Angel Hacks - Inside the Pitch: Part 4

As an angel investor, I’ve sat through countless pitches, and I’ve learned a thing or two about what makes a pitch successful. In this fourth and final article of my Angel Hacks: Inside the Pitch Series, I’ll share my personal approach to evaluating pitches. I’ll walk you through my process, from the preparation before the pitch to the research after it.?

Remember, these are my personal strategies, and they may not work for everyone. But I hope they can provide some insights and help you develop your own approach.

Before the Pitch

If you’re watching a pitch with previous access to a data room, there’s no excuse for not preparing. If this is your first time watching the pitch, take these hints to the “After the Pitch” session. You can do them after the pitch, but doing them before is much better.

Analyze

Start by taking a look at all the available files. They could be a teaser version of the pitch deck, a spreadsheet with the financial forecast, a short video with the founders, or a product demo. I personally go through the financial analysis only after watching the video or reading the deck. This way, I can understand the nature of the business and the main assumptions that should be considered.?

My goals here are:

1. To understand the business assumptions and how they reflect in the revenues and costs forecasted.
2. To identify major lines of costs and see if they make sense (take a look at the salaries of the founding team, for instance, or the level of fixed costs).
3. To check if the team has minimum know-how in financial management (these are the people who will manage the funds raised, your money).
4. To check any inconsistencies that you can clarify during the Q&A session, after the pitch.

Research

After you get the idea and the economic assumptions, you can research a little bit. Here, I don’t waste a lot of time because the pitch will tell me if I should invest more in it. Looking at the website, the company’s page and the founders’ page on LinkedIn will give you an idea of their positioning, the founders’ dedication, and how much they are aligned/identified with the company. If it’s a B2C, you can check other channels, like Instagram, TikTok, etc. It will also give you some perspective on the activity level in these channels. Look at potential competitors (you will be prepared for the competitors slide that I dislike so much as you see in the article “Inside the Pitch #2”) and similar solutions that have been tried before.?

Suppose you get here and believe it is worth studying more. In that case, you can go deeper into the market they are serving, main trends, what has been happening, regulation issues, level of M&A, IPOs, rounds happening, most relevant players, etc.

After the Pitch

While watching the pitch, take notes. They will guide you to the questions you may ask in the Q&A session or even some post-pitch research you need to do.

Q&A

You can either clarify a few points or ask to dig a little more into some points not so well covered during the pitch (intentionally or not). Here are a few suggestions on each topic, based on what is usually hard to assess during the pitch.

Team

• “Can you tell us more about the backgrounds and expertise of the team members?” - Here you want to assess what recruiters call “transferable skills” or what they have done and learned with previous experiences that can be used in the challenges they will face.?
• “How do your team’s skills complement each other?”?
• “Have you worked together before?”?
• “What is the role of the advisors?”
• “On which topics do they help you most?”

If they didn’t mention it, check their dedication through their full-time involvement and personal investments.

Go-to-Market Strategy

• “What is your plan for acquiring customers/users?” - Analyze the specific marketing and outreach methods planned for attracting customers, such as digital marketing, public relations, and direct sales.?
• “How do you intend to scale your marketing efforts?” - Evaluate how the startup plans to expand marketing operations and adapt strategies for new markets, ensuring marketing efforts scale with growing demand.?
• “Have you tested your pricing strategy, and what were the results?” ?- Assess the results from pricing strategy tests, including market research and customer feedback.

Product Development

• “What milestones have you achieved in product development?” - Assess key product development milestones that demonstrate the startup’s commitment and capacity of execution.?
• “Do you have a roadmap for future product iterations?” - Detail the planned product iterations, featuring upcoming enhancements that show the startup’s strategic foresight and readiness for market changes.?
• Feedback Integration Strategy: Examine how customer feedback is utilized to refine product iterations, using methods like beta testing and surveys to drive continuous improvement.

Financials and Funding Needs

• "How much funding are you seeking, and what will it be used for?" - You need to clearly understand the funding amount and its purposes, such as product development and market expansion, to clarify how investments will advance business objectives.?
• Justification of Financial Assumptions: check the financial assumptions from what you have analyzed in preparation for the pitch or new information you just heard during the pitch.

Exit Strategy

• "What is your long-term vision for the company?"
• "Are these founders willing to sell the company?"
• "Is it a lifestyle business?"
• "Have you thought about potential exit opportunities for investors?"

Explore potential exit strategies like acquisitions, public offerings, or partnerships, highlighting how they can yield profitable returns and demonstrate the startup’s exit potential. If you are analyzing a pre-seed, not very frequently will the founders have this clear.

Research After the Pitch

After the pitch, you’ll have learned much more about the startup. You can ask for the current customers’ names (in the case of companies) and look at your network to check how you can connect with the company about this solution. You can also talk to common contacts to check their experience with the founders of previous companies.

As an angel investor, your job doesn’t end with the pitch. The real work begins after the pitch when you start to dig deeper into the company’s business model, team, and market potential. Remember, investing is not just about finding the next big thing, but also about understanding the risks and making informed decisions.

That’s it for my Angel Hacks: Inside the Pitch Series. I hope you found these insights helpful and that they will assist you in making informed investment decisions.?

Happy investing!