Securing funding for a startup from venture capital (VC) or angel investors can be a challenging process for founders, which means many are looking for advice and tips from those writing the cheques.
With half of small business owners in the UK concerned that their business won’t survive the next 12 months, it’s important for founders to have the right advice when raising startup funding.
To demystify the investment journey, UKTN spoke with experts to find out what founders should know before pitching, what investors look for in pitch decks, and the typical process once an investor shows interest.
To get tips from investors who have funded countless startups, we spoke with Chenelle Ansah, founder of LightPace VC; Andy Ayim MBE, founder of the Angel Investing School; Henrik Sanchez, a general partner at Playfair VC; George Whitehead, partner at ACF Investors; and Chris Lascelles, investment manager at Triple Point Ventures.
What should founders keep in mind before pitching?
Henrik Sanchez: Most funds aren’t very good at responding to cold emails so bear that in mind. It all depends on how you reach them. For most VCs, about 90-95%, you need a warm introduction, usually through a founder in their portfolio, another investor, or an angel investor. Personally, at Playfair, we think this isn’t forward-thinking and doesn’t help underrepresented founders without networks.
We focus on cold inbound pitches. We have a pitch form on our website, playfair.vc. Anyone can apply, and we respond to everyone within five days. While you won’t get personalised feedback due to the high volume of about 200 applications per week, we will reply to everyone within a week, which is more than most do.
Henrik Wetter Sanchez
Chenelle Ansah: Never pitch a fintech idea to a healthcare-focused investor. Spending a bit of time to understand who you’re speaking to is really important. You’ll be surprised how often this happens.
The other thing I would suggest is to make a wish list. Create it and then flip it upside down. Start pitching from the bottom of your list. When you begin pitching, you won’t be great, but with each pitch, you’ll improve based on the questions, challenges, and feedback you receive. By the time you reach the top of your wish list, you’ll be a superstar.
Additionally, craft the titles or headings in your pitch deck to tell a story, so that even a lazy reader can easily understand the what, why, and why you, without needing too much detail.
Don’t let the nos knock you down, you need to keep going until you get your yes. Also, be careful about feedback from different investors. Use your own conviction; but if you hear the same message consistently, it’s worth paying attention.
Chenelle Ansah
Andy Ayim: Speaking from an angel investor’s perspective, I’d say to founders: don’t forget your “why” because 80% of an angel investor’s decision is based on the connection they have with you, who you are, and your story, as well as their belief in you and your ability to execute your idea. You need to understand the journey you’re going to go on: are you trying to build a bootstrap business, build an e-commerce business that needs a lot of capital and therefore a lot of debt in order to build your business, or are you going for a venture-backed business? Because all this will impact what story you tell the angel investor and how you tell it.
You also need to understand that with venture capitalists, they’re trying to invest in businesses that can scale exponentially in a short amount of time, whereas with angel investors, you’re raising funds from individuals, not institutions, and angels can be more patient about the return on their investment. And if we’re honest, the main reason angels invest isn’t for financial return; it’s because they are motivated by their own experiences. For example, someone who worked in financial services for 20 years can add value to a fintech startup.
What do you look for in a pitch deck?
George Whitehead: We are looking for real substance rather than the gloss of a beautifully presented deck. Too many pitch decks sacrifice this substance for a highly sheened polish which fails to show a good understanding of fundamentals such as a clear business model, and a considered, achievable route to market.
Please be straightforward and honest – we want to roll up our sleeves and discuss the business with you in detail and there is nothing that takes the credibility of an entrepreneur away more quickly than when their claims appear exaggerated or misleading.
The primary aim of your pitch deck is to secure a meeting but you can easily fall at this second hurdle if you are not fully prepared to answer the detailed questions that arise from every figure and every statement in the deck. Practice the pitch beforehand and have the figures to hand to demonstrate there is real depth behind this high-level overview of the business.
George Whitehead
Chenelle Ansah: I often say this all the time but investors are very time-poor and often skim-read. We need to understand the problem being solved in under a minute. The first couple of pages should clearly outline the proposition, the problem, and why the founding team is best suited to solve it.
After this, the focus shifts to understanding the route to commercialisation based on your aspirations. There are two types of angels: those looking for venture returns and those who invest to provide a runway. I fall into the former category, seeking venture-like returns. When reviewing a pitch deck, I first ensure I clearly understand the problem.
Henrik Sanchez: Your first deck’s goal is to get a call, not an investment, so keep it to a maximum of 10 slides. Cover who you are as a team and why you are the best people to build this business. Highlight the market—why it’s exciting, why now, why it’s massive, and why it’s venture-scale if you’re seeking venture or angel investment.
Discuss your unique insight—what you’ve noticed about the market or product use that others haven’t. After these three points, fill in any gaps. Numerous good resources online can help, but focus on cutting through the noise. These are the three main things I look for when deciding if I should take a 30-minute pitch call.
How do founders sell the vision without exaggerating?
Henrik Sanchez: Personally, I would never go as far as to lie. For example, I would never claim I have X revenue when I don’t. However, you can pitch a story in a way that serves your purpose. Instead of falsely saying you have 500k ARR when you only have 100k, you can say, “We have early signs of customer traction and significant market pull, and we believe we’re well on our way to reaching a million in the next couple of years.
You’re just painting a picture that someone else can challenge. For example, if a founder says that to me, I’d respond with, ‘Okay, great. What signals do you have to prove you’ll reach a million ARR? What’s been your growth in the last few months? How many customers do you have in your pipeline? How many have you signed? Give me some historical figures to back up these assumptions.’ The investor’s job is to challenge assumptions, but being directly lied to is very dangerous. This approach is more subjective.
What general advice would you give a startup founder seeking funding?
George Whitehead: The smartest entrepreneurs I know are good at bringing their existing investors along the journey with them so that they are geared up to reinvest and support them in the next funding round.
Good communication prior to the fundraise allows entrepreneurs to be much more confident in creating that all important initial momentum and is a clear message to incoming investors that existing investors are still believers. Most rounds take longer than people expect to close and so early discussions with investors is well worth it in the long run.
Chris Lascelles: I often recommend that founders pull together a list of frequently asked questions. 80-90% of the questions investors ask will be the same ones, so you can save yourself a lot of time by laying these out in a doc. In those FAQs, prepare answers to the toughest questions you might expect. Expect people to challenge your traction metrics, your revenue numbers, your churn figures, or even how reasonable your burn is.
By being upfront with helpful context about those numbers, you’ll build trust in your metrics and pre-empt long discussions. Think of the questions that someone new to the business and even the industry would ask, and answer them in advance.”
Chris Lascelles
Thoughts on AI becoming the new ‘thing’ for every startup?
Chenelle Ansah: Having an AI-powered business can help give an edge but it’s problematic when founders include AI in a pitch deck without understanding how it will transform their business or optimise results.
You can’t just slap the words AI onto it and not be questioned…AI should be seen as horizontal, impacting everything rather than being a standalone vertical. It’s not really that new, AI has been around for a long time. Founders should focus on how AI enhances outputs and adds value, leading to better commercial results.
What does the process typically look like once a VC likes a pitch deck?
George Whitehead: [For us] we look to co-invest with sector-focused angel investors who will work with us to share due diligence and support the business going forward. Our funds typically invest £500,000 – £1m in the first round and when we have identified a partnering syndicate of angel investors (looking to invest at least £50,000) we will work with them to complete our due diligence before preparing a detailed investment paper. We then have a detailed discussion with our investment advisory committee before pushing ahead to agree final terms and complete the investment.
Chris Lascelles: Triple Point Ventures’ investment process is relatively straightforward: a member of the investment team will have one or two initial calls or meetings with the founder/founding team, which will be followed by some internal conversations. If the venture team is bullish on the prospects, we will move into further due diligence with the objective of writing an investment paper which we take to our investment committee (IC).
The IC has the chance to ask further questions and ultimately needs to approve the investment. If the IC is positive about the opportunity, the decision to invest is made and we then move onto agreeing the legal documents. Money is transferred once the legal documents are signed.
The post From a killer pitch deck to grabbing outreach, five investors share startup funding advice appeared first on UKTN.