How to Ace Your Pitch to Angel Investors
1. Know your angel investor
Not all angel investors are made equal. Make no mistake: they all care about money, but some are also motivated by other factors. For example, some angel investors enjoy the thrill of investing. They want to be involved in a project that creates something truly new. Other angel investors have an altruistic bent. They’re genuinely trying to improve the world with their investments. Of course, many angel investors really are in it just for the money. They’ve turned angel investing into a science and they’re primarily focusing on the numbers so they can calculate their risk-reward.
If you can determine which type of angel investor you’re dealing with, you should be able to tweak your pitch to appeal to him or her individually.
2. Tell the story of your startup
The best way to get angel investors excited about your startup is if you’re genuinely excited too. In your pitch be sure to explain how you came into this sector. What drew you into the project? What excites you about the opportunity? Telling the story of how you got where you are will also demonstrate to the angel investor that you’re truly knowledgeable about your sector -- a key success factor for any startup.
3. Present a compelling but realistic market opportunity
It’s essential that your pitch contain research on the market opportunity in your sector. There’s no need to go into detailed revenue projections, but you do need to demonstrate that you’ve studied the market carefully and/or that you have detailed knowledge of your startup’s potential in your sector. However, it’s important to make “believable” estimations of the opportunity. Many startups make the mistake of pointing to the total spend in their space as the market opportunity. That’s too simple. Be sure to focus on what portion of the sector your startup can realistically reach.
4. Don’t be afraid to highlight potential threats to your startup
For angel investors, the pitch is an opportunity to get to know you. They want to know if you’re the type of person they can work with over the next few years. One way they can determine your trustworthiness is by the level of honesty you bring to your pitch. Just as you should present a believable market opportunity, you should also be honest about the potential threats to your startup. Chances are, if you don’t mention the threats, the angel investor will be thinking about them anyway, and they’ll be wondering why you didn’t mention them. In addition to showing your honesty, presenting the threats to your startup clearly demonstrates to angel investors that you understand your sector and that you know what to do to succeed in it.
5. Show that you’re committed
Angel investors want to know that you and your cofounders believe in your idea so much you’re willing to put everything on the line for it. It’s an assurance for the investor that you’re going to be giving this project 100% of your attention. If you’ve quit your job so you can work on this startup full-time, find a way to (tactfully) let that be known during your pitch. One caveat here is that your level of desperation can have an impact on the valuation of your startup. So, if you really are desperate for money, it’s probably not a good idea to let the investor know that you’ll lose your house if you get don’t her money by the end of the month. That being said, demonstrating that you’ve put your own money into your startup is further proof of your commitment, so don’t be afraid to mention it.
6. Demonstrate a clear exit plan
Most angel investors want to know how they can turn their investment into a profit, and the vast majority don’t want to wait 10 years for your startup to go public so that can happen. In your pitch, therefore, you should make it very clear how you intend to achieve liquidity for your investors, including your anticipated timeline for doing so. Is your goal to be acquired in two years? If so, in your pitch you should highlight some potential buyers and map out the steps you’ll be taking to become an attractive proposition to those buyers.
If you’ve nailed your pitch, chances are you’ll start getting offers from angel investors.