I often do speaking engagements on behalf of the Pasadena Angels at a wide range of entrepreneurial events. At these events I’m invariably approached by a lot of CEOs and company founders who are in fundraising mode and want to pitch their companies. After meeting hundreds of these folks over the years at these events, I’m still surprised at how few people get it right and are able to move the conversation toward their ultimate goal—getting an opportunity to pitch our group.
As a preface to what I’m about to mention below, let me start by saying how much I love being on panels and speaking at these events. Although there’s a self-serving aspect to doing this (e.g., promoting the Pasadena Angels), I’ve really enjoyed meeting some phenomenal company founders and hearing what they had to say. One of the other great things about doing this are some of the relationships that have developed over the years from these encounters—including some companies that we’ve ultimately funded.
At these events my biggest frustration is that most of the brief 2-3 minute pitches I informally hear are getting minimal impact. Although the companies doing this may be exciting and potentially fundable, I don’t often come away with a warm feeling about them. Over the years a lot of emphasis—and rightly so—has been put on developing the optimal 20-45 minute pitch for a meeting with prospective investors. I would, however, also suggest developing a very brief pitch that can be delivered without slides and can be done in a couple of minutes in a public venue.
Having been an Angel for many years and a VC in a former life, there are five magic questions that the majority of investors want to have answered in the initial conversation before deciding to go to the logical next step:
- What do you do and how are you changing the world?
What’s radically different and revolutionary about your product/company. With the Pasadena Angels we have a lot of very bright and accomplished members. However, their path to success was typically in a specific field (medicine, drug development, banking, etc.). So unless your product is a great fit with a member’s particular background, please don’t throw out a log of jargon and technical terms that we’re not familiar with. The rule of thumb is your answer to this question should be simple enough that my 90-year old mother (accountant from an Ivy) can understand it.
- What makes you unique vs. the competition?
Similar comments to #1.
- What is your market size and growth rate?
Once again, we may not be familiar with your specific market space, so spend a few seconds educating us. Many times I’ve had entrepreneurs tell me that they’re part of a market estimated to be billions and billions of dollars by IDC, Gartner, Morgan Stanley, [or feel free to fill in whatever name you prefer]. In reality this is not usually the case as these are aggregate markets with many different products and technologies. A better way to describe this is a bottom-up approach—How many users or companies in your product’s sweet spot exist, how many of these represent untapped potential and are not using your competitors’ products, and how fast is this pool of potential users growing.
- What’s the current status of your venture?
As an Angel group that funds early stage companies, and typically with a prototype and some market validation at a minimum, the answer to this is important. If you’re pre-product and haven’t yet talked to customers, then you’re likely too early. At the other end of the spectrum, B through E+ rounds are not going to be of interest either.
- How much capital do you require, both now and in the future?
This is a key question, as we typically invest a few hundred thousand dollars, and maybe a million if we’re co-investing with someone else. Although we may have the capacity to initially fund a company, we look at what the future capital requirements are as well. If we perceive that there’s significant financing risk with respect to the next round and/or we’re likely to be heavily diluted when that occurs, it’s probably not going to be a good fit for us.
More to follow in my next post on putting together a longer pitch.