Pitching to an Angel investor? Answers during SEEDCON After Hours @ 1871 in Chicago
There is a growing ecosystem with digital startups in the Midwest with a new digital company being formed every two days. To help continue the momentum, a SEEDCON After Hours discussion was recently held at 1871 in Chicago.
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The panel included:
- Jeff Carter, Investor at Hyde Park Angels
- Troy Henikoff , CEO of Excelerate Labs
- Waverly Deutsch, Clinical Professor of Entrepreneurship at University of Chicago
- Joe Lee, CEO at Club Champion
- Gregory Grossman, Partner at DLA Piper
- Elisa All, Founder 30 Second Mom
During the open Q&A discussion, a question came from the audience regarding how to pitch to an Angel investor, and whether there was an “Aha! Moment” for investors when they hear “a great idea”.
A Great Idea?
Waveryly Deutsch of University of Chicago was quick to fire back, that “you cannot tell a good business investment from just hearing an idea”. From her perspective, “judging ideas is foolish” since you cannot tell whether a business investment is good or not from just the idea alone. For instance, in the mid-90’s (prior to the large adoption of the Internet), many ideas such as doing a garage sale online (ex. Ebay) or selling books online (ex. Amazon) were dismissed.
Simply, there are things that work in business and things that do not. From Duetsch’s perspective, you don’t know until really until you try. What matters are “risk reducers”.
Some examples include:
- Will customers buy this?
- Does it do something for them?
- Do the people pitching the idea know how to execute?
- Do they know how to sell?
In essence, the more investors hear about the “risk reducers”, the more likely the business is investable.
How to Pitch?
As part of the panel discussion, Jeff Carter of Hyde Park Angels offered Midwest tech entrepreneurs some tips when doing an initial pitch. From his perspective, “you have about 90 seconds to 2 minutes to get our attention”. He explained last year about 600,000 businesses were created, approximately 60,000 received angel money, and about 1,000 got VC money. In the case of Hyde Park Angels, they have seen over 800 deals, and invested in about 16 or 17 of them. This provides some perspective on the deal funnel.
Some tips:
- Keep the initial pitch short. You have about 90 seconds to 2 minutes to get their attention.
- Identify the pain point right away (and don’t tell your life story).
- Indicate the size of the market. Less than $100M? Over a couple billion?
- Indicate how the team can execute, and convince investors you can do it. Do you have prior experience? Have you failed? What have you learned?
Keep in mind it takes time to get comfortable, and due diligence can take some time. A special thanks goes to the event producer and Chicago Booth MBA student Jason Kania, master of ceremony Kathleen Fitzgerald of the University of Chicago, and event moderator Brian Bauer of Kurfuffl for pulling together a great event and helping continue to build momentum with tech in Chicago.
