What do I do? I mostly crush dreams, and sometimes throw a bit of my own money in to go down with the ship. I am an angel investor in Vermont, and this is part of the story.
Someone has a seed of an idea. That person talks to a friend or a colleague about it. Together they sketch out a more complete vision of the project, product, or program. Its all pro right now, except for the most part the team is made of amateurs.
They put together something, a pitch deck or a pilot program. They begin testing and iterating. So It is better and more clear than it was before. Also more clear? Their needs. Time, advice, equipment, space CASH. These are the early days. Days of possibilities.
So these two take the idea into the world to get feedback and support. This is casual. They talk to friends and family, build out a prototype, and carry it or images of it around with them. If they live in Vermont they might get to the point where they take it to a non profit who helps incubate business ideas, or the economic development office, or our friendly accessible local venture firm. Or just a friend of a friend of mine. If, like most emerging enterprises, you have an incomplete team, an underdeveloped marketing scheme, a smaller than necessary distribution funnel, or are not in fact poised to immediately make money, they get sent to me.
I am a VERY common first or second step in this area. I have hosted hundreds of pitch meetings. Although hosted makes it sound as if I have planned them. This is rarely the case. Usually I am the crochety guest. You would imagine that by now I have a format that I follow, or even another person in the room, but it is usually just me. At my conference table, my dining table, a restaurant table. So the table is a constant.
These people are new at this. Maybe even new to one another. They don’t know what to expect from me, except someone told them to meet me, and now they are meeting with me. At a table some where.
So here we are. I am early, because I can’t not be early. To their credit they are usually early also. I say hello, ask them how they found me (who I should plotting my revenge on.) It is almost always someone more formal and organized, like a VC firm, who punted to me because these folks are no where near venture ready. So after I have my target I tell them I won’t give them money. Just to save them time on the pitch. They laugh. I am probably not kidding, but we go ahead with the pitch anyways. By saying this I am hoping both to help them relax and decrease the chances I will write a check purely out of a sympathetic urge. Sometimes they say they are only looking for advice and then I know they are lying, except in the case of that one guy who seems to genuinely take pride in how many times we have met without me giving him money and in the end his weird reverse psychology is working and I am shoving a check at him.)
Now I tell them that I am completely unqualified to provide any help. I remind them that I have between 4-10 failed businesses to my name depending on how you count, so their best move might just be to disregard everything I say. So far no one has left so I try again, telling them that I will likely be mean at the meeting. The more of these I do the meaner I get. I do try to be funny mean instead of just mean mean, but that is probably in the ears of the beholder.
They have a pitch deck. What is a pitch deck? Well ideally it is a simple explanation of the background of the team, the problem they will be solving, the program or product that will solve it, what the competitive landscape is, what differentiates them from the competition, how they will build and test the thing, how they will identify their audience and turn them into customers and how the money that they bring in from their customers will be more than the money they are spending. And how that money will grown and be scalable.
Easy enough, right? But it requires a fair amount of extrapolation (or bullshit) because some amount of this has not been done or they wouldn’t be in a room with me.
If they are designers the deck itself is the project and it looks great. Lately that means clean and white. If they are product people the idea is good, it probably has a name, but they likely have fundamental confusion between a product and a business . The branders know their audience, have a tagline, and usually an excellent logo. The solution folks have the “competitive landscape” and “minimal viable product” portions of the pitch nailed with fewer and fewer details as things progress. The biz guys always have huge and deep theoreticals which are too small to read from the chair. And almost always green with plenty of acronyms.
What do all of the pitches have in common? Totally unrealistic expense numbers (if they have expenses enumerated at all), the fact that they used “conservative estimates” (of the 80 billion moms on planet earth only .1% need to use our product for us to become quadrillionaires (which means I guess that the .1% is the conservative number), and the fact that they used too little orange.
That is a tip I give freely. Use more orange. People like orange.
What else might be wrong? They may have poured too much of their time and capital into it or too little. Both tricky. Too much and there is usually a sort of “you owe it to me to fund this” vibe. Which doesn’t work well for me. Too little and it is clearly how easy it will be for them to walk away unscathed. If I am going to take a risk on them they need to be taking a risk as well.
They often have the wrong ask in mind. For non profits they can look back at past gifts and know how to target their ask. With angels it is tough to know. Even if we are registered on angel list the amount of the gift is not listed. I have given between $1,000 and $150,000 in individual checks to other people’s ventures. So asking me for $500 may feel like a slam dunk but it is really a waste of time. Anyone who asks me for $500,000 is way off. Anyone who asks a VC firm for $100,000 is way off in the other direction. If you are asking for that little their return will be proportionately small. That is an even bigger waste of time.
The most interesting to me is the group who finishes their pitch deck and then doesn’t pitch. Ideally you will go through the deck and then ask me for feedback on the product, the roll out, something. Ask if I agree with your target audience? If I tell you (and I will) that I care about how this exact idea is going to get money back into vermont focus on that. But be careful…you need to be that most elusive thing…sustainable, and if you are reinvesting too much in the community you are not maximizing your chance to succeed. Says the pot to the kettle.
So I’ve interjected enough now so you’ve taken my temperature, adjusted things to sound a little more earthy crunchy than you would for a banker. You can tell I am not big on systems, so you emphasize how things will be nimble and responsive (for that banker you’d want to highlight checks and balances without redundancies) you need to show me you know your audience for the pitch to convince me you will know your audience for your business.
If you have any inside connections, a partnership with an established company, a media economy of scale, you should have those in there. Whatever makes you not just the idea guy is good.
Years ago my friend told me that he values the idea part of the company at 10%, it seemed low to me. We met for lunch again recently and re-evaluated. The idea is worth 2%. At most. A crappy idea with a streamlined build out and some sort of connection for distribution is much more likely to succeed than the best idea in the world that my eight year old has.
So now you do the ask. Its the hardest part. What are you looking for overall? And from me? What will this first in investment allow you to do? What is there that ONLY cash allows. No in kind, no sweat equity, no college roomate coding late at night.
1. I give you what you ask for. Try not to look surprised. That makes all of us look like assholes.
2. I give you more than you ask for. Don’t say no. That makes me look like an asshole.
3. I give you less than you ask for with a specific direction. I want you to use this money to pay this professional person to investigate the legalities of x, write code for the mvp on such and such a platform, run a split test on your name idea v. my name idea.
4. I give you nothing.
This is when its good to have a fall back. I’ve said no to giving you money before we started. That should take the sting out of the second no. But what else can I do for you? Even though I have sat at this (these?) table(s) many many times I still want to feel helpful. I want to be an insider and a part of the start up team. I imagine I am not the only angel that feels this way. So what else do you need? Conference space? Introductions? Advice on a first media buy? I agree that cash is like oxygen and you should NEVER dilute your ask with these other possibilities until the money answer is a no.
Then try to keep me on the hook.
Maybe I will write you a check the next time.
Just don’t call me about it.