Understanding the unique motivations and experiences of angel investors is crucial for entrepreneurs looking to secure funding. Angel investing involves not only financial support but also a passion for working with early-stage founders despite the risks involved.

When pitching to angel investors, it is essential to deliver concise and engaging presentations. One of the common mistakes entrepreneurs make is failing to prepare adequately and not understanding their audience, which can significantly undermine their chances of securing funding.

What is a startup pitch?

A startup pitch is a short presentation of a business idea or company to potential investors. The goal is to convince the audience of the value of the startup and get them interested in investing in it. One of the biggest mistakes entrepreneurs make during the pitching process is a lack of preparation and misalignment with investor interests.

A successful pitch combines clarity, conciseness, and a vision that helps to understand the startup’s potential. However, the pitching process can not only convince investors to back you, but it can also kill the opportunity. And it’s not just about how clearly the founder speaks, but also about some mistakes he or she may make, or has already made.

Competitors

In a slide about competitors, the first thing you should not do is ignore the competition. Startups like to talk about the uniqueness of their product and the absence of any competitors, which is impossible. This is not the way to do it. Investors may think you haven’t researched the market or don’t understand how to evaluate it. Even if your idea is new, there will be competition in the form of alternative solutions.

The startup team may also misclassify some companies or products as direct competitors when they offer completely different solutions or operate in a different market. This shows a superficial approach to competitive analysis and can reduce the credibility of your strategy.

A startup may also underestimate competitors’ strengths, for example by describing them as weak without considering their real capabilities. This is a dangerous phenomenon. It can lead to investors knowing more about the market than you do.

You should not use generalisations that do not clearly state the benefits of your product. For example, abstract ‘better service’ or ‘more features’. Comparisons should be specific and highlight unique advantages.

You should also avoid being overconfident. This can give investors the impression that you are not being objective or that you do not understand the market.

Finally, a lack of clear positioning, where a startup fails to show how its product is different from its competitors and where it fits into the market. Without a clear positioning, you cannot convince investors that your startup has a sustainable competitive advantage.

Cap Table

The Cap Table is literally a spreadsheet that shows the ownership structure of a company: who the shareholders are and how much each shareholder owns. Understanding the Cap Table is crucial, and incorporating well-thought-out financial projections can further enhance investor confidence by demonstrating a solid grasp of the company's financials and growth plans. Here are the main problems that can arise:

• An opaque or unclear ownership structure. This makes it difficult for investors to understand who controls the company and how shares are distributed;
• Excessive dilution of the founders’ stake. In the early stages, founders should own at least 50 per cent of the company. If the percentage is lower, VCs may question the founders’ ability to continue to run the company effectively;
• Complex or non-standard shareholder terms. If the cap table includes shareholders with different rights, terms, or preferences (e.g. preference shares), it may be difficult to attract new investors;
• Many small investors. If the cap table contains numerous investors with small stakes, it may complicate decision-making by requiring approval from many parties.

Focus on the solution, not the problem

Pitching shouldn’t focus too much on features, technology or product design, because these things don’t explain what specific problem the startup is solving for users or the business. Instead, the focus should be specifically on the needs of potential customers. Without a clear definition of the difficulty, it’s tough to assess the viability and potential of the product.

A clear and simple business model is crucial in conveying how the startup will generate revenue, addressing investor concerns, and showcasing the value proposition.

Startup founders should also take the time to think about scaling. A product that doesn’t solve an acute and widespread problem may have a limited market.

Another issue is the lack of emotional connection. Don’t make your product presentation too technical or dry. An emotional connection is important to capture the interest of both investors and users.

Insisting on signing an NDA

Insisting on signing an NDA (Non-Disclosure Agreement) is an unconventional practice and can cause complications when pitching and raising investment.

First, it shows that the founders are inexperienced. Investors will not bother to sign an NDA before pitching because it is not a necessary practice at this stage.

Secondly, signing an NDA complicates the investment process. Insisting on an NDA can create additional barriers, slowing down the discussion process and making it less comfortable for investors.

Third, trust and transparency. By requiring an NDA, the startup shows that it does not trust the investor and fears that its ideas will be stolen. At the same time, in the case of raising investment, it will have to learn to trust the VC as a full partner, so an NDA will be a bad first step in such a relationship.

Additionally, being prepared to answer tough questions during investor presentations is crucial. This not only builds credibility but also demonstrates the ability to think critically under pressure.

Excessive focus on awards

Sometimes founders pay particular attention to awards when pitching. This is understandable, as each one seems to add weight and recognition. The media, for example, love to write about awards. Clients also look at them. Investors, however, are more complicated. They are investing money, so they want to see traction and a product that users want, not a shelf of prizes.

Many startups fail due to a lack of sufficient funding, making it crucial to focus on product relevance to attract investors.

Pitching can lose focus on the business because of intrusive stories about awards. Investors might be under-informed, which means their conclusions about the company could be flawed.

Another problem is that awards don’t always correlate with a company’s success. Investors may get the impression that the founders are more focused on touring than on the business.

Focusing on this point can also raise suspicions that it is a way for founders to avoid talking about product relevance and business features.

Pitch deck design and structure

The design of the presentation is another important part of the pitch. Mistakes can ruin the impression of even the best product. A well-structured pitch deck is essential in capturing the interest of potential investors. Let’s look at them in detail:

• Overloading slides with text. Too much text on the slides distracts attention and makes it difficult to absorb the information. The best option would be short theses, key phrases and visual elements (infographics, diagrams). The rest can be narrated by the presenter;
• Uneven structure and order of slides can also be confusing and even annoying. For example, if the speaker keeps ‘jumping’ between different topics;
• Inconsistent design. Using different fonts, colours, and styles on different slides gives the impression of sloppy or unprofessional work;
• Excessive graphics and visuals. Using poor quality images, too many graphics or inappropriate animations overloads the presentation.

The wrong angel investors

When pitching, it’s not just what you present, but who you present it to. Even if you have the perfect presentation and a great speaker, it won’t help if you don’t have the right investor.

Targeting the wrong investors can lead to significant challenges and mistakes. It's crucial to ensure alignment between the entrepreneur's vision and the investors' interests to avoid common pitfalls such as overselling or including irrelevant information.

Firstly, a startup needs to choose an investor who specialises in the relevant industry. For example, there is no point in pitching a car-sharing product to a health-tech investor.

Secondly, the startup needs to pick an investor who invests at the right stage. If you are looking for pre-seed or seed investment, there is no point in going to a fund that invests in Series A.

Also, think about potential conflicts of interest. An investor may have a stake in a startup’s competitor. In that case, they are likely to turn you down.

Understanding the investment criteria of angel investors is crucial to tailor pitches effectively. Researching the interests and past investments of angel networks can help align your proposals with what the investors are looking for, thereby increasing the chances of securing funding.

Why now?

This is a question investors often look for an answer to during a pitch. It relates to the relevance and timeliness of your product or solution. The answer should convince investors that now is the best time to back your startup. Additionally, having a clear exit strategy is crucial to attracting angel investors, as it ensures they can recover their investments through share sales or profit distributions. Here’s what can signal this:

• Market trends. If there are new trends that open up opportunities for your product, that’s a strong argument. For example, growing interest in artificial intelligence, green technology or changing consumer habits;
• A technological breakthrough that enables solutions that were previously impossible. For example, new computing techniques or the availability of more powerful hardware;
• Changes in the regulatory environment. New laws or standards can create favourable conditions for a startup in areas that were previously inaccessible;
• Social or economic changes. For example, a shift to teleworking, and increased interest in health or environmental responsibility.

Calls instead of emails

Communication is the key to raising investment. Sometimes it’s not just about a quality presentation, but also about the choice of channels to contact the investor. Let’s start with the main point: a phone call is hardly the worst choice.

Investors are likely to have busy schedules. Your call will be untimely, and there is usually no second attempt. When a busy investor picks up the phone and hears a pitch from someone they don’t know, the urge to block the number is strong.

In addition, the information may be presented messy during the phone call and some important details may be left out altogether. In writing, you can make your case clearly and present facts.

Also, if you have communicated in writing before the pitch, you can always go back to that correspondence: add details, give updates and so on. With phone calls, you lose this opportunity.

Poor English

One of the most obvious mistakes Ukrainian (and not only) founders make is their knowledge of English. Any product or presentation can be destroyed by trivial spelling mistakes and typos.

Without a grasp of the language, it is difficult to understand the context and make an emotional connection. Therefore, the funder with the best rhetoric and knowledge of English should speak.

English also gives you access to investors in global markets. This is key to the development of a startup, which in principle should grow into an international company.