Polish is the easiest part of a pitch. A well-designed slide deck, a slick financial model and a rehearsed presentation are all important but are not the only things experienced angels focus on. This post explores five more subtle signs to watch for.
Founder self-awareness
Does the founder know their (and their business’s) weak points as well as their strengths, or does every question get answered with confidence regardless of whether they really know the answer? A founder who says “we haven't solved that yet, here's how we're thinking about it” is giving you more useful information than one who has an answer for everything.
Evidence over assertion
“The market is huge” is an assertion. Customer interviews, a waitlist, early usage data are evidence. The best angels are looking for signs that the founder knows where to look for the signals that inform. It doesn't have to be revenue at an early stage but it needs something more concrete than the founder's own belief.
Coherence between ask and plan
A founder that cannot show how the funds are going to deliver something specific doesn’t inspire confidence. Does the amount being raised map to a specific, sensible use of funds that gets the company to the next milestone, the next round or a specific proof point? Angels know plans will change, that’s the nature of early-stage growth, but a good plan, with sensible provisos projects understanding and business acumen. Many founders underfund, thinking they can achieve a lot with a little. Angels like founders who run a tight ship, but spend on the right things.
Quality of answers
This is the most telling thing you can do in a pitch meeting: ask a question about something not on a slide and see what happens. Founders who know their business, can think on their feet and can reason through something they hadn't prepared for build confidence. The best founders rarely struggle with questions because they face them day-in, day-out. They live the business.
Test the market
TAM/SAM/SOM numbers are often a founders Achilles’ heel because they built backwards from the number they want to show you. The test is not to challenge the numbers, unless you have specific domain knowledge, but to probe how the founder got to them. Can they explain their research methodology? What assumptions have they used and how do they justify them? Have they considered best and worst case. Perhaps most importantly, can they show how they are going to reach their first 100 customers. The best entrepreneurs understand that focus on a tightly defined segment is essential to gaining traction. Think big, start small is what you are looking for.
The founders worth backing aren't the ones with the fewest visible problems; every early-stage company has plenty. They're the ones who understand their problems clearly enough to talk about them without flinching, and who can back up what they're claiming with something other than confidence.
David Jackson, Founder & CEO, Certitia