As an active angel investor, I attend a lot of startup pitching events. These are organised by angel networks; incubators; and accelerators, and they allow a bunch of founders to present to a group of investors so that they can convince them to give them money.
These events are useful, for both funders and founders. They allow investors to look the founder in the eye, so we can ask him questions and see how well he answers them. Since this is done on a many-to- many basis, it’s quite cost-effective and efficient because investors get to evaluate lots of founders at one time.
These events allow investors to learn from each other as well. Thus, one investor may have a lot of domain expertise, and he may ask lots of probing, thoughtful intelligent questions which you may not have thought of. Also, if a charismatic lead investor decides to fund the company, a lot of the other investors will follow his lead as well.
It’s very useful for founders as well. They get to pitch to a group of investors at one time, which helps them to reduce the time and energy they need to invest in raising funds. They may also get asked some very smart, insightful questions by some of the investors, which may help them to improve their business plan or to pivot. This is all for the best because it stops them from pursuing paths which have a low probability of success.
Too Much In Too Little Time
However, a major criticism I have of all these pitch events is that they try to do too much in too little time. In the few minutes which are allotted to each founder, he is supposed to talk about the history of his company; what they’ve achieved; what their future plans are; how much money they want to raise; and what they’re going to do with the money. Quite frankly, after listening to two or three pitches, the investor’s brain gets fried, and all the pitches start blurring into one another. You can’t remember any of the finer points, and when you start getting bored, you stop paying attention to the pitch. This is not fair on anyone.
I think we need to improve the format. The reality is that no investor is ever going to sign a cheque because he is blown away by a persuasive, well-crafted pitch. All the investor will do at the end of an interesting presentation is say – Hmm – this sounds interesting – I want to find out more.
This is a good outcome and all a pitch should be designed to do is to encourage potential investors to reach out and ask for more detail, so that they can do a deeper dive.
Outcome Is Binary
The outcome of these pitch events is binary – either the investor is interested in a particular startup, or he is not – that’s it. This is all the investor should be asked – would you like to find out more about this company? This will help to sharpen the focus for everyone attending the event.
Most importantly, it will remind founders that all they can do in the few minutes which they have is to tell a convincing, persuasive story. This should be designed to be emotionally appealing so that the investor wants to find out more about what you want to do. Realistically, that’s all anyone can possibly accomplish in the ten minutes which are assigned to you. This would be a far more productive use of everyone’s time; and after the pitches are over when energy levels are still high, the organisers can set up tables for each startup, so that investors who are interested in a particular founder can get together and ask him questions.
What about all the technical details about the product, the market, the financial projections? Yes, all this remains critically important, but this is best shared before the pitch. It can also be circulated after the event so that investors who are interested can study a more detailed deck at their own convenience.
The whole point of the pitch event should be to facilitate speed dating between investors and entrepreneurs. Putting a gun to the investor’s head and asking him to commit to signing a cheque at the end of the event is not a sensible way of raising funds – this usually ends badly.
A good pitching event will allow founders to spark the curiosity of many investors so that they will want to engage with him further on a one-on-one basi because his persuasive pitch has piqued their interest. This respects the natural process of how most angels invest – we evaluate the pitch, and if it seems interesting, we will then allocate time and energy into doing a deep dive to see if the startup fits our sweet spot.
[This post by Dr. Aniruddha Malpani first appeared on LinkedIn and has been reproduced with permission.]