#44 Angelinvesting.it - From idea to Series A - Weekly Newsletter
Angel's Notes
I see a lot of mediocre pitch decks. Often the effort is there, but what's missing is an understanding of the task a pre-seed pitch must accomplish.
The pitch is there to answer 3 questions, not 4 or 2:
What do you want to build?
Why now?
Why you?
For investors who are not at their first rodeo, it often happens to see decks with ideas already seen, sometimes identical, sometimes very similar. Nothing wrong with that, there's no prize for originality in this business. Original or not, a pitch that answers the 3 questions well, wins.
What you want to build. The setup is universally understood. It starts with a good articulation of a problem that affects someone and arrives at a possible solution. As a general rule, talk is cheap; if founders show a demo or some sort of traction, it's better.
Why now is particularly interesting. Technological changes, shifts in customer perception, special events. Ideas are not in Plato's hyperuranium. They are here and now. They confront the reality of the world, the market. Maybe to my demerit, I've seen very few decks in my life with a really convincing answer to the question why now.
Last but not least; why you? A business angel, in my way of conceiving investment, is not betting on an idea, but on a team of people. To invest or not to invest, in the end, is a decision about the team proposing the idea.
2 Resources to pro
1. How to evaluate a team from a call or just a bit more?
For an angel, time is often as scarce a resource as that of the entrepreneur on the other side. Understanding from a few meetings who to bet on is objectively a gamble made of intellect (little) and gut (a lot).
Over time, I have found some tricks to simplify my process of evaluating the team:
How you do anything is how you do everything. So, how I am approached, the quality of the deck, the iteration, the discipline in the follow-ons, all become elements/signals to evaluate the entrepreneur.
Honesty in feedback. I love being direct with entrepreneurs. If I don't believe in something they are telling me, I communicate it straight away. This direct approach, sometimes is liked, sometimes less so. When it is embraced and not taken as an attack, it opens the door to conversations that get to the heart of the matter.
I add value to entrepreneurs to cool down the decision-making process. To the very few projects that convince me, I make 2-3 targeted introductions to other potential angels or VCs. Sometimes even to potential customers. I use their opinion as another element of the decision-making process.
2. My tactic to reduce the risk by another magnitude
I estimate that out of every 10 who contact me, I make calls with 2 or 3. For every 40 to 50 meetings, I make one investment.
So far, I believe my approach is average. The uniqueness of my investment process emerges later. When I decide to invest in pre-seed, I aim to contribute the smallest ticket possible while offering as much time as I can.
This involves weekly calls, introductions, access to CRM, and whatever else is useful. These continuous touchpoints solidify the relationship. The entrepreneurs get to know me, and I get a deeper understanding of them.
This in-depth understanding of the person and the business puts me in a good position when evaluating the seed round. Typically, half of my pre-seed investments progress to the seed stage. If I'm convinced, I tend to significantly increase my stake. Then, when 1 out of those 10 reaches Series A, I defend my pro-rata rights tooth and nail.
It seems like a smart approach to me, but, to be honest, my investment portfolio doesn't yet agree.
1 Reason to be happy
This week, too, many VC deals in the world of AI are following this smart strategy: "generative AI is always generating new ideas, not any revenues”
Have a great weekend,
Simone
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