“I cannot teach anybody anything. I can only make them think,” said the ancient Greek philosopher Socrates.
Volker Hüther, Managing Member of Global Bridge LLC and Vice President at Tech Coast Angels, believes Socrates was right. As a business leader and investor, he has a strong track record of building, leading, and advising corporations for over 30 years, using an ‘agnostic’ approach to analyze early-stage companies with potential.
In many instances, whether or not an angel signs the dotted line depends on their background and subject matter expertise. Volker’s Socratic frame of reference steps beyond these boundaries—asking questions rather than generating all the answers. It's also a philosophy that leads him to invest outside his comfort zone.
So, what is the angel investor’s perspective on ‘The Pitch’? How can founders make a significant first impression and possibly chart the beginning of a long, trusting partnership?
The Mission Critical
“Have you ever seen an investor write a check after a presentation? I have not,” says Volker.
The purpose of The Pitch is not to sell your product or service. It is to generate enough interest and initiate a relationship with investors who would then want to discuss things in detail at a later stage. Because of time constraints, the nuances involved in a deal cannot be explored at this point.
The founder should be able to recognize and seek what fits the company and its current needs. Are the investors being pursued because they are industry experts or because they have a sought-after network? Are they simply a financial resource? Questions like these are vital because angel investing is a long-term relationship where chemistry, trust, and added value are crucial.
Knowing one’s audience is probably a foundational aphorism. It naturally applies to The Pitch. For example, if there's a technical expert among the investors, a life sciences founder might delve deeper into the technical aspects. But if the audience lacks expertise, simplicity is key—following the KISS philosophy: Keep It Simple, Stupid.
Volker advises against reading slides verbatim or overwhelming them with information. Stick to the most relevant points. The 'Problem' section should be concise, not overly detailed.
Right Product and Market Fit
When it's time for the ‘Solution’ slide, offer clear insights about the uniqueness of the product and how it solves the stated problem. Volker reminds us that the purpose of The Pitch is not to sell the product but to generate interest. An efficient guideline for realizing this aim is talking to investors about the
- Business opportunity of investing early
- Potential rewards
At this stage of the presentation, investors would want to know about the company’s moat and why their product is faster, cheaper, or better. Any IPs, sales leads, details on market size, and opportunities/challenges need to be shown. Knowing your TAM, SAM, and SOM helps. However, inflated numbers are a huge no-no. These might escape scrutiny during The Pitch but are bound to surface in due diligence reports.
Once the founder establishes that their product is worth the investors’ attention, the question of getting it to the market needs to be answered. Any barriers the company faces must be discussed during the pitch; these may refer to regulatory hurdles or other issues.
Moving on to the ‘Competition’ slide, a smart analysis of other fish in the pond adds context to the company’s business plan. Investors want to know if the founder’s product can be replicated by a larger entity with more muscle. Naturally, entrepreneurs need to (and do) talk about market share. However, an insight into industry giants and their potential reaction to a new competitor is also helpful.
Talking Money and The Team
The ‘Financials’ section is Volker’s personal favourite. As he explains, “It must align with the rest of the pitch.”
Bringing up 3 to 5-year forecasts and up-to-date actuals is recommended, but more importantly, the figures have to be supported by valid reasoning and assumptions. The numbers must be realistic. Some investors are even picky about investor salaries!
Valuations are a sticky subject and there may be multiple ways to arrive at any given figure. However, relying on experts can always make a difference. As Volker advises, “Numbers are critical. Invest in a temporary, interim, or fractional CFO. It can help you professionalize that part of the presentation.”
Building the right team is crucial to understanding and executing the founder’s vision. The Team is a significant part of a company’s credibility. When you’re pitching, mention your core members and what makes them tick, but in brief. Volker suggests being honest about any deficiencies or missing links in the team or board—in fact, these could even be filled by investors or subject experts.
The all-important ‘Deal’ is a topic that investors probably understand much better than the entrepreneur. Here, founders need to state their ask clearly: whether it is convertible notes, equity, or SAFEs. The timing of filing the round and details on lead investor/s need to be discussed. The exit plan is crucial. Show the investors where the money is! Is the exit through an IPO or acquisition? And how much does the company hope to get?
“Understanding the question is half the answer,” says Volker. It helps to remember this when it's time for the dreaded Q&A. The entrepreneur should remain mindful of the allotted time and remain as succinct and precise as possible. If the answer evades them, “Do not invent, just guess.”
The Pitch is a potential launchpad for the founder. It needs to be treated as an IPO event. However, its purpose, or ‘mission critical’, is to solicit interest and scatter the seeds for a new relationship. If, in the very first encounter, a founder builds trust, proposes value, offers fair deal terms, and validates the assumptions behind their forecasts, they might just have nailed it.
About the Speaker
Volker Hüther, a trilingual German, has spent much of his life growing up and traveling between three continents. With a passion that transcends numbers, Volker strives for improvement in any situation. With over thirty years of experience in enterprises ranging from Startups to Fortune 500 advise a broad spectrum of businesses. He is fluent in German, Spanish and English. Having lived in Germany, Switzerland, Brazil, Mexico, and the United States and traveled multiple times throughout Asia, Volker is well-familiarized with the cultural differences in international business and regional customs and traditions.
To watch Volker’s entire keynote, visit this link on Keiretsu Forum TV: https://keiretsuforum.tv/lessons-for-technology-entrepreneurs-looking-to-raise-capital/