.

In addition to these basics, you may want to include much more information. Don’t.

The point of the pitch deck isn’t to answer all the questions, it’s to get you to access to a deeper conversation with your investors.

It’s for them to lean-in and express interest in learning more. Resist having too much information.

It’s Ok to have your own notes or backup slides to answer deeper questions. This will help keep you focused.

There’s always more you can include in a pitch so you have to tune the deck and the presentation to the audience and the venue. For example, you should have several version of your pitch based on your situation.

The most common versions of pitches should include:

  • Elevator pitch – A well-rehearsed 1-2 minute conversational pitch that can be done with no slides.
  • Lightning pitch – 5 minutes (some visuals but not too much)
  • Emailed deck – A variation in between your lightning and normal pitch that doesn’t require a voice-over.
  • Normal Pitch. – 10-minute pitch visuals/slides
  • Long Pitch – 30min-1 hour pitch tuned for Zoom or In-Person with backup slides prepped for any anticipated questions
  • Demo Pitch – A rehearsed and working walk-through of the product that can easily be reset for the next demo

The most important two things for a startup, getting ready to pitch are preparation & passion. If you can connect with your audience in a deep and meaningful way and if you prepare well you’ll be far ahead of most startups.

business startups

Why I became an Angel Investor

I started my business in 2003 after leaving Microsoft and I grew my business to be one of the leading mobile development companies. I was working with a diverse set of companies around the world, building incredible technology. When I sold my business in 2017 I started to think about how I could give back to both the Boston community as well as other founders, leaders, and entrepreneurs.

Investment stages and startup stages

Angel investors are typically people who make investments from 5K-100K in early-stage companies. Companies at this stage typically have an idea, they have a team and maybe they’ve made some traction or progress but they need additional help to get to the next stage of growth. They often are too early for VC’s and don’t make enough to be profitable on their own… The TV show Shark Tank popularized some of the ideas but angel investing has been around since the late 1970’s, and most investors aren’t as predatory or quite as “sharkie”.

Angel investing isn’t adversarial and the drama that unfolds on TV in 15 minutes is often more complex and takes weeks to sort out in real life.

One of the reasons I wanted to give back and help other entrepreneurs and CEO’s is because entrepreneurship and being CEO is incredibly lonely. It’s an amazing job and really rewarding but being a successful leader means constantly solving problems and having the entire weight of a company on your shoulders. This is both exhilarating and incredibly stressful.

It also means that there aren’t too many people you can talk too. You can’t talk to your employees about your business problems and your family and friends wouldn’t really understand the challenges. No CEO knows all the answers and having good mentors and business partners and investors helps companies succeed along that journey.

Angel investors invest not just money but time and expertise in helping companies. Most importantly they can be a sounding board and compass for entrepreneurs blazing a trail.

Why don’t I just invest in the stock market? That seems a lot easier? It is a lot easier and a lot less risky. I do invest in the stock market but it’s also less rewarding. While I can make money in the stock market, I don’t really feel like I’m advising the founders and CEO’s. Elon, Bezos, Sundar, and Satya are probably having their own challenges but they haven’t called me up… Just sayin’.

As a CEO you don’t really like anyone telling you what to do because you like to run the show, and if your business has any success you definitely don’t want people telling you what to do. But you also don’t have a lot of people to bounce ideas off of.

The second reason is to make an impact. When you start a company, or run a company you’re solving a problem and in most cases you’re helping either people or other businesses. As a founder you can really only focus on one big problem at a time but as an angel investor you can participate and help multiple companies working on problems you care about. I’m interested in the environment, alternative energy, artificial intelligence, robotics, and more. Angel investing allows me to have an impact across a wide range of fields and technologies.

And lastly… Making money. Yes, making money is important but I list it last for a reason. Investing in companies takes time. You often don’t get your investment back for 7 or more years so short-term financial returns isn’t ideally suited for angel investing. The returns for an investment can range from losing your entire investment in a company to making a hundred times your investment. The range is very broad because many companies don’t make it.

Example returns across five scenarios assuming twentyfive companies

If I invest in 25 early-stage companies I can expect that 21 won’t make it, two will do Ok, and if I’m lucky, one will be a huge hit. Lots of angel investors don’t make money and while my goal is to do better than average I think that only by understanding the models for success can I hope to do better.

So far we’ve hit three things:

  1. Helping founders
  2. Making an impact
  3. Financial returns…

And the reason that financial returns are important is that it can help more founders and make an even larger impact.

So, if you’re a startup founder, an entrepreneur looking for advice, funding or help. Please follow along, reach out, and let’s make something awesome!