How to deliver a great pitch to angel investors

So last night,* Nick and I pitched our start-up, lifetise.com, to a group of angel investors.

Cue the montage

For those who last tuned in when we were working on Be Neighbourly, I feel that we need a montage to explain what’s happened in the past year. So here goes…

Being neighbourly didn’t work. People in London want to be neighbourly only conceptually. Not in real life. Not if that means talking to strangers. Especially strangers who know where you live.

Flash forward.

One idea to create an app for us normal people who don’t have assets, to help us figure out how to afford our lives. A retro eureka moment when we remembered the Game of Life (“be a winner with the game of life”). A decision to create a Sims-style game for your real life, that shows you how to manage your money and plan for the future.

Flash forward.

Find a games studio to build the game. Get excited that people are interested, then sad that we don’t have the cash to build. Apply for government funding (free money). Miss out by a score 2% lower than the qualifying standard. Re-apply with confidence, having totally nailed the responses to their feedback. Get rejected again because the government thinks it’s fine to get a whole different bunch of people to review the application, who give totally different scores. Fuckers. Lose the games studio to other, paying projects.

Flash forward.

Find another games studio. Try to pitch the concept to investors. Working on the assumption that raising £250k shouldn’t be too hard in London. Get investor interest but no moolah (no MVP no money).

Flash forward.

Find games industry legend who wants in and has a development partner who can build an MVP for £35k. Freak out about spending life savings on a punt. Do it anyway. Interview loads of 20 – 30 somethings about how shit their lives are. Hustle the hell out of anyone who’ll listen (and plenty who don’t) about how amazing our product is. Get on the radar of some angel investing groups. Go to more FinTech events than any one person should have to and network like a duracell bunny.

Flash forward.

Read too many blog posts on how to create the perfect pitch deck. Lose all cognitive function. Create pitch deck (many, many versions), business plan (many, many versions), grapple with a growth model and revenue forecasts, P&L and cash-flow projections for a business that does not exist and has no revenue. Do pop-quiz-style valuation calculations. Google everything to find somebody smarter who’s already thought these things through. Do that.

Flash forward.

Apply for angel pitch events. Create endless, awful, poorly-lit grainy videos introducing ourselves to the selection panel. Do 83 retakes before saying fuck-it, you can only see half my face, but that will have to do. Get through the selection process for FinTech Circle. Do celebratory chest bump. Then remember that we still don’t have a product to show on the night.

Flash forward.

Scream at developer team to please, please, please have something vaguely approaching a demo ready for the pitch event in 3 weeks’ time. Inwardly weep at the likelihood that they won’t. And you’ll be all fur-coat-no-knickers in the dragons’ den. Design a really bright pop-up banner and snazzy business cards to detract from the fact that you don’t have a demo.

Flash forward.

Finalise your pitch deck. Do a practice run to the FinTech Circle team. Get told you stand weirdly, so you need to sort that out. Practise ‘relaxed confidence boss-woman’ poses in the mirror.

…And finally, it’s pitch day. Nerves, adrenaline, focus, meditation, fixed smiles, power pose in the ladies loo. It all comes together.

So what did we learn about how to pitch to angels:

Go early in the billing:

We went first. Which we thought was brave / foolhardy of the organisers. Putting the “computer game to fix your finances” first on the bill in a room full of serious money people. I worried that we’d look lightweight compared to the blockchain and moneytransfer companies. I worried that the room was only half full so the angels who turned up late would miss our pitch. I worried about many things.

Turns out it’s better to open or go early in the list. You have people’s full attention. It was a hot room and people started to doze off in the second half. By the end I couldn’t remember half the pitches, so you have more chance of being remembered if you’re up early.

Prepare like a MoFo:

It goes without saying, but if you’re someone who’d sooner down a pint of fire ants with a chaser of rat poison than present to a room full of people, then (1) for gawd’s sake find someone else who can pitch for you, or if that’s not an option ‘cos you’ve got no friends, then (2) put in enough practice that you can forget about what you’re saying and just concentrate on not fainting.

I’m a confident little stand-up (some would replace ‘confident’ with ‘arrogant’ or ‘cocky’), but my legs still evaporate and my mouth freeze-dries when it comes to pitching. I got over it with a small glass of wine before we started and deep breathing from my belly (don’t do this if you’re holding a mic – you’ll sound like you’re giving birth).

Expect difficult AND stupid questions:

Just because you know your business inside out (you do, don’t you?), don’t expect anyone else in the room to have understood a single word of it. So when they ask questions that indicate they haven’t listened or haven’t understood, don’t look surprised. Just be grateful that it’s something you can answer.

Use it as an opportunity to add some interesting detail to particular points. We had a ‘hidden’ stack of 10 additional slides on our deck, just waiting for people to ask us the right question. It feels awesome to be able to point to stats to back up your answer. Especially if you can work the slide clicker.

Accept that there’ll always be at least one person in the room who feels it is their duty to ask a dickish question or to try to catch you out in some way. To those people, I say “thank you”. Because we’re ready for you and we’re going to use the tried and tested politician swerve.

So when the hand goes up from the twitchy-looking guy at the back who doesn’t appear to own any eyes, make sure you’re primed. Whatever he asks, you are going to answer the question you wish he’d asked. You’re going to take his mealy-mounthed question and you’re going to turn it into an answer about something you’re desperate to show-off. The positive energy from everyone else in the room will carry you through.

Hustle the hell out of it:

We missed most of the second half pitches. We were stood outside the auditorium talking to some angels. Remember why you’re there. Only one goal. Convince those with money to invest in your startup. This goes back to point 1. If you’re early in the billing, then people know who you are early. You can have many more focused conversations with investors than if they haven’t yet seen you pitch and they’re just making small-talk.

Out of all the angels in the room, we got interest from around 70%. We made sure we got their business cards, so we could make the next move. And we followed up with them the next day to set up meetings.

Giving your pitch is just the beginning. You have to be willing to network with everyone in the room. Don’t expect people to come to you. Get around everyone and find out who they are and why they’re there. We found that even those who weren’t interested in investing in Lifetise were happy to introduce us to someone who might be a better fit.

And finally, treat every pitch likes it’s THE pitch. Keep your energy and enthusiasm high – it’s the thing that investors have remarked on with our team – we are experienced (read: old) and incredibly enthusiastic. Investors want to work with people who are passionate about their business.

*Um, two months ago. I started this post the day after the pitch, but then got a bit busy with investor meetings. Sorry.

mo’ money, mo’ problems

The dreadful thing about having a steady job and a decent monthly salary is that you become conditioned to believe that you need it.  And if you don’t particularly enjoy your job, then that salary becomes the justification for sticking it out and the means of paying for all those treats you buy yourself to make up for it.  Sound familiar??

Allegedly, there’s a button on Word Press that allows you to insert a poll.  I am nowhere near that level of technical wizardry, but if I were to do a poll of top reasons for not starting something new, I’d guess that lack of cash/fear of financial meltdown would come up pretty high.  Understandable, perhaps, but (whispers), I think you might be using this as an excuse…

what’s it worth?

I’m not going to pretend that it’s easy to walk away from a salary.  It’s not.  I thought long and hard about when to do it.  I gave 3 months’ extra notice on my job, just to get that bit more cash in the bank and to give myself time to adjust to thinking about my finances differently.

But ultimately, I decided that I valued my time more than I valued the money I was earning.  Ask me again in 12 months’ time, but right now I wouldn’t go back to employment for all the tea in China.

easy for you to say

I hear you.  It’s easy for me to enthuse about lifestyle changes when I’m childless, mortgage-less, debt-free and have no dependents relying on me.  That’s all true.  But I still have financial obligations.  I pay a staggering amount of monthly rent and council tax on my flat (London, I love you dearly, but you’re killing me).  I don’t have a pension, stocks or shares or any other security, except the cash in my bank and my earning potential.

I’m not here to tell you that my way is the best way.  That everyone should quit their jobs, eschew material things and live like financial nomads in pursuit of spiritual enlightenment.

It’s just that I’ve realised that this is the best way for me, right now.  And maybe it’s something you’ve wondered about.  In which case, use what I’ve learned so far to see what your options are.

you do the math*

I’m a little scared of money.  I didn’t have a lot growing up, so I’m probably more fearful than most about not having enough.  In my last job, I did a lot of forecasting and financial modelling for investment raising and I learned to read a balance sheet, P&L and cash-flow statement.  So when I was trying to decide if I could afford to leave my job, I applied that learning to my own finances.

Personal balance sheet

Crucial first step: you need to work out what you’ve got in terms of assets and liabilities.

If you’re a whizz on excel, then start using a spreadsheet for your personal finances.  It does all the number crunching for you, so you’re less likely to make mistakes.  Otherwise, just write it out old-school in a notebook.

You need two columns: Assets and Liabilities.

Under the “Assets” column, list out all your assets (the value of your house/flat/car, cash in the bank, stocks and shares, pension, ISAs, premium bonds, etc.).

Under the “Liabilities” column, list out all your liabilities (your current total mortgage owing, credit card debts, car repayments, etc.).

Deducting the total amount of Liabilities from the total amount of Assets, gives you your basic net worth in money terms.  It will either be a positive number (i.e. what you own is greater than what you owe) or negative (i.e. what you owe is greater than what you own).

Remember, it’s a snapshot of this moment in time and will change, but it gives you a good indication as to whether you have assets you can free up to finance your lifestyle change.  Don’t panic if the picture looks bleak.  A negative personal balance sheet doesn’t mean you’re stuck as a wage slave forever.  It’s only part of the equation.

Cash-flow

Next, you need to work out your average monthly cash-flow, so you know what you need to earn to meet your commitments.  For this you need 3 columns: a blank first column, then “Monthly Income” and “Monthly Expenditure”.

In your first column, list out each category of income and each category of expenditure, as this allows you to do a more detailed projection.  Then deduct the total expenditure from the total income, to get your balance.

It should look something like this:

Do this exercise for at least 3 months back (go through your bank statements to work out each month’s expenditure).  This will help you to then get an average of your monthly income and outgoings.  This is essential before you even begin to consider giving up your salary.

You need to know that your assets (from Step 1 above) and your non-salary income are sufficient to meet your expenditure requirements going forward.

Remember: not all assets are created equal.  Cash is king, because you can get at it readily.  Having a house that’s worth a lot of money does not help with cash-flow, because it will take time to remortgage it or sell it to get cash in your hand.

what’s the plan, Stan?  

It pains me to tell you, guys, but quitting your job and going solo does require a bit of planning.  There’s nothing that sours the satisfaction of giving the 2-fingered salute to full-time employment like having no way to pay your rent next month.

So don’t rush it.  It’s rarely so bad that you can’t stick it out a couple more months.

You’ve got your balance sheet and cash-flow data, so use it to forecast your new life.

1.     Improve your cash-flow (or stop spending so much goddam money on stuff you don’t need)

  • I’m not a massive consumer (unless you count booze, in which case I’m right up there with the best of them).  I’m also pretty thrifty.  I have spidey sense to spot the “reduced to clear” stickers in the supermarket.  I rarely shop for clothes and, when I do, I sell a load of my back-wardrobe on eBay (seller name raghi77 if you’re interested…).  Before you buy anything, ask yourself if it will help or hinder your new lifestyle.
  • I spend my money on experiences – travel, festivals, gigs, nights out with friends, spa sessions.  These don’t come cheaply, but they do tend to come less frequently, so it helps with cash-flow.  I also tend to pay for these on a cheap credit card (look for 0% balance transfers and purchase deals on moneysupermarket.com), so I have longer to pay them off.
  • If you can start up your business by working on it during weekends/evenings around your existing job, then for gawd’s sake do that.  Keep the money rolling in from your salary to finance it, so that the financial risk is lower.
  • Consider going part-time or freelance for your existing company.  You may feel like you couldn’t stand to work another day, but you’d be surprised how differently you feel once you’re in control of your time.
  • Before you quit, sign up with some temp agencies for your specialism.  Knowing that you can get a few weeks’/months’ work here and there as you need it helps to keep the fear gremlins at bay.
  • Separate your bank accounts.  Put the majority of your savings beyond easy reach somewhere where it’s earning a reasonable rate of interest.  Set up a standing order to feed your monthly cash requirement into your day-to-day account and have a second current account with a buffer amount in it, for contingencies.  Then learn to live within your means (easier said than done!!).

2.     Weave your safety net

Ask yourself what you could realistically do to get money in if you were in a tight spot or to finance your new business plans.  For most people, this will mean looking at your assets on your balance sheet and working out how to make some money out of them. For example, you could:

  • rent out / sell / remortgage your house
  • cash in stock options / ISAs / pensions
  • borrow money
  • sell other assets (car, clothes, furniture)

Clearly these are big decisions and should not be taken lightly unless you derive perverse pleasure from riding a financial rollercoaster.  But what I’m trying to get across is that most people have options when it comes to money.  These options may seem terrifying and some may be totally inappropriate for your circumstances, but they should all be factored in to your financial planning.

Knowing that you have a safety net (or starting to weave one) allows you to shift your focus away from simply surviving to creating your new life.

I am fortunate that I have a reasonable amount of money saved up to support me.  But I’ve also downsized my living arrangements, cashed in my Oyster card (getting around by bike also keeps me fit), stopped getting my hair cut so frequently and haven’t been into a clothes shop in 6 months.

I’m still working on cutting down on my £10-a-pop cocktail habit…..

 *sorry for the Americanism, but it scans better…