When describing his firm’s investment process, Marc Andreesen once said, “We can do maybe 15 or 20 investments out of the 3,000 [applications] a year. So I like to say our day job is crushing entrepreneurs' hopes and dreams.”
But if you’re one of the stubborn ones that are going to try anyway . . . welcome!
Before you go running in head first to your investor meetings, you should prepare what you’re going to say in your pitch. After speaking with accredited and non-accredited investors across the country, here’s what they need to know before they write a check.
Why did you start your startup?
It’s time to tell your story. Craft your message to who you're talking to, and do your research. Angels want a clear, compelling story of the problem you are solving, how you plan to do so, and why you, the founder, are the person to do it.
Part of your pitch is convincing the investor that you are unfairly qualified to build out the company. To do so, you need to show your passion, expertise, and confidence in following your idea through.
1. Why now?
Timing is arguably the most important aspect in determining a startup’s success. You don’t have to look far to see it’s true, just look at the likes of Instacart, DoorDash, and Zoom throughout the pandemic. You’re going to describe how you’ve achieved product-market fit, so make sure that timing is an aspect of that.
2. What are your metrics?
There are certainly stylistic differences between how angel investors select companies in their portfolio. One of those styles is relying heavily on data. For those raising their seed round, this can be a little daunting, especially if you’re still finding your early adopters or building your MVP.
However, you should still have an answer to this question. Reference industry data, and know the metrics in your industry and how you plan to address them. For example, your SAAS company will address customer churn by addressing the concerns your potential early adopters address in your interviews with your key demographic.
3. How much are you raising?
Give a straight answer, and don’t waver. For example, you’re not looking for “around” $1M. You’re raising $1.2M where 60% of the proceeds are going towards hiring your content marketing team to focus on building a community around your product. 40% of the proceeds are for building out your customer success team to better understand your user base and craft their experience with your company.
They’re investing in your company, so be exact in how much you need to get started. If you’re not sure, an investor isn’t going to give you that $25k check.
4. Who are your competitors?
Let’s start with the incorrect answer to this question: “We don’t have any.”
This is how you can immediately break trust and authority with your investor. Every startup has competitors, and (to be frank), your idea is not as original as you think (We’ll write soon on how being a first mover is actually a disadvantage). If you’re not aware of who is in your space, that spells difficulty in how your team will handle competition down the road.
So do your research. Even if you’re sure that there’s no one doing exactly what you’re doing, there’s going to be a product that’s close. If they’re close, they can move into your space at any time, so be aware of them. Most importantly, be candid with your investor, and explain how your product is differentiated.
Finally, the most important question of all:
5. Will I regret walking away from this investment? Your goal as the entrepreneur is to make your investor feel like they found the next Elon Musk, Steve Jobs, Bill Gates . . . you get the idea. By the end of your meeting, you should instill the fear of missing out (yes, FOMO). Fear of loss is just as strong as the desire to gain something. In other words, they’re looking for a diamond in the rough. It’s your job to convince them it’s you.
This isn’t a definitive list of what an investor needs to invest, but they do need these questions answered. Are there other questions you see in investor meetings? Feel free to put them in the comments below!