Today I want to talk to you about “the anatomy of a perfect startup pitch”
It’s when a founder sits down with you and lays out their case on why you should invest in them.
I receive them all the time…
And while they’re fun to listen to…
I generally pass on most deals that come my way.
But before I explain to you what the essential ingredients are for an amazing pitch…
I want to talk to you about something rare that happened yesterday…
A live pitch we received from a young startup… that we believe has incredible upside potential.
The company’s name is Rentberry (if you missed it, watch the replay here)
What was it about THIS pitch that got us to strike a deal and drop a $100,000 investment in their upcoming round?
Here are a few of the reasons we got excited:
- Problem – Oleksiy (their CEO) and the Rentberry team have targeted huge issues faced by renters and landlords. The current system was broken.
- Solution – Rentberry has created an end-to-end solution that serves both the renter and landlord. Their platform makes the process of finding and applying for rentals easy for the tenant…and their backend management system a breeze for landlords.
- Market – There are 40M+ units rented each year in the US alone.
- Growth – They have been nearly doubling their revenue and user base year-over-year. Traction like this is a great indicator!
But this is just the start! If you want to see the biggest reasons we invested (and how you can too), you NEED to watch the pitch for yourself.
What does a company have to do for us to whip out our checkbook?
One of the biggest moments in any investment is the pitch.
This is the moment when your first impression of a founder will be set in stone forever.
Watching their presentation, you will become familiar with the technical aspects of the business as well as the story behind it.
For most angel investors, the pitch is the most crucial factor in deciding whether to pass or invest.
This is why angels must study the ins and outs of pitch decks — what to expect, what to watch out for, and what questions to ask.
Today, I’m going to break down the art of the pitch deck.
You will learn what to expect, how to spot potential, and tips to make your investment succeed.
How a Pitch Works
A startup pitch isn’t anything fancy. It’s basically like presenting a summer project in front of the class — but with much higher stakes.
The founder (or founders) will present their startup idea and plan to you, either in person or via online video chat.
The pitch will show you relevant information through a PowerPoint, Keynote, or Prezi presentation. The founder will work through their slides explaining and inspiring the prospective investors.
The whole thing usually lasts no more than 10 minutes.
Lastly, a Q&A takes place so angels can dig deeper, testing the founders and filling in the gaps.
In this scenario, you are the teacher. The founders did their project and now you have to grade it. Whether they pass or fail, depends on the quality of the presentation and your personal needs as an investor.
Next up, you will learn the must-haves of any good pitch.
Before getting into our tips for pitch-success, you need to know the essential components of a good pitch.
These are questions you should ask yourself, and if they aren’t addressed, you should ask the founder directly during Q&A.
- Product and problem – What is the product/service, who is it for, and what problem does it solve? How is this solution better than others?
- Startup team – Who are the founders, advisors, and team members. What are their areas of expertise and accomplishments?
- Market – What is the size of the market? How will the startup be able to expand into this market? What does the competition look like?
- Sales engine – How will the company sell its product? How much will it cost to execute this market strategy
- Current stage – Where is the company currently on the roadmap? Is the product fully developed? Do they have partner relationships and early-adopters?
- Key challenges – What hurdles will the company have to surmount to succeed?
- Five-year projections – What is the best and worst-case scenario after five years? How much time and money will it take to break even?
- Exit – This one is essential for angels to know. Is an IPO the goal? If not, who are the likely buyers? How long will it take to see your return?
- Funding – How much money does the startup need to reach its milestones?
You can watch founders pitch and access the hottest startup deal flow with our Angel Investing Insider service.
Top 3 Tips for Assessing a Pitch
Now I have a few special tips. These are the things I wish I knew when I was starting out.
It’s your job to make assessments in the heat of the moment. There will be some things you just won’t be able to figure out while conducting due diligence after the pitch.
With practice, you’ll be able to smell a bad deal from a mile away.
1. Only invest in founders that come prepared.
As we say in the angel investing world, you invest in people, not ideas.
The founder — as the most important person in the company — should show up to the pitch fresh, prepared, and armed to the teeth.
The founder should have honor-roll, overachiever vibes — not late-to-class, forgot their homework vibes.
Presentation quality, in terms of organization and aesthetics, isn’t a deal-breaker. But, having clean, legible slides that flow logically from one to another is a great sign.
Ask yourself, if the founder can’t make a simple presentation for you and your peers, how can they make important decisions and lead their team?
2. Make sure the founder(s) understand their business better than anyone.
It should be difficult to stump a good founder.
Their understanding of the target market should be astounding. Most of all, they should know who their customer is.
What does the customer want? Where do they live? Have they been naughty or nice?
Your founder should be the Santa Claus of their target demographic.
Another thing — think twice about the deal if the founder is reading from their slides!
While not everyone is a naturally gifted public speaker, this information should be ingrained. You should get the sense that they could explain their business model and market in their sleep.
If the founder hasn’t spent an inordinate amount of time thinking about these things, consider passing.
If they inspire your confidence and show a profound understanding of how their business ticks, you’re golden.
3. Find an entrepreneur who thinks like an investor.
This is one of the best tips I can give you!
We are in this game to find exits and secure returns. We are neither investing to change the world nor fund the “next big thing”.
Those are extras. If you can pull that off while turning a profit, more power to you.
Here’s the thing — entrepreneurs don’t usually think like this. They have an entirely different mindset.
You will find some founders that can’t give you the assurances you need to throw down some bills.
If the pitch has an overemphasis on the story, innovation, or novelty and a serious lack of research, figures, and goals — you better do a reality check.
Another difficult part of this dance is getting entrepreneurs to think in terms of an exit.
The financial plan and ultimate exit strategy is literally the most important thing for investors to consider. All the bells and whistles in the world can’t compare to a simple map with an “X” that marks the spot.
Some founders just don’t like to put a limit or label on their company. Maybe the startup is their baby, and they don’t want to consider it growing up and moving out.
Whatever the case, you will be surprised by how many founders come to a pitch without understanding why investors even showed up — a profitable exit.
It can be tough, but if you find a founder who thinks like an investor, you’ve lucked out.
At a pitch deck, you need to have the right questions and a strong backbone.
Go ahead, tug at those loose ends and see if the whole thing unravels.
Stay firm in your goals and values as an investor, never being swayed by style over substance.
Like anything else, these are skills that must be practiced over time. No angel starts with these skills and everyone makes mistakes.
This is why it’s great to get involved in group-oriented, low-risk pitch decks.
Angel investing communities, like Angel Investing Insider, give you the chance to be a part of real startup pitches. You can ask the founders questions and make real investments, all from the comfort of your home — and with the guidance of experienced angels to boot.
This way, you can boost your deal-flow and angel experience at the same time.