Six Steps to Catching an Angel (Investor)

I recently received a message from a dear friend of mine, asking if I would review a pitch deck that was specifically intended for angel investors and provide some feedback.  Although the request was likely in the same vein as when a recruiter contacts you and says "if you know anybody who would be interested [hint, hint]", I took it as an honest request for feedback.  So I put on my Super Investor Vision Goggles and looked critically at the pitch deck, writing a bunch of notes in the process.

After sending off that email, I realized how I could have used that same feedback when I was just starting out.  When I started my first company, I didn't have any relationships with people capable of being angel investors, nor would I have had the guts to ask for this kind of feedback.  All people's time is valuable, but successful people even more so and might not have the time to respond.  It felt like a good topic to write about.

As for writing a great pitch deck, I certainly won't stop you from googling up other formats and guides–there are (sadly) even services that will ghost write one for you.  But what really matters is that you have answers for the following Six fundamentals, and pack them into about 10 slides:

1. What You Are Doing

Describe your operation in basic terms without too much jargon.  Investors may know a little about your market, but probably won't.  Give enough detail that it's clear you know how to make money doing this activity.  Explain who your founding team is, who your advisors are, and how often you solicit their opinions.  Also be honest about whether this is your full time gig or a side hustle, and what the trigger is for you to go full time with it.  It's okay to say it's not sustainable at present to be all-in on something--that's why you're looking for funding, right?

2. Who Are Your Competitors

There is no such thing as a competitor-less market.  Find your nearest competition and explain how they are similar to your operation, estimate their size (in headcount, revenue, and any other metrics you can find).  Use this to measure the market size.

3. Risks and Mitigations

Every business is at the mercy of supply (suppliers), demand (customers), and competition.  List a few of the most likely changes that could occur that are risks to the health of your business, and what your thresholds are for mitigating actions.  These are serious threats to your success, and if you're paying attention to the business, you'll take these seriously.  If your business relies on hard drive prices being low and you have a great supplier, talk about this being a strength, but if it were to suddenly evaporate, where would you go for hard drives and how much would that affect your operating costs?  Study every risk and have an answer to each.

4. Current Costs and Revenues

You should already have a spreadsheet with your P&L in it.  Assuming you get this far, an investor will want to know the monthly burn rate, the revenue model, the fixed costs, the flexible costs, and how healthy the company is right now.  Be able to provide projections based on price increases for suppliers, or lower sales to customers, or increased competition increasing the costs of marketing, etc.  This sets the stage for the clincher below.  

5. How Adding Money Changes the Equation

This is your journey.  Investors have their own journeys, and don't want to be on yours unless it's incredibly compelling.  Asking for "some money" is just lazy.  Justify the amount with what you'll do with it, and why that isn't too little or too much.  What in your equation changes as a result of having it?

6. The Opportunity

Money is an accelerant.  At this point, a potential investor should understand how adding money to an existing company will allow the flexible costs and income to rise above the fixed costs and become very profitable.  Be able to explain how much of the company you're selling, which directly implies your present valuation... so you'd better have documented traction to back that up.  Also be able to show (expected, low, and high) projections about profits, growth in the market, etc.  Include thresholds where you start increasing capacity by hiring, purchasing more equipment, increasing reach, investing in more sales or marketing, etc.  Most businesses are not just dumping gasoline on a fire and printing more money–you have to coax it into efficiency, so be able to speak to that process.

Parting Thoughts

It helps to have a strong elevator pitch, since that's the first impression that will lead to an angel asking for a pitch deck at all.  I've also seen contradictory advice about having too much data in an investor pitch deck.  As an analytical person, I don't feel very convinced unless I can see the numbers, but some folks are probably swayed by pretty graphics that move up-and-to-the-right.  Know your audience, I guess.  

And finally, if you're starting your company or have been running for a little while, build the pitch deck occasionally, even if you have no interest in pitching any investors.  It's similar to building one of those useless business plans that nobody ever refers to, except that you might learn something about your own business, and have a tool–the pitch deck–in your hands that could be immediately useful if you happen to meet the right person.