Glen’s Speed-Pitch Guide
10 Tips for Speed-Pitching to an Angel Investor
You are the founder of a great startup. Like Eminem says, you have one shot, one opportunity.
That’s not really true. You have a lot of shots. A ton of them, in fact.
But still, if you have three minutes (or two, or five) to give an angel investor your pitch, you should do some pre-work to make the most out of it.
In this article, I’ll try to give you tips on how to maximize your benefits from this interaction.
There are some caveats to this post.
First, angel investors vary widely both in their investing behavior and how they approach their interaction with founders. I don’t claim to speak for all angel investors or even most of them. These are just my personal observations from hearing 400 speed pitches over the past four years.
Second, these tips are specifically targeted towards a speed-pitch environment. This can be a structured situation, notably Danny Jang’s Founder Meet Funder events in Los Angeles, which are like speed dating meetups where you move in chairs to get time slices with each investor, or it could be the classic “elevator pitch” situation where you’ve somehow got yourself a small window to make a quick impression (if it’s in a Hollywood movie, it’s always at a wedding, right?)
Third, even though there are consistent themes, and investors are eager to pattern match and bucket you into one of their templates — which you will likely resist — every startup is different and based on your situation you may or may not want to adhere to any particular tip I give here.
Tip #1: Make a bold claim, then let me drive.
This is my #1 most useful tip in this entire document. If you read nothing else, read this one!
If you have let’s say 3 minutes, far too many founders make the mistake of talking non-stop for the entire time. The time goes by really fast especially when you get excited, which is understandable because not only are you passionate about your company but you also are amped up so that you want to make an especially convincing impression that yes indeed you are passionate about your company. (We get it!)
A better way to manage the outcome of this interaction for your own benefit, in my opinion, is to make a bold claim that catches my interest and then stop. Wait a few seconds for me to process it, and then let me direct the use of the remaining time.
I might say, wow, I don’t believe your bold claim. To which you can say, yes, we’re really doing it. And I can say what’s the proof, where are your sales, and you can respond with that or some other validation and off we go to an interesting discussion.
Or I might say, I believe your claim, but I don’t think it matters, that I don’t think the market is big enough. Or that you aren’t enough different from these other ways people solve this problem. And you can answer, and off we go.
The main observation here is that if you allow your “extrovert talking mode” — which all founders have, it’s table stakes in order to play this game! — to free-run without feedback for 3 minutes, it’s unlikely you’ll hit my main topics of interest. Usually what you are saying will be engaging enough and you will be saying it with enough energy that it will be awkward for me to interrupt you (I will occasionally). But, it won’t be quite what I would prefer to talk about, either, and I might leave our interaction feeling like I didn’t really uncover enough to take the closer look you want me to.
Tip #2: Tell me the current state of your company.
What is the difference in these two companies?
I have an idea and have left my job for it, and I’ve convinced one other person to work on it with me on her weekends and we are hustling hard.
I have a team of 15 and annual sales of $3M and profitable.
I have literally heard founders (many of them) tell me about their opportunity for 3 minutes non-stop, all about the customers and the product they need and how much they will pay for it and the competition, and yet I do not know which category they are in. When I finally get a chance to ask, I’ve been surprised in both directions: I am guessing the first and they are the second, or vice versa.
If you are the second type, and you are sitting talking to me with the (deserved — congrats!) swagger of a founder of a successful company, you might be thinking, of course he can tell by my confidence that I have a big, successful company, I don’t need to spell it out for him.
What you may not realize — being of founder personality type yourself — is that there are oodles of founders of the first type of company that present identically and have the exact same swagger that you do as a founder of the second type of company! In their minds they are already you— their idea is gold! It’s really hard for the investor to tell. At least I get fooled a lot. It’s kind of an amusing human behavior, actually, and one of the reasons I find this angel investing so interesting. (I’m sure there is a corollary to the investors’ personality presentation, so I am not claiming we are immune to this reality-masking effect either.)
So it’s worth a one-liner before you dive in about your market or your product to say where you are in your company: pre-product, pre-revenue, or post-revenue (and how much), and how big your team is and what funding you have taken in so far. Don’t assume I can tell by the way you act!
Tip #3: Don’t talk too long about the problem domain.
This is a controversial tip because it’s actually the reverse of sound advice for a longer VC pitch.
In a classic “Sand Hill Road” 45-minute or hour pitch to a group of investors, you almost can’t talk enough about the specific problem domain and give examples of the pain point of your customer in their daily lives. Most founders don’t do a good enough job identifying a true pain point in the longer pitch format. I’d say half of pitches to VCs fail because the partners look at each other after the meeting and say, meh, just not an important or big enough problem to solve. Can’t pay off our fund. Pass.
But if you have only a couple minutes, I’m going to advise that you don’t spend it talking in general terms about why GenZ cares about climate change or that workers want ESG investment options or a wider societal need for your product or service segment. Your audience has most likely heard enough about these trends. Instead, allow the investor to bucket you into a category that they understand (see the later section) and just leverage that crude categorization as a proxy for their understanding of the market need.
The reason I’m proposing that you take this approach is that your interactive time with the investor is limited. If the rest of your pitch is compelling, the investor will later read up on your general market segment, on their own, and confirm the trend you claim. You want to spend your time together diving into the immediate state of your business and to communicate this amazing and unusual opportunity you are offering to this chosen angel and what you are looking for in funding.
Tip #4: Keep your value proposition super crisp.
This is advice for any pitch situation, but especially in a 3-minute speed pitch.
The elevator pitch is a useful acid test. If you can’t describe your positioning, your benefits, in a sentence or two, then — and this is blunt to say — it is probable that you don’t have a solid business premise. If you require minutes of careful construction of the details of why the customer’s problem is not being addressed by existing solutions and why you solve their problem in a way that is subtle and complicated but really awesome and differentiated (to you), then it’s likely that the marketplace won’t appreciate that distinction either, even if you are correct in some academic sense.
I come from a more academic, deep-tech background myself, and founders such as this — who I empathize with — are often way more clever in thinking about the business situation than is productive for their own good. If this describes you, dumb down your high-end notions about market sub-segments and detailed needs and constraints and buying motivations, and act more like street hustlers in order to accurately gauge a business opportunity. The sharks of Shark Tank are really good at this, bringing ideas down to a common reality check, so if you suspect you might be getting too complicated in your value proposition, imagine that you are on stage pitching it to them, and they are all up in your face, like, “Come on, really? No way. Does that make any sense?”
Real life is fuzzy and customers make all kinds of tradeoffs always in the favor of incumbents, even if you are technically better, because it’s the low-energy path. To get people off that path and part with their money you have to have a super clear value proposition that is really simple at its core. Work and work at that value proposition until your brain doesn’t reject being bucketed into a general category, because you are confident of your differentiation.
Which brings up categories.
Tip #5: Don’t resist being bucketed into a category.
This is a tip that applies to speed pitching in particular. In a standard pitch format you’ll have time to explore the exact market segment you are operating in and the particulars of your solution and why “you are not like the other guys.” But if you have only a few minutes, don’t waste that time unnecessarily refining or even arguing with the investor’s quick assessment of what category you are in. (Unless it’s grossly wrong, of course)
I think it’s best to just play along with the investor’s natural — and strong! — desire to bucket you into a category that they understand, or think they understand. You just don’t have time in the three minutes to fight it.
Here’s how it happens. You will start by saying a few things about your business, then they will interrupt and say something like:
I see, you are providing employee wellness monitoring. I get it.
You are a social networking site for finding new business connections.
You help creators produce and publish content.
You are a managed marketplace for sheet metal manufacturing.
You make an internet-connected toy.
A large portion of your brain will object to — and even be insulted by — being thrown in a general bucket that may even be distasteful to you, because you started this company to disrupt exactly the other established, lazy companies in that bucket. Having your beautifully and carefully constructed baby described so bluntly and unglamorously will make you want to spend time to defend it and clarify precisely what you mean. No no, you’ll say, you don’t get it. You’ll want to explain, we really are different than that because we don’t only provide the way for creators to publish content, we address their specific need for managing their intellectual property licensing rights, let me tell you all about it.
But there just isn’t time. It doesn’t pay for you to take the bait. Try to just let it roll over you and get to the good stuff. “Yes, we are a wellness solution but we are different because we focus on surfacing workplace bullying to the board of directors. Our revenue is …”
In fact, if you spend time objecting to our crude categorization, I think it works to your disadvantage by muddying the waters. Imagine the investors sharing notes afterwards. “I met this interesting wellness monitoring app. They have good traction and it’s a hot segment. But it was strange, the founder insisted it wasn’t a wellness monitoring app.”
The exception to this section is if you truly are creating a new category, something rare like an Uber. The challenge is that many more founders think they have this than is probably true, and they probably underestimate that “category creation,” even though it’s a hot topic (you can go read books on it) carries its own high burden of proof and go-to-market cost — because by definition there won’t be a market primed to understand and buy your product.
If you are convinced this is you and you go this route, you will spend most of your time talking about whether or not you really have identified a new viable category, so it’s sort of an all-or-nothing bet. If so, I would hit this head on and start with, “We are creating a new category” and then explain how you’ve analyzed it carefully and have a plan. But don’t do this lightly! Because no matter how your lips are moving, the investor will hear, “I have an idea that will take an enormous amount of money.”
Tip #6: The math is not in your favor. Be okay with that.
Just as a data point of one (or more correctly a “datum point of one” as my late statistician Uncle Albert would always correct), of the 400 speed pitches I’ve heard over four years at various events, I estimate that I’ve added zero value to half of the founders. I’d like to think I gave some vaguely useful info of some kind to the other half, and for about 40 provided a tangible benefit such as specific leads to other investors who I know would have an interest in the opportunity, and then 6 of them I have funded myself. (That’s out of a funded angel portfolio of 34 companies, so you can see the bias towards other means besides speed pitches of getting interest, such as personal referrals and demo days.)
Those aren’t great odds. But it’s like sales, or job hunting, or fishing, or dating I suppose, you may have to pitch repeatedly to find the right match. And if you can convey that you are honestly enjoying the journey it will 1) make it more pleasant for everybody and 2) probably increase your chances of success anyway!
If you are glum that your pitch doesn’t seem to be resonating, and give me a soft guilt trip about how dare I not get excited immediately about your startup, the chance I’ll think back favorably is low. But I have had a few times when the idea didn’t quite gel with me at first but on reflection I thought back, remember that energetic young founder doing the GenZ face cream, maybe that idea does make sense after all, and in fact she was really amazing, wasn’t she. (And then I funded her!)
Tip #7: If it’s not a match, ask me something useful.
No matter how wide an angel investor’s interests may be — and mine are pretty wide from cancer to cashmere to K-Pop — every investor has some “keep outs” or dead zones. For me one of these happens to be cannabis. It’s not due to any ethical or moral high-ground posturing, it’s just that I’m not interested in funding companies in this area. Same goes for flying cars (really). I’ve heard too many pitches, they require too much money, and I just don’t think I can play there effectively as an angel. And a few other areas where I’ve either invested and failed or think it’s just too much of a dogfight or merely not interested.
If you hit an angel’s dead zone, it doesn’t matter that you have $2M in sales at 80% margin, or that you have four patents on a new hydroponic, or that your VTOL is 30% more fuel-efficient as the other guys, or that you hired the ex-CEO of whatever to run your bizdev. I’m just not going to fund you. (Actually, if you have $2M in sales at 80% margin you’ll probably shun angel money anyway!)
So, when you pick up on this information (and see tip #1 for how you pick up on it), try to use the remaining time to your advantage. What else can you talk about for a couple minutes?
Well, for one, angels are founder advocates. We’re on your side. Really. At least a lot more than most VCs. We do this whole endeavor of risky, crazy, angel investing precisely because we love your enthusiasm and passion, and even if you are in one of our dead zones we’re vulnerable to the same need for validation as any other human and will gladly give you advice from our experience if you simply ask. (And know that like any other human, we will overplay the relevance of our experience to your situation.)
Second, we’re disinterested parties and — to some extent — our judgement of you is of zero value to you because you have nothing at stake. What I mean is, if you’ve learned that you’re in one of our dead zones, there is no longer a need to try to impress us. This is a break! You can turn off the sales mode. It’s a unique chance to get some 100% honest feedback for your own benefit.
What topics might you ask? We probably have time for only one or two, so the more specific to your situation, the better.
What do you think is the weakest part of my pitch?
Give me one thing to improve on in my communication style.
For angels who fund this area, do you think I’m fundable? (This is a bold question but the answer might be quite illuminating if you are gutsy enough to ask it, and to listen honestly to the answer.)
Given my $12K MRR, growing 15% MoM, do you think I can raise at $6M cap? Does that sound high to you, low to you?
Someone proposed funding me with weird string X attached (revenue share, payback clauses, interest, IP rights). Do you think that would be worth it?
Do you recommend I go through an accelerator? What about this one?
Do you know any other angels that might be interested? Or VCs for my next round?
I’ve raised from my Dad and two friends, they just wrote me checks. How should I clean that up to prepare for an outside investor?
I have 12% unspent option pool, how much do you think I should give to this amazing almost-cofounder person that I want to bring on as my CTO?
I’m still running this as an LLC. Should I incorpoate? (Yes! for QSBS, for one reason)
What LTV/CAC ratio do you support for growth against profits?
etc etc the list is pretty long
Tip #8: Be familiar with financing stages.
Opinions vary and the dollar amounts drift over time, but today the terms mean something close to this:
Pre-seed: Almost always pre-revenue and often even pre-product idea stage, raising anything from $50k to something under $1M on a valuation that can range widely but always above a floor (my own theory, haven’t heard others say this) by the opportunity cost of the founders salaries times four years vesting. In the SF bay area this might be $2–6M valuation; in other parts of the country it might be $1–4M. This is almost always friends, family, and angels; rarely will a VC play here unless it’s some special scouting deal.
Seed: Raising $1–2M, maybe even 3M these days, on valuations ranging from $5–12M in SF bay area or $3–8M elsewhere. This will always be with an existing MVP (minimum viable product) and usually at least some proof of revenue of $XXk ARR or creeping up into $XXXk ARR. Angels and super-angels can play here, as well as many seed VCs that can lead these rounds, usually arguing for a priced round but sometimes writing a SAFE.
Series A: This has inflated over the years to now mean a pretty serious raise requiring something like $1M ARR (annual recurring revenue) for deeper-tech B2B companies up to perhaps $6M revenue for lower-multiple DTC companies, with companies in other markets such as hospitality or construction tech in between these ranges. Tony Lewis of Aumni has the latest figures from real transaction data: he says the median Series A today in Q2 of 2021 is a $9M raise on $26M premoney, and that valuation differences seen by geo — Silicon Valley vs. Boston vs. NYC vs. LA vs. SLC — shrink as the raise grows, because traction and even public-market-style revenue multiples start to apply and it’s less about the dream. (Do people in SF area dream bigger? Or is it just the comps?)
Tip #9: Be familiar with financing vehicles.
These are the main ways startups are funded in the US:
Common stock. Used almost exclusively for founders and maybe some really close friends and family, with options out of the common stock pool for employees. Very few or no investors in the SF bay area would purchase common stock for invested $, but it is more common overseas, I’m learning.
SAFE note (Simple Agreement for Future Equity). In the SF bay area and a few other major areas in the country this is the dominant form. It’s founder favorable compared to a convert note. All the recent YC companies and a few other newish startups will use the post-money form which offers some advantages to investors, but many others still ask for the “old” (pre-2018) pre-money form. The difference in the math isn’t that big, actually: investors think the post-money works better for them which it does by including other SAFE notes in “the denominator” of the SAFE price math (dilution protection against concurrent SAFEs) but it also excludes the stock option pool which works in the founders’ favor to partly compensate. There’s a lot on the web on this to research if you care enough.
Convertible note. A lot of more “VC-minded” smaller investors will only use this vehicle and refuse SAFE notes out of principle. Plus it’s popular in more investor-favorable regions of the country such as Colorado. One tip for founders: don’t use a short term like 18 or even 24 months. Time goes by fast and schedules slip and you can get yourself boxed in giving an uncooperative investor the right to bankrupt you by demanding repayment exactly at that time when you don’t have the cash to do it (it happens — it’s happened to me twice). Try to get a longer term to the note.
Other types of notes (500 startup’s KISS note, other custom equity-ish notes). These are less common but are out there, especially as you get away from the major funding hubs like SF, Boston, NYC, or with some of the accelerators that let their lawyers get a little too carried away IMO. YMMV, just have your lawyer review it and it’s probably okay if it gets you the money in the bank. But do be careful of onerous dilution protection agreements, specifically “post-money % ownership” terms that have even more teeth than YC’s “post-money” (in the YC case “post-money” refers to all the money up to but not including the money raised in the next round, but some of these custom notes have provisions guaranteeing XX% ownership of the company including or “post” of what you raise next, which I think is unfair to the founder and counter-productive to their incentives to raise a big next round).
Priced round. Seed VCs will usually prefer or even insist on this. The lead investor, usually a VC, hires the investor counsel, which you will always pay for out of the raise proceeds after close. NVCA standard “seed” docs are often used today (for something like 50 pages instead of 120), but you still have some holdover from earlier days when different types like Wilson Sonsini’s standard docs or a few others are used. There isn’t any reason to use anything other than NVCA seed docs today, in my opinion, it saves lawyering costs for both investor and company and provides all the benefits of the Preferred Stock ownership for the investor. All the stuff like SEC registration rights will (usually) be reworked anyway in later priced rounds so there isn’t a lot of benefit papering all of that now.
MFNs: most savvy investors if they are prudent will ask for an MFN (“most favored nation”) clause to be added to SAFE or convert note. It simply says that if you offer sweeter terms to the next investor in line chronologically after you, that the investor can opt for what they feel (their decision) is the better of the terms. I ask for it if I remember — sometimes if the deal is hot and the cap low I will skip it — and encourage founders to offer it to all. It’s not win-win, but it’s more like win-neutral.
In the priced round that follows, all terms get exposed in excruciating detail in spreadsheets for everybody to see and you can get some bad blood if note holders find out that they were the sucker at the table. If you close one note fast with friendly money but then find you need to raise further money at a lower cap or higher discount than the very first SAFE, it’s better to just lower the terms for everyone and get your raise done than jeapordize the business by not raising enough capital. Plus, it’s the right thing to do to someone who was there for you first.
Tip #10: Don’t tell me you’re tired!
Speed pitch events can be exhausting, for funders too but especially for founders. Maintaining a high level of energy and enthusiasim is critical, in the way you signal to the investor both in your words and actions.
A specific trigger for angels is founders that they’ve invested in who have given up when times get tough and not done what they can to try to return at least part of the money to their investors. There are many shades of gray in different exit situations, but the degree to which founders work hard in both good exits and not-so-good exits is significant to the “down-side” financial outcome for the investor. These don’t matter as much statistically as the wins, but it’s still part of the return math.
I’ve had some founders sign up for two-year acquihire deals that were not desirable to them just so that they could return 80% of the investor’s money out of principle and pride for doing the right thing (sometimes this can also be personal or team pride in seeing their code ship); versus other founders who just walked away leaving nothing, and sometimes a pile of debt too. I am sensitive to trying to predict which category of founder you are. Any signals that you are too-easily willing to stop putting in the effort are noticed by me in making this prediction.
It’s like you’ve signed up to run a 5k at the Invitational Meet, and you are complaining during the 12x400m workout three months prior about how much work it is and how tired you are, it’s not a good sign you will do well at the meet! That’s the signal the investors are looking for in order to give you money— total, borderline irrational commitment and endless energy to give your idea at every stage of your journey. It’s a lot to ask but that’s the game you have signed up to play!
Bonus Tip: You can ask about us.
I think when you sit to talk to an investor, your key questions are 1) are they interested in funding me, and 2) what size check do they write.
I think it’s fair to ask about check size, and you should learn what the likely range might be so that you can plan your raise, but for the sake of politeness I wouldn’t make it the very first thing you blurt out when you sit down. It’s a little personal for many angels, who aren’t as blunt as VCs are when they brag about the tens of millions of dollars in their fourth fund. It’s a little like HBO Silicon Valley asking how many zeroes your bank account has in it.
But I think if you can squeeze it in, towards the end of the 3 minutes you can try to phrase it gracefully, perhaps as, “If GizmoOnline is a match for you, what would be the general range of your check size?” and see what reaction you get.
A majority of classic angels are in the $25k-$50k range. I don’t think you should entertain down to $10k unless there is some special circumstance. It’s too hard to manage the few hundred thousand dollars that you’ll need for virtually any project by putting together chunks that small. Some angels can get to $100–200k and then you are in superangel territory or small seed VC funds when you get higher than that.
Best regards,
Glen Anderson