This piece is joint-written with my digital health friend, Nikhil Krishnan. I met Nikhil when he was covering digital health at CB Insights. Now he’s on his own, as an angel investor and the founder of Out-of-Pocket. Nikhil does a phenomenal job breaking down some of the complexities of healthcare, through both his newsletter and courses. He’s also super funny (much needed in our industry), and gets ALL the credit for the memes in this blog post.

Nikhil and I both like working with early stage entrepreneurs and generally demystifying things, so we thought it might be fun to write a little bit about some mistakes and tips for entrepreneurs that are going out to pitch to angels. Enjoy!

So you’re pitching angels…

If you’re looking to raise funding from angel investors, there are a few things you should know.

First, angel investors can get a lot of pitches. We try really hard to get back to everybody, but it makes our lives much easier when things are concise, easy to understand, and related to something we’re interested in. Help us help you help us.

Second, we are not paid to angel invest. Quite the opposite, we have both definitely lost money. This means when the day job or personal lives get busy, angel investing gets a back seat. If only we were getting paid some of that sweet sweet 2% management fees, things may be different.

And lastly, we love doing it! We know most startups fail, and healthcare startups are no exception. But the best way to combat healthcare cynicism is to work with early stage founders. They still have a raging sense of optimism that comes from imagining a bright future and also not knowing what HITRUST is. We love working with founders, learning from them, and helping them avoid mistakes we’ve seen over and over again.

In our time meeting with founders and investing in startups, we’ve seen a lot of things that can sour a pitch which no one tells people (especially first time founders). So we decided to put a list together of common mistakes we see to demystify some of these things. Remember that every angel investor will think about this differently and many people will disagree with some of these.

Your competitor slide

We don’t know who developed the whole “two axes and my company is in the top right” framework but we wish them poorly. This slide very rarely communicates much and honestly can actually detract your pitch. If one of your axes is “customer empathy” then we’re actually worried that you don’t have other defensible qualities to the business.

If you’re going to compare the competitors, then it’s better to do a feature comparison instead. This way it’s clearer that you’ve walked through some of the other products and have an opinion on what will make yours stand out.

Honestly you can probably even put this in the appendix. At the earliest stage, it makes more sense to talk about your key differentiators. That doesn’t mean you shouldn’t know your competitors - be ready to talk about them and how you’re different. But the deck can focus more on how your company is going to win in the long run.

2. A messed up cap table

There is nothing worse than falling in love with a team, product, and pitch only to find out that their cap table is an absolute mess. This isn’t a deal breaker, but it requires a lot of legwork from a lead investor to fix a messy cap table and it will almost never be an angel investor.

What do we mean by a messed up cap table? We’ve seen advisors that own way too much, like 10%+ of a company just to have their name in the pitch deck. Or a co-founder who didn’t have a vesting cliff, left early and owns a huge chunk of the company but isn’t adding value. Egregious stuff.

These days we’ve also seen a lot of stacking convertible/SAFE notes with valuations that keep changing. This isn’t a total deal breaker, but can be very challenging to figure out how much you own if this is overly complicated in the early stages.

3. Getting intro’d through the wrong channels

Here are our favorite ways to get introductions to founders, from most preferred to least:

The ideal path is through a seed investor (who invests as their day job) and is leading your round. We don’t want to price the round, and we don’t have the capacity to do as thorough of a diligence job as they do. So the best path is to ask them for introductions to angel investors to fill the remainder of the round. We love knowing that someone we trust has done their homework on the deal; it derisks things for us as angels.

Introductions from other founders or thought leaders in the space are great too. If you’ve been working in healthcare, lean on your past colleagues or conference friends to help you get in front of the right angels.

Via our archnemeses and childhood bullies. Weird choice, but can be overlooked.

Cold emails are fine but it’s lower likelihood unless you write a killer cold email. Make it easy for us to read and personalize it so it doesn’t feel like I got Hey {firstname} mail merged. Remember - a big part of pitching is understanding your aptitude in selling and a cold email is part of that.

Whatever you do – do not hire a banker or consultant to pitch on your behalf.

4. Solution-first vs. problem-oriented

Have a rock-solid understanding of the problem your target user is facing and know exactly what KPI/metric is the north star for their pain point. The way you come to this conclusion is by actually talking to potential customers. Way too many founders start with the solution first because they find some cool new tech or they prototyped something they found interesting and think it would be valuable to society. Last time this happened someone thought putting trackable devices into the pills of schizophrenics was a good idea.

Relatedly, you should explain your business model. Weirdly, 25%+ of pitches do not have a clear slide explaining this. Your business model is going to be derived from the amount of value that the customer’s getting from their pain point being solved. This can totally change over time, but it's a useful thought exercise that you understand where you’re creating value and for you.

Here’s a very common example:

“My solution helps clinicians deliver more personalized care plans to patients using [AI, hardware, apps, etc.]. We’re going to charge clinicians $X per user.”

The reality is that this is not an actual pain point clinicians feel if physicians cannot bill for it they won’t use it, and they definitely won’t be paying you.

Or another one:

“Employers struggle with [X condition] that affects productivity and absenteeism, we’ll reduce that with our solution.

The key here is understanding what employers say vs. actually do. Most employers barely track this, which will make it almost impossible for you to measure the success of your solution. When interviewing users, you should be digging into their state vs. revealed preferences.

Your pitch should make it clear that you know are an expert of this problem. Of course, we want to know how you’ll solve this problem, and you should be able to talk through your tech stack intelligibly. But focus more on the problem and don’t be wedded to the specific solution/technology. This will also make pivoting much easier if you need to, since you’re not stuck on what you’ve already built.

5. Asking for an NDA

We get that you’re worried that someone is going to steal your idea, but it’s pretty unrealistic for angels (or any investor for that matter) to sign a non-disclosure agreement at this stage. Honestly our memory has started failing us anyway, so you’re probably good.

Because we’re talking to hundreds of founders each year, it’s simply impossible to avoid scenarios where we might see similar ideas from different companies. Signing NDAs adds unnecessary risk, hinders our ability to talk to other companies, and makes it hard for us to help your company when we’re not sure what we can talk about without your permission.

The reality is that there’s a much higher chance someone will be able to help your company if you freely let people talk about it. You really think someone is going to drop everything they’re doing to copy your idea that has 0 traction? Instead of worrying about information leaks, ask yourself if your business relies on a secret that could easily be replicated. If it does, you might have bigger problems. And “there’s this new CPT code that lets us bill” is not a secret, trust us.

Avoid paranoia and focus on building something so exceptional that competition becomes less of a concern.

6. A good “why now?” explanation

Most healthcare ideas have been tried at some point, but that shouldn't discourage you. Instead, ask yourself: why is now the perfect moment to launch this idea? Are there new regulations, payment structures, or groundbreaking technologies that make your approach different?

Be able to speak to past attempts at solving this problem— it shows you're serious. It also helps you clearly explain how your solution is more likely to work.

From Turquoise Health’s first pitch deck (shared with permission)

7. Over-indexing on awards

Another thing we’re trying to get a sense of: do you know the right metrics to focus on that will make your business successful? There are infinite ways to get distracted and feel good when running the business while the actual core business is really failing. *Cough* Forbes 30 under 30 *Cough* which is like 900 people per year now anyway *Cough/Wheeze*.

Press and awards are especially tantalizing because early validation is scarce. But unless that award directly fueled your business (say, you won prize money or something that led to a pilot), it's a better use of your pitch time to dive into the meat of your company and show that you’re razor focused on the handful of things that matter like usage, retention, sales pipeline, achieving vengeance, etc.

8. Mistakes in deck design

It seems silly but your deck should look good. You might think it’s superfluous, but the reality is that your pitch is also a gauge on your ability to sell in general. As a founder, selling is going to be your main job (to customers, potential employees, the press, etc.).

A deck is part of the selling process, and nowadays it’s pretty easy to make the deck look good with available templates online with almost no effort. This mistake comes up particularly in people that leave academia or research roles where well-designed decks are seemingly illegal or suspected of hiding bad results.

Your deck also should be able to standalone without a voiceover, because more likely than not it’s going to get read a few times without you before a decision to invest actually gets made.

9. Pitching the wrong investors

The goal of pitching is to find a mutual fit between yourself and the angels. You should be assessing your angels just as much as they’re assessing you. A big part of the pitch process for angels is just to figure out if it’s something that we can actually help with and if we are interested in the problem you’re tackling. You might have a fantastic business idea that’s just really out of our wheelhouse. Biotech companies seem sick with all their fancy terms like “cytokines” and “permeate” but we just can’t really do anything helpful here.

Simultaneously, you don’t want angels that are misaligned with what you’re trying to do. We’ve heard horror stories of angels demanding their money back, being a hold up at M&A, having hotmail accounts, etc.

Targeted pitches get way better results than the "spray and pray" approach. Do some research, find investors who align with your vision and ~vibe~, and hit them with anything that’s not hey {firstname}.

10. Calling us on the phone

Getting a cold call from a founder can feel super invasive of personal space, especially if we never gave you our number. So unless we've explicitly requested a call, it's far better to start outreach with an email. This shows respect for time and boundaries, and lets the angel reply asynchronously.

A few more considerations

Okay, we shared a lot of what you shouldn’t do… here are some pieces of random advice on things you should do:

If you’re planning to raise money, please be a Delaware C-corp. Other formation structures make it very difficult to raise external capital.
Product demos, screenshots of the product, or customer journeys that show when they would use the product are really helpful in explaining what your company does so please use them.
Written memos can be really helpful as a supplement to decks. It helps to see all the research organizing one place, and it makes our lives easier when we need to double click into certain areas or need to explain something to other angels that have questions without needing to ping you every time.
While it’s not common, having a section on major risks or reasons the business might fail can actually be very helpful. For one it demonstrates you know what hypotheses need to work for your business to succeed. But also most investors are trying to guess the risks to your business anyway to see if they’re comfortable underwriting it. But many times we’re wrong about the biggest risks since we’re not experts in the area like you are.
Team is the most important thing when assessing an early stage startup. We’re trying to understand if you work together well, if both parties have well-defined responsibilities, etc. We’re also trying to understand if you’re the right team for the problem you’re pitching - different businesses require different skill sets (how to build consumer products, knowhow to get a marketplace off the ground, employer sales, etc.). If the founding team doesn’t have direct experience with the problems, it’s probably good to have advisors or early hires that can round that out.
Remember: the check size someone writes has nothing to do with how helpful they’ll be to your company. In fact, the people writing a very small number of <$5K checks can actually be the most helpful since they don’t invest in many companies and can focus on yours.
If an investor says no, or says nothing at all, let it go.

Hopefully these things can help you think through your pitch. We’re excited to see them!

10 Things to Avoid When Pitching Angel Investors