On pitching to angels
, 2,519 words
Whilst I've stopped entertaining pitching entrepreneurs every week, I still see quite a few pitches for product companies raising seed rounds. Unfortunately, a surprising number of the pitches are poor, and they let down the CEOs giving them. Having endured or testily interrupted hundreds of pitches over the years, here’s a share on the sort of pitch that I can comprehend without getting restless.
Comprehensible structure and ordering
Message aside, the two most frequent problems I encounter are over-long pitches and confusing ordering of information. Entrepreneurs can get carried away presenting the detail of their solution before they have convincingly described the problem they are trying to solve.
Jean-Louis Gassée of the Monday Note describes his ideal pitch in 7 — or 3 — slides from his notable experience. His well thought-out approach, however, may be better suited for venture capital. Marty Zwilling's 10 page version is done well, and better suited for seed rounds. Given enough time, all things come and go in the Valley. That explained the brief “deckless wonder” phenomena, where hoodie-clad youths purportedly wandered Sand Hill Road empty-handed. This came and went, if it ever really came. And it certainly didn’t in London.
With that disclaimer of subjectivity, and my view that ten slides is too many, here's the six or so I find flow most naturally and are easiest digest in an angel pitch:
- The problem. Something which spells out for the unfamiliar the pain which MyCo solves or addresses. What is the real cost of this problem?
- The solution, & how it works. Please don’t be fuzzy. One can always find an exception but perhaps best not to shoot for being it.
- Traction to date, and proof elements — client names, revenue growth so far. Demonstrate you have momentum. Can you include a one-line quote from a customer on how your product has resolved their problem?
- The TAM and your plan to address it. What are you doing now to grow and what comes next? Will the market change?
- “What we need”. Funding needed to do this — now & other rounds? Do you also need advice or introductions from investors? When will you break even?
- Exit potential. Simple summary on who might be interested in acquiring the business. Have they bought similar things? Evidence of how they might value the company. IRR may be more appropriate than ROI. Suggestions of strategic acquisition will need some benchmark data with relevant multiples.
The front and back: a simple cover and a call to action
- The cover. Simple, optional, direct. Probably eight words and a logo. “MyCo. Investment: £300k for 40% Equity (EIS approved)”. That spells out what you’re doing here. If it makes sense, and you can meaningfully describe the company as an “X for Y”, then do it. “Evernote for Dogwalkers”.
- "Any questions?" Blank but for your contact details.
I’m a big fan of these, as I’ve found using them makes it easier for entrepreneurs to let go of data that shouldn’t be in the main pitch. Stick it in the appendices. Only the first bit really matters here:
- 3 or 5 year P&L. Keep it summarised, avoid the detail. A good pitch will determine whether the investor likes the entrepreneur and business. Emotion comes first. One needs to get past that before the financials are relevant, and a slide on a future Sales Director’s salary is just a distraction to argue over. I wouldn't show the breakdown of who you are hiring in a pitch meeting; there's no need to get into a discussion, who cares if they would hire differently? Roll it all up into "staff" and maybe show key individuals or a headcount by function.
- The team & existing investors. Please, keep it short and recall what this is for. It is not a biography or a CV. It is a chance to show that you or your team are exceptional. If you are not exceptional, don’t show it. If you didn’t get an exceptional degree from an exceptional university — don’t mention it. if your last employer wasn’t exceptional — don’t mention them. If your last company didn’t get decent traction, don’t mention them. If your last investor is wealthy but hasn’t been commercially successful in a related field — don’t mention them. Skip the slide, it’s OK not to have an exceptional past so long as you’re committed to an exceptional future.
- Product shots. What does it look like, will it help me understand it? I probably don’t want to watch your video and it seems half the time embedded videos don’t work anyway. Don’t try too hard with partner logos: if you’re going to tell me Salesforce love you so much they’ve partnered with you, I’ll ask you why they’re not putting the $300k in themselves.
- Prior investment, and a summary cap table if so.
- If there might be a strategic inflection point in a few years, then a “what next” slide can work. This slide is the antidote to something that drives me crazy: entrepreneur creep.
Simple, compelling slides
Vinod Khosla has a lovely rule for pitches, stating that if a slide can’t be digested in a five second glance, it’s too complex. It’s basic, but some pitches have slide decks which repeat everything that’s said word-for-word. This is too painful to sit through.
Instead of spelling out what one will talk through on a slide — or god forbid, writing it word for word — using interesting numbers, data highlights or quotes can work well. Putting these simple figures in the deck without context can be strikingly effective, and prevents your audience from reading ahead and not paying attention. Fewer pages also prevent a lot of flicking back and forth between the P&L in the appendices and the other numbers. It also means there's little detail a potential investor could send around, although that’s rarely important.
For instance, a slide might simply have three big numbers with nothing else: 15%, $50k, 40%. When you come to talk through the market slide, you could explain that these numbers show the proportion of the market addressable with your solution, their LTV, and your post-trial conversion rate.
The investor translator
Investors often ask oblique questions as they try to rationalise a decisions made in the first minute of seeing you and your pitch. Attitudes differ, but generally pitching for money without any demonstrable market traction — particularly after spending a bunch of money already — comes across poorly. Here are a few things I've heard in pitches, along with a handy translation to what it has sometimes suggested.
“We’ve put all our money in and have a private beta but no customers. We’re having to down tools and need $100k to resume and get to market."
Translation: “We're not savvy operators who have managed our own money effectively enough to get to a proof point with the vision; however we expect you to think we’ll apply your capital more diligently and effectively than we applied our own. We are no longer willing to work on it unpaid, perhaps because we’d rather treat this like a salaried job. It feels like such a gamble that we’ve not been up for working on the side.”
“We’ve put almost all our money in and have a private beta but no customers. We need $100k to get to market."
Translation “We haven’t been disciplined enough to manage the money we had, and our confidence in this idea is waning. Consequently our commitment to fund this this to its proof point has evaporated. Rather than looking for a financial partner to help us execute and exploit a business we have built, we are instead looking for someone to fund us to make the most basic tests."
“We haven’t got market proof yet but we need money to do a big launch."
Translation: "We've either failed to make it work, or are too scared to test it without having someone else's money behind it. Is it that we're prone to getting stuck behind simple obstacles or that we're too scared to put our own in and test?"
“We are disruptive”
Translation: “Ask me if I’ve read the Innovator’s Dilemna. I might look daft throwing that word around if I don’t know what it means, and dafter yet assuming I’m pitching someone else who doesn't."
I’ve found use of “disruptive” is a bit of a special case. It is probably the most reliable qualifier for identifying a pitch I don’t want to see where it is misapplied as a synonym for a business being scalable or having high potential. Some businesses genuinely have the potential to be disruptive, but very few. For those that aren’t it is a surefire way to call yourself out as lazy or misleading, and for those that are it can be more convincing to show rather than to tell.
“Yes, it’s a consumer note-taking app sold B2C but it will also be sold B2B to restaurants for managing customer orders. The potential is massive!"
Translation: What the hell? Uber’s poor example (“we’re a taxi company but actually we want to let anyone deliver anything anywhere”) has led entrepreneurs to think it is OK conflating what they’re doing now with what they might do in 5 years once it’s fully built. Stay simple and disciplined. If you can’t discipline yourself to concentrate on what you’re building now in a 20 minute pitch, can you be trusted to be disciplined with the capital?
As a former CTO I will almost certainly ask what technology your product runs on, but most angels won’t care. There’s really no need to have that in the pitch: I only ask to gauge how technically savvy you are, or to check that the answer isn’t inappropriate.
What is the right message, then?
If my response to the second situation above seems a bit harsh then it’s all in the telling, and it's a mistake I've made myself in the past. Sure, some investors will fund these scenarios, but the better tale is about having something that is in train, and which the investor is being offered a limited window to invest before new things happen.
“We’ve invested $75k of friends & family money, we’ve got some great traction and deals in the pipeline, we’ve got enough money for another 4 months of this.
We're looking to get the right people on our board or advisory board as investors to support us. We need funding to increase the speed or volume with which we’re executing, rather than enabling us to prove the fundamentals.
We’re approaching you because of your role in X or your experience in Y industry, we think your connections or knowhow would be particularly valuable. We’ve approached you through your contact Z because they’ve worked with us in the past and can vouch for our integrity.
Speaking of integrity, it’s early days yet but we’ve drafted out some of our values to give you an idea of the principles that will guide our execution, and to help assess our compatibility if you work with us."
- No desperation, the limit is months away and is variable, the entrepreneur is planning ahead
- There's emphasis on the knowledge or positioning of investor, rather than their just being a schmuck with a bob or two
- The approach to that investor has been thought out; the important first impression is carefully managed which also suggests the entrepreneur isn’t spamming this offer out
- The approach has been made through a third-party who can vouch for the entrepreneur — this counts for a lot and is so rarely done
- There are proof elements that something is already happening
- The entrepreneur is marketing a limited opportunity to get in on cracking company that is clearly doing things — rather than trying to offload 25% to keep the lights on at home
- The pitching entrepreneur has reflected on why and how they're starting the business, and helping a potential investor suss this out is worthwhile
Practise, timing and meeting style
I mentioned a 20 minute pitch because that feels like the absolute upper bound for a pitch time. Any longer than that and the investor is likely to wrestle control of the meeting from you and direct the flow with their own questions. Practising a pitch to time is vital, as is practising succinctly answering questions. If you secure an hour of an investor's time to pitch, that probably gives you 5 minutes for an introductory conversation, 20 minutes for the pitch, and 35 minutes for any Q&A and discussion. Having twice the pitch time for discussion is about right, so if you only have half an hour for a pitch meeting the delivery needs to be really tight and cut down to 10 minutes. Ask how much time you have at the start.
Having to sit through videos in pitches is particularly annoying. Not being able to skip ahead, go back, search, or even ask a question during a pitch is frustrating, and videos tend to run more slowly than anyone would read a deck. Sitting through a trite and simplistic video without being able to ask a question is my idea of purgatory; I dislike wordy business plans but I'd much rather skim-read one than watch a video.
Determination and getting to yes
Afterwards, investors will rarely give a hard "no". Usually "yes" or "maybe" are all you'll hear, and "maybe" can extend to mean "definitely no and never darken our doors again". One way to make sense of this is to wrap up with an action, asking whether there are any specific concerns or points of interest the investor has, and if they are considering it what their process will be.
With enough forward planning, canny entrepreneurs can use this to their advantage. Pitching the same investor several times without a direct call for funding can work: it provides an opportunity to show traction over time, builds familiarity with the business, and readies them for the point at which the capital is needed. It also sends a strong signal that the entrepreneur is prepared enough to be out pitching other investors, and thus that when the times comes the investor will need to commit rapidly or pass up the chance.
Getting all of this right is hard, and many entrepreneurs don’t. Being truthful in the approach is vital. I wrote six years ago on what one needs to raise investment, and little has changed since. Good luck!