WHAT ANGELS WILL BE LOOKING FOR IN YOUR PITCH DECK
It’s not enough to have a great idea for a business — you’ll also need to communicate the value of that idea to an audience of investors clearly and succinctly. Your pitch deck is a key component of this communication strategy, but do you know what angel investors are really looking for in a pitch? Do you know how to craft a slide deck that maximizes your chances of getting funding?
“A key tip as you are building your deck is maybe not to just think about your deck, but keep in mind that what you are doing is creating slides that tell your story,” says Mike Eckert, chairman and founder of NO/LA Angel Network.
Eckert and Scott Whittaker, a partner at the law firm Stone Pigman Walther Wittmann, paired up at a recent Tech Park Academy discussion to share wisdom they’ve accumulated from years of working with firms seeking capital from angel investors. Read on for some of the key takeaways from their discussion about what angels will be looking for in your pitch.
Make Your Pitch Compelling from the Start
The early portion of your presentation must walk a tricky line: It has to quickly and clearly explain who you are and what you do, but without becoming too complex. “You’re dead,” Eckert says, if the people you’re presenting to don’t understand what the company does within the first few slides.
He says you’ll want to start with a slide that includes the company name and logo, and follow it with an “elevator description” — an outline of your elevator pitch that briefly tells the audience who the company is intended for, what the product is and what it will provide its users. This can also include a statement that addresses how your company differentiates itself from competitors.
Whittaker says the focus here should be delivering a clear, succinct message that generates enthusiasm for potential investors, rather than getting into the nitty-gritty details of your business.
To prepare for this, you’ll definitely want to develop and practice your elevator speech; this means working with mentors, advisers and anyone who will listen to whittle it down to its essence. Once your elevator pitch is ready, it’ll be easy to make a slide to back it up and help you articulate what your company is all about. Conversely, without a good elevator pitch, you won’t be able to create a slide deck that helps you win over any angel investor.
Talk About Where You Fit in the Market
Once you’ve established who you are and what you do, it’s time to talk about the space you’ll be competing in. Eckert says this is one of the most important things he looks at when making investment decisions.
Angels will be looking for a slide or two that cover the opportunity and customer pain that your business will address, the overall market size, the size of the target market segment and relevant market trends, he says.
Eckert and Whittaker emphasize the need to do your homework when developing this part of your pitch. For example, don’t make the mistake of citing an enormous number that represents an unrealistic target market size — which could lead potential investors to think you’re either trying to hype up your potential or you don’t know what you’re talking about. Eckert and Whittaker suggest going narrower instead: Drill down to the specific market segment that you are targeting.
Also, when discussing marketing trends, they recommend using data from analyst reports, industry studies and other available sources. You should be able to describe not only the current state of the market but where your segment of the market is going.
Explain How You’ll Make Money
After potential investors get an understanding of the market and the solutions you offer, they’re going to want to know where you plan to go next, which means it’s time to deliver your go-to-market-strategy. The focus here should be on providing a high-level understanding of your business model and how you plan to make money, Eckert says.
Different business models will have different capital requirements, and your potential investors will be considering that future rounds of funding could mean their early investment ends up diluted, Eckert says. This doesn’t mean models with heavy capital requirements, like manufacturing, will be dismissed; it just means angels are going to need to feel confident they’ll be getting a good deal.
They’ll also want to understand your sales model. Give them details on whether you’ll use direct sales, channel partners or some combination of the two. Fill them in on any strategic alliances you have, and talk about your pricing strategy, Eckert says.
The last part of any pitch deck concerns what you are asking for (the “ask”) and what you plan to do with the money (the “sources and uses of funds”). You need to ask for only the money you need and you need to know whether you need it all up front or whether it can come in over time.
For a new company, investors aren’t going to expect you to be an expert on every element of your market, business model and sales strategy, but they will want to know that you’ve given these matters a lot of thought. The homework you do before making your pitch is a crucial part of meeting these expectations.