Pitching Angels #22
After writing more than twenty articles on pitching, I was asked if I could sum up my advice in a single sentence. My first reaction was a snarky, “Yes, my advice is read all the damn articles.”
But while working with various startups over the past few weeks to help them prepare for their pitches, I realized I frequently said, “The one thing you need to keep in mind is…”
When getting started raising money from friends and family, and even into pre-seed, people are investing in you because they know you, they want to support you, they love you, they want you to succeed. Or you’re building something that they believe in and want to do their part to bring your product to fruition. In this early stage you’re selling yourself, your potential, and your vision.
But once you start talking to professional investors, whether angels or venture capital firms, you’re not selling your product, nor your team, nor even your traction. You’re selling an investment in your company. Your pitch needs to be a story about how the investor makes money.
Practically, that means the pitch is structured a particular way, starting with the context, showing us the evidence, and leading into the deal.
The context is the problem, your solution, and the market size. The point is not to sell the product or even explain it in detail, but only to convince investors there’s a real need and a big opportunity. Most amateurs stop here or add a couple of extra slides on team and competition because someone told them they had to. Investors are not customers. Let me be blunt — professional investors don’t really care about your product. It could be the best product in the world, but if the company won’t go public or get acquired at a high multiple, it’s a bad investment. Instead of showing us how wonderful your product is, get us excited by proving you solve a real need for a large number of potential customers.
Next is the evidence. You have the perfect team to solve the problem and build the business. There’s other people in the space, but you not only have a better solution, but patents or another moat to keep the competition at bay. Best of all you have traction to validate your solution is what users need.
Last is the investment. How large will the business grow in five years when you’re ready for acquisition. Who is going to acquire it, and at what multiple of your revenues? Finally, how much are your raising now, and at what terms? This gives us the details we need to evaluate your investment. Without it, it’s like listing a house on the market without an address or price. It might be a great house, but without knowing how much it costs and the comps for the neighborhood, I have no way to evaluate whether it’s a good deal or not.
Throughout the pitch, sprinkle in anything you can to convince investors this is a great investment that will generate a huge return. Do you have people on your team who’ve already succeeded with a big exit? Non-dilutive funding that multiplies investors’ money. Big name investors already signed up? Industry giants already discussing with you the potential for acquisition? If you’ve got ’em, be sure to use ‘em.
By the end of a great pitch, aim to have investors drooling. You’re the one investment that can’t possibly fail; you’ll be the one company in their portfolio certain to have a big exit and make up for all the flops. You’re the one opportunity they’ll regret later if they don’t invest now.
To get investors begging to be allowed to invest in you, use your pitch to prove that you’re offering a chance to get into the greatest investment ever.
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