What to Look for in a Founder Pitch

Part of Our Research Series for Angel Investors

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Active Angel Investors can see hundreds of opportunities a year, so in addition to having a robust due diligence process, knowing what to expect and look for in a pitch deck can help with efficiency. Ultimately, it comes down to a degree of personal preference when it comes to reviewing pitch decks: do you prefer visuals? Lots of data? Specific content?

Below we create some guidelines for best-practices in order to establish the minimum criteria Angels should seek in a founder pitch. At the end of the pitch, investors should feel like they’re acquired some unique knowledge — and should be able to see where their own backgrounds can create additional value.

Cover All the Bases

The pitch should contain all the relevant information that gives the investor the full context of the company: the who, what, why and how. Of course, the order of these is less relevant as long as the founder is able to cover, coherently and precisely, each component within their pitch.

• Who: An overview of the team, their backgrounds, and why each is the best person to be in the role solving the problem at hand
• What: A description of the company, the intended audience, and the product or service to be developed
• Why: The problem or opportunity
• How: A roadmap for how the company will solve the problem

The Good Contents

The founder pitch should include all of the below relevant details:

• Company Name, logo, and location
• The management team and titles
• Business description
• The problem
• The solution
• The market size
• The company business model (how it intends to make money)
• The target market
• The product or service roadmap
• The competitive landscape
• The company competitive advantage(s)
• The proforma/projected financials, including how much the company intends to raise and how the funds will be used

This information will allow an Angel to gather the minimum amount of information necessary to put into context alongside their own investment thesis, experience, and abilities.

The most important aspects for Angels to hone in on during a founder pitch relate to how well the story is told by the founder — how well do they know the problem, the market, etc. and how passionate and able are they able to communicate that to investors, and eventually customers? Founds who appear to be in control and have a grasp on the details of the market and company will likely be better positioned to incorporate feedback and make challenging decisions down the road.

Another key point to focus on is the use of capital. How exactly do the founders intend to use the capital raised? How long do they estimate it will last and over that time period what will be achieved? The more concrete details the founders can provide, the better. This means going beyond “to develop the MVP” and into the specifics of research initiatives, sales and marketing spend, hiring, etc. Capital should be used for growth.

The last most important facet is related to valuation expectations. For Angels, this is often a rather quick and back-of-the-envelope type approach — but it needs to be reasonable. While it may be tempting for both investors and founders to raise money at a high valuation, this sets a high bar for the necessary growth objectives that need to be achieved to justify the current valuation and attract investors during subsequent rounds of financing.

Red Flags

It can be very exciting as an Angel investor to see incoming deal flow. It can even be challenging to find ways to say no! Having a list of red flags to look for can help Angels both whittle down the list of potential opportunities to spend time reviewing and ultimately limit the number of poor investments made.

Every company needs to be grounded in some semblance of reality. An easy red flag to look for happens when companies have unrealistic expectations. This can be in terms of market size, time to market, price points, or others. Keep in mind that there is a difference between solving problems that have been seen as unrealistic and companies solving problems in an unrealistic way. The former is something that can be achieved, the latter often is not.

For example, a company that intends to develop a means to reverse the aging process through nanotechnology may actually be a better investment than one that is pitching the idea of developing a household product that competes directly with large, global competitors.

Other red flags come into play when reviewing the data, particularly financials. Founders that have put together very loose estimates with inconsistent timelines and proforma financials that in no way line up or seem realistic may mean the founders do not have a strong grasp of the business, the market, or both.

Lastly, look at the dynamics of the team. Beyond the backgrounds and founder-market fit, do they get along and seem to like each other? Do you envision each working as hard as it takes together to solve inevitable problems that arise for every startup?

A good way to test the last part is to ask founders a hypothetical question and observe how they communicate and think through it. What would happen if a customer had a negative experience with the service? What happens if right after you ship the product you discover a bug? What if competitor X launches a rival product?

At the end of the day, investors are looking for signals as to the probability of success — and at the earliest stage, this comes disproportionately from the makeup of the team and their grasp on the marketplace. Angels are best served to focus on these critical points during a founder pitch.

Are you a founder or funder? We’d love to chat!

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