How startups should communicate with investors with entrepreneurial backgrounds. Tips and tricks from AngelsDeck

The AngelsDeck club brings together a variety of venture capitalists. Among them are business angels who themselves once launched startups. To present their project correctly to such a particular audience, founders need to grasp the specific thinking of business angels with entrepreneurial experience and what indicators and metrics they look at first. Let us unpack this.

Focus on strategy and team

It is often challenging for a startup to operate with traction numbers at an early stage. Those with experience in launching projects are familiar with that feeling. Therefore, instead of revenue, founders might highlight factors such business angels usually pay attention to in the pitch: strategy, business model, and team experience.

Founders cannot continually grind out unique strategies and business models when launching a project. Nevertheless, this does not diminish the investment attractiveness. Take the example of ElectroNeek, a project that develops and implements robotic process automation (RPA) in small and medium-sized enterprises. The founders made an effort to follow the classical model for a year. It suited large companies due to the high cost and complexity of integrating robots but never worked for SMBs.

Therefore, the project pivoted and elaborated a unique business model that benefits all stakeholders: the startup, system integrators of RPA solutions, and small and medium-sized companies. The founders’ expertise helped in this endeavor. One of the cofounders, Sergey Yudovsky, knew well the pains of integrators: Before launching the startup, he was selling RPA solutions of the international developer UiPath. With the pivot, ElectroNeek quickly overcame the pre-seed and seed stages and, in just one year, closed the Series A round for $20 million. Quite swiftly, system integrators saw prospects in cooperation as well. At present, the startup boasts more than 250 partners globally.

Show the investor the wow effect of the audience’s solution to their pain

A team that is superficially immersed in the pains of its target audience may fail even with a considerable investment. A case in point: the mobile streaming short-form platform Quibi. The startup attracted an incredible $1.75 billion, yet, alas, it shut down six months after launch. The service tried to compete with the most prominent players on the market but barely focused on understanding and solving the audience’s issues. As a result, 92% of users refused to renew their subscriptions after the trial period, and Quibi was left with no money to pivot.

To prove to investors that the team knows the market and audience, the startup can show how solving issues may cause a natural wow effect in end users. Thus, you may confirm the product’s immediate value. Investors can hypothesize its overall relevance in a highly competitive market if customers are willing to use the solution here and now.

For instance, Educate.Online developed a platform to study remotely at top international schools. Educational institutions saw great potential in the platform even before the pandemic; in late 2018, a school in Florida offered the partnership. Thanks to this, the startup had time to test the new format and prepare itself better than its competitors for the mass transition to online learning. Subsequently, rapid growth made the project particularly attractive to venture capitalists.

Be sincere when it comes to digits and financial metrics

Some founders fear losing investor interest if they don’t embellish the project. It is understandable — pitching is a kind of a test of the founder’s sales, negotiation, and public speaking skills, which will come in handy in the future.

Though things are different with digits and key metrics, any deception will be revealed immediately after due diligence. Hence, we advise avoiding unverified and, even more so, false data in the pitches at all costs. The consequences can be disastrous, as witnessed by Renato Libric and his startup Bouxti. The Croatian entrepreneur raised $1.5 million, but it soon turned out that he had forged signatures on checks to make partners think his app was getting ready for corporate purchase. The court sentenced Libric to three years in prison and massive compensation to defrauded investors.

Follow these guidelines, and your dialogue with business angels will be as productive as possible.