Angel Hacks - Inside the Pitch: Part 1

Welcome to the first part of our four-part series, “Angel Hacks - Inside the Pitch”. This series aims to provide practical tips on how to analyze pitch slides effectively. Whether you’re watching a startup pitch or accessing a data room, understanding what to look for can be a game-changer.

Imagine this... you’re watching a startup pitch. The founder controls the narrative, presenting the typical 10 slides with problem, solution, market, team, and so on. But what should we analyze when watching the presentation? Or even before, when accessing the data room?

In this series, I’ll share my perspective on each slide, what I like to observe, what I don’t care about and why, and what I often find missing in many pitches. This insight comes from hundreds of pitches I have watched and analyzed throughout the years.

Problem Slide

Clarity:

The problem statement should be crystal clear and concise. A vague problem statement can lead to confusion and misinterpretation. For instance, instead of saying “Many people struggle with time management,” a more precise statement could be “Busy professionals find it challenging to balance work commitments with personal tasks due to a lack of effective time management tools.” This statement is specific, relatable, and directly addresses the target audience. Storytelling can work fine here, but it also needs to be concise. If the founder uses stories to illustrate, you can get back to them in the Q&A for more details.

Indication of the problem size:

Before delving into the market slide, the pitch should provide concrete figures or estimates to showcase the market’s magnitude. This gives an idea of the potential customer base and the scope of the problem. For example, “According to XYZ research, the global market for time management software is projected to reach $X billion by 2025.” or “X million people are facing this only in the region of XYZ, and are willing to pay to solve this problem.” If the numbers are not supported by referenced data, simply don’t consider them. Unsupported data can be misleading and may indicate a lack of thorough research.

Validation:

This is where you can gauge how much the founders have worked so far and some signals about the business, especially when they are pre-revenue or pre-product market fit. They should offer compelling evidence to validate the problem. This could include survey results, testimonials, or industry reports. For instance, “Our interviews with over 100 professionals revealed that 80% struggle with time management, with 70% expressing dissatisfaction with existing solutions.” This shows that the founders have done their homework and understand their target market’s needs and pain points.?

In this situation, we're still validating if the problem is real, not the solution. The questions to be answered here are: "Is this a genuine problem?" "Do lots of people or groups see it?" "Is it a big problem?" This matters because founders might only rely on their own ideas or talk to a few people or companies. If they don't confirm that the problem really exists and is important, they might create something based on only a small group's experiences.

Solution Slide

Again, Clarity:

It’s surprising how some founders complicate their explanation of the solution. They should explain what the solution is and how it works in simple terms. They should use clean figures, and good visuals, to make this very clear. A complicated explanation can be a red flag, indicating that the founders themselves may not fully understand their product or service.

Uniqueness:

If the founders don’t understand what sets their solution apart from competitors, that’s a bad sign. It shows a lack of market understanding and could indicate that the product or service is not unique enough to stand out in the market. If they don’t know their competitors or believe they don’t exist, that’s a really bad sign. It could mean that they have not done enough market research or are overly confident, both of which can be detrimental to the business.?

I remember watching a pitch where the founder confidently claimed, "No one else in this country is doing what we're doing." But then an investor chimed in from the audience, "What about X and Y? They're doing something similar. I just looked them up on Google." Maybe X and Y weren't direct competitors, but that wasn't the point. The issue was that the founders were caught off guard; they didn't know about X and Y. They were so focused on developing the product that they hadn't kept an eye on the broader landscape.

Feasibility:

Look for insights into the feasibility of the presented solution. For example, “We’ve already developed a working prototype and conducted beta tests with positive feedback from users.” This shows that the founders have moved beyond the idea stage and have something tangible to show. It also indicates that they have received validation from potential users, which is a positive sign.

Scalability:

Scalability is a crucial factor to consider. Can you see the solution scaling? Or will it take too many resources to grow from one level to another? A business that cannot scale may struggle to become profitable or may only appeal to a niche market.

Business Model Slide

Revenue Streams:

The founders should clearly outline their revenue streams and pricing strategy. For example, “We offer a freemium model with basic features available for free and premium subscriptions priced at $X per month, per user.” This gives an idea of how the business plans to make money and whether the pricing strategy aligns with the target market.?

Different customers:

If the business serves different types of customers, such as companies and individuals, they should explain each flow separately. This shows that they understand the different needs and expectations of their customer segments. They should also anticipate potential weaknesses and mention how they plan to mitigate them.

Profitability:

The founders should break down their cost structure and revenue projections. For instance, “With an estimated CAC of $Y and an LTV of $Z, we anticipate achieving profitability within 18 months.” This shows that they have a clear financial plan and understand the key metrics that will drive their business.

This concludes the first part of our series. We’ve covered the problem, solution, and business model slides in more detail.?

Stay tuned for the next part where we’ll dive deeper into the other aspects of a pitch. Remember, understanding what to look for in a pitch can be the difference between betting and investing.?

Happy investing!