Beyond the Pitch
7 Ways to Make Your Deal More Appealing to Angel Investors
Practical advice from an angel investor
As an angel investor and fund manager, over the last 25 years, I’ve been in the audience of more business plan presentations that I can possibly count.
The other day, someone asked me what is the single most important thing an entrepreneur should do to prepare for a business plan/investor pitch.
My answer: Learn to think like an angel investor or VC.
Investors often judge the quality of the business by the quality of the pitch.
When the opportunity to make a formal business plan presentation arrives, be ready with a thoughtful, well-rehearsed pitch that captures investors’ attention at the very start.
Your delivery and content counts—and your understanding of your audience.
Entrepreneurs aren’t mind readers, but if they were, here’s what they might learn about what VCs and angels are thinking during an investor pitch.
- “Hockey season was over weeks ago.”
Don’t, don’t, do not forecast the hockey stick. Focus instead on how your marketing and distribution strategy will leverage early adopters to become referenceable in the industry. Don’t base your sales projects on hiring a direct sales team. Talk instead about relationships with resellers who have relationships with your prospects already.
- “Does this entrepreneur understand that I have no interest in using my money to pay her a six-figure salary?
Many angels are cashed out entrepreneurs. They understand the extra commitment and push that comes when the entrepreneur has skin in the game.
- “This guy seems to have the technology down cold. That’s fine for now, but I wonder how hard it will be if we want to bring in a more customer-minded CEO.
It’s common that the company founder isn’t the right person to grow the business once the job is more about creating revenue and booking early customers. CEOs who can’t develop their skills and interests beyond technology need to accept the likelihood that they’ll end up being CTO instead of CEO—and that’s not necessarily bad, especially if they hold a significant percentage of equity.
- “Does she have any idea that there have been less than two dozen IPOs in the last 24 months?”
Express a willingness to IPO, but lead off the discussion of exits with a list of potential companies that might acquire your firm and why they would pay enough—because of your feature set, early revenue, market position, IP, or your engineers—to give your investors a 2-3X return before the turn of the next century.
- “Why should I put in my money when he hasn’t?
Use your own financial resources first. Mortgage your house. Pony up your savings. Tap your 401K or IRA. Talk to you banker. Consider your credit cards. Sell assets. Put your money where your vision is.
- “Who does she think she’s kidding? Few pre-revenue companies are worth more than a million dollars pre-money.
Investors know average valuations. If your proposed valuation is out of line, they will move on to a more realistic entrepreneur. If you change your mind later, don’t expect a second chance.
And one last thing. The only “silver bullets” in an investor presentation are the “silver bullets” that unprepared entrepreneurs use to shoot themselves in the foot.
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