Angel Hacks - Inside the Pitch: Part 2

Welcome back to the second part of our series, where we dive into the art of analyzing startup pitches. As an angel investor, I’ve had the privilege of watching and analyzing hundreds of pitches. In this series, I share my insights on what to look for, what to disregard, and what often gets overlooked.

In this article, we’ll focus on three key slides: the Market Size, Competitors, and Traction. Let’s jump in!

Market Size Slide

Addressable Market:?

Founders are often advised to present estimates like TAM, SAM, and SOM, but truth be told, I find them less important. This slide often seems more about show than substance. It's designed to reassure founders and excite investors, but it has its flaws. The top-down approach relies on defining the market accurately, which is tough. It also assumes technology adoption and customer behavior, leading to overly optimistic revenue projections. A better approach is bottom-up, estimating customers and what they're willing to pay. However, this requires more research and validation.?

?Market Growth:?

This slide assesses how the market is growing—whether it's expanding, stagnant, or declining. Look for data showing potential for sustained growth. A rapidly growing market can be promising, indicating high demand for the startup's product or service. But consider why the market is growing and if it's likely to continue. If you're unsure, discussing with someone knowledgeable about the market can help spot potential regulatory changes or threats.

Market Segmentation:?

This slide explains how the startup plans to reach different market segments. A clear target market and expansion strategy are crucial. Look for evidence of this in the startup's segmentation plan. They may target specific demographics, regions, or customer needs. In the early stages, like pre-seed, it might be challenging as they haven't received much customer feedback or tested different approaches.

Competitors Slide

Another usually useless slide. For two reasons. First, all competitors' slides look the same. They typically feature a table with competitors in one column and attributes in the rows. But who says the attributes were well chosen? They should be the ones defining the buying decision, right? Not really, not even close many times. Usually, the chosen attributes are the ones where the pitched solution stands out, making it seem better than competitors in all aspects.

Indirect Competitors:?

These are alternative solutions that address the same customer needs. They might not offer the same product or service, but they solve the same problem or satisfy the same need. Understanding indirect competition can help identify additional threats and opportunities and can show you, as an angel investor, if the founders truly understand their market and potential customers.

Differentiation:?

This is an understanding of how the startup differentiates itself from competitors. Unique value propositions, competitive advantages, or innovative features can set a startup apart from its competitors and make it more attractive to customers and investors. Facing competition isn't a problem. When Google started, it had direct and very well-known competitors. The key is analyzing if the aspects that make this solution the best are sustainable and recognized by customers.

Traction Slide

Key Metrics:

These are specific metrics that demonstrate the startup’s progress and momentum. Metrics can provide a quantitative measure of the startup’s performance and growth. Look for metrics like user growth, revenue, engagement metrics, or customer acquisition cost.

Milestones:?

These are significant achievements or milestones reached by the startup. Milestones can provide evidence of the startup’s progress and validate its business model. This could include product launches, partnerships, or funding rounds. But for pre-seed startups, all they have are milestones. As founders are usually thinking of metrics they fail in this. Many times, when I am mentoring startups in building their pitches I say, “You are telling me great progress that I don’t see in the pitch. How come? You need to demonstrate what you have accomplished so far, especially if you don’t have revenues”.

Validation:?

This is evidence of market validation. Validation can come in many forms, such as user testimonials, case studies, or partnerships with reputable organizations. It proves that the startup’s product or service is valued by its target market.

Projection:?

This is an assessment of the startup’s future trajectory based on its current traction. Projections should be realistic and based on solid assumptions. They can provide a glimpse into the startup’s potential for growth and profitability.

Analyzing a pitch is more than just listening to the founder’s narrative. It’s about digging deeper into the data, asking the right questions, and understanding the market and competitive landscape. By focusing on these key areas in the Market Size, Competitors, and Traction slides, you’ll be well-equipped to make informed investment decisions.

Stay tuned for Part 3 of our series, where we’ll continue to explore more of the art of pitch analysis.?

Happy investing!