I’m an active angel investor, focusing mostly on early-revenue companies with over 185 companies currently in my portfolio.
You sent me your pitch deck and I passed. What happened? How could your wonderful pitch deck not excite me?
Simple. Your pitch deck sucked. And that means your company probably sucks too.
That may not be the case, of course, but that’s the way to bet, and I’m in the business of high risk, high reward betting.
As an active angel investor, I look at 50 to 100 pitch decks before inviting one to pitch. And when you look at as many pitch decks as I do, you realize 95% of those deals are un-investible. They’re either concept-stage deals unlikely to ever get off the ground, or they’re development-stage deals that can’t demonstrate product-market fit.
Here’s why your pitch deck failed to get me interested…
Fail #1: You pitched your product, not your business
Big mistake. Rookie mistake.
There is an old saying that investors invest in companies, not product or markets. Yes, I am sure your product is awesome, but I’m not investing in your product. I’m investing in your high-growth business. Big difference.
Sorry but angels like me aren’t in the business of funding your pipe dreams; we’re in the business of funding operational high-growth businesses. Early-stage businesses to be sure, but only once they’re operational. If you have a product, but no business, you’re too early for most angel investors.
What are your KPIs? What are your CAC and LTV? If these terms are unfamiliar, or if you haven’t calculated them for your business, then you are not ready to pitch me.
Pitch your business, not your product.
Fail #2: You pitched your market, not your business
See Fail #1 above. You wouldn’t believe how many pitch decks have pitched me on the diabetes market but fail to pitch me their business. I’d happily invest in diabetes, but your company, not so much because you didn’t tell me anything about it.
Market size is not a substitute for customer engagement, traction, sales, or subscribers. Virtually every market is sufficiently large, so stating the obvious just wastes both our time.
Market statistics belong in the appendix, not in the main part of your pitch deck.
Fail #3: You have no traction
Angel investors like me invest in high growth businesses, preferably ones with accelerating growth.
As an angel investor, I am always looking to de-risk our investment because most will fail, and I don’t like to lose my money. If you have no customers, beta testers, proofs of concept trials or any other way to confirm product-market fit, how am I supposed to assess your business? I can’t.
Without traction, you just have an interesting idea or product, but you don’t have a business. Real companies have customer engagement. Engage with customers before you even start your business; you’ll have customers ready to buy when your product ships.
Many rookie entrepreneurs think that winning a pitch competition or being accepted into an accelerator is traction. It’s not. Customer engagement is traction.
Fail #4: You don’t have the juice
I’ll pass if I don’t believe you have the ability to build a $100M business over the next few years. I’ve learned from painful experience that you can’t hire an entrepreneur, so even if you have a billion-dollar idea, but can’t personally get it there, then I won’t invest in your company.
While juice is hard to quantify, I never invest in anyone I wouldn’t work for. As serial entrepreneur myself, I would not work for just anybody. You must be a true leader. To get me excited, you must articulate a compelling vision, have great people management skills that inspires the best in your employees, and you must be someone who confidently and efficiently executes.
Age isn’t a factor. I’ve invested in 23 year-olds I would love to work with and passed on 50 year-olds I just don’t think will ever cross the finish line.
You know deep down whether you have the juice. If you’re a technical founder and need help with sales and marketing, then find a co-founding partner with those abilities and make him or her your equal partner in the business.
Fail #5: You didn’t show me an exit
As an investor, I’m in it for the money. Mostly anyway. Tell me up front how you expect me to cash out when the time comes. Will you be acquired? Will you IPO? More importantly, will your business ever grow large enough to do either?
Lifestyle companies are the zombies of angel investing. Companies that grow to a few million dollars or even ten million dollars and then stop growing. They provide entrepreneurs a nice lifestyle but no way for investors to cash out, leaving my cash stranded with no exit in sight.
But, but, but…
But how do I get my product built and company launched if I don’t have any funding? That’s where friends and family funding comes in. If you don’t have skin in the game, then why should we angels invest? Prove you’re committed and all in.
More importantly, kill two birds with one stone and use customer financing to start your business. If your product is really as good as you say, then you’ll be able to find customers to advance you funds to buy your product at a discount.
About Me
Alan Fisher is a serial entrepreneur and active technology investor. He co-founded and took public two technology companies in the 1990’s and more recently has been working on a financial technology startup.
Mr. Fisher has been a board member of several public companies, including Egghead.com (N:EGGS), Onsale (N:ONSL), Fatbrain.com (N:FATB) and Infodata Systems, Inc. (N:INFD), as well as a number of privately held companies.
Mr. Fisher has an MS in Electrical Engineering from Stanford University and a BS in Electrical Engineering from the University of Missouri. He also holds 16 patents and is the author of “CASE: Computer Aided Software Engineering”, published by John Wiley & Sons.