Why VCs and Angel Investors Prioritize Team over Projections in Pre-Seed Pitch Decks

Why VCs and Angel Investors Prioritize Team over Projections in Pre-Seed Pitch Decks

From Product-Market Fit to Team-Market Fit

The startup world often revolves around the concept of product-market fit. This refers to the alignment between a product and a market need. While undeniably crucial, there's an equally important concept at the pre-seed stage: team-market fit. This is the alignment between a team's capabilities and the market opportunity.

The Crucial Role of the Founding Team

At the pre-seed stage, investors are primarily betting on the team, not the product. While a promising product idea is essential, it’s the team’s ability to execute, adapt, and learn that truly drives success. A strong founding team can overcome product challenges and pivot as needed.

Decoding Investor Psychology: What Angel Investors and Pre-Seed VCs Really Want

Risk, Reward, and the Human Factor

Angel investors and pre-seed VCs are a unique breed. They're willing to take significant risks for the potential of extraordinary returns. However, they're not reckless.

At the pre-seed stage, when tangible metrics are scarce, the human element becomes paramount. Investors are betting on the team's ability to navigate challenges, adapt to market changes, and ultimately build a successful business.Some of the podcasts I’ve done with the likes of Haley Bryant and Casey Williams of Hustle Fund VC and Fenway Summer have highlighted the importance they place on the team.

The Limitations of Early-Stage Projections

While it's tempting to dazzle investors with ambitious projections in your pitch deck, it's often counterproductive at the pre-seed stage. The business landscape is highly dynamic, and unforeseen challenges can derail 95% of most carefully crafted plans.

Instead of focusing on hypothetical future outcomes, concentrate on demonstrating the team's ability to execute on the current vision. Share how each team member’s experience will help to navigate roadblocks to achieve growth.

Investors are more interested in understanding how you'll respond to obstacles than in seeing a perfect, unattainable forecast.

I came across this tweet from an investor that said :“As an investor, I find the projection slide in a seed round’s deck utterly useless. Here’s why:

All projection slides look strikingly similar. They invariably show the company breaking even in Q2 of the following year, followed by an exciting upward trajectory to $100M ARR within five years.

At the seed stage, it is simply too early to make any meaningful projections. The product, if it exists at all, is likely to undergo significant changes, as well as the go-to-market strategy and almost every other aspect of the business.”

Instead, I am much more interested in learning about the founding team and their demonstrated results. The team's vision, resilience, and ability to execute are far more telling indicators of future success than any early projections.

At pre-seed or seed stage focus is always about the team. In fact, VCs and Angel investors want founders at this stage to put their team slide in the first page.

Assemble Your Dream Team: Essential Roles for Pre-Seed Success

Building a great founding team is the cornerstone of a successful pre-seed startup. Each member should bring unique skills and experience to the table.

Essential roles include:

  • Visionary: The individual with the original idea and the ability to inspire the team.
  • Tech Lead: The technical mastermind responsible for product development.
  • Business Development: The person focused on market penetration and customer acquisition.
  • Financial Steward: The individual managing the company's finances.

While these roles are essential, it's important to remember that these roles are often occupied by 2 or 3 individuals.

After all, at pre-seed you rarely have any revenue, therefore you all must come together to fill the skill gaps where necessary.

Cultivating a High-Performance Culture

A strong team culture is more than just a buzzword; it's the lifeblood of a successful startup. It's about fostering a collaborative environment where everyone feels valued and empowered. Key elements of a high-performance culture include:

  • Open communication: Encourage honest and transparent dialogue among team members.
  • Shared values: Define a set of core values that guide the team's behavior.
  • Mutual respect: Create an inclusive environment where everyone feels valued.
  • Continuous learning: Foster a culture of curiosity and growth.
  • Experimentation and failure: Embrace risk-taking and learn from mistakes.

Diversity and Inclusion: A Competitive Advantage

A diverse team brings together individuals with different backgrounds, perspectives, and experiences. This diversity can lead to increased creativity, problem-solving, and innovation. By fostering an inclusive environment, you create a space where everyone feels empowered to contribute their unique talents.

To add some numbers to this narrative, remember that diverse companies generate 2.5x more revenue per employee than non-diverse ones. And if we are talking about productivity, diverse teams are 35% more productive while making better decisions 87% of the time.

Looking no further than this article as to why DEI Diversity Equity and Inclusion should be at the top of your Startup’s team mission.

Tell Your Story: How to Showcase Your Team's Potential

Demonstrating Synergy and Complementary Skills

A high-performing team is more than just a collection of individuals. It's a cohesive unit where each member's strengths complement the others.

Highlight specific examples of how your team members collaborate effectively. Discuss how their diverse skill sets contribute to problem-solving and innovation. Showcase how your team operates as a unified force.

Quantifying Your Team's Impact

While it's challenging to quantify the impact of a team at the pre-seed stage, you can still provide evidence of your team's capabilities. Focus on achievements that demonstrate your team's potential. This could include:

  • Previous successes: Highlight the accomplishments of individual team members in past ventures. For example something like, Taylor is a 2x exited founder who built a product to help [target audience] achieve [outcome] in [industry]
  • Industry experience: Showcase the team's collective knowledge and expertise in the target market. Learn what investors want to see in your pitch deck’s team slide.
  • Problem-solving abilities: Describe instances where the team overcame challenges and found innovative solutions. Tyler was responsible for generating $5 million in revenue for [company x] with a marketing budget of only $10,000.
  • Customer feedback: Share positive testimonials or case studies that highlight the team's impact on customers.

Nurturing Investor Relationships: Beyond the Pitch

The Power of Networking and Mentorship

Building strong relationships with investors goes beyond the pitch deck. Attend industry events, participate in startup communities, and seek mentorship from experienced entrepreneurs.

Networking allows you to build trust and credibility with investors, increasing your chances of securing funding.

Passion, Perseverance, and Investor Trust

Investors are drawn to founders who are passionate about their vision and demonstrate unwavering perseverance. Similar to Melanie Perkins (founder of Canva), share your story with authenticity and enthusiasm. Build trust by being transparent, honest, and responsive

Invest in Your Team, Invest in Your Future

Actionable Steps for Pre-Seed Success

To increase your chances of securing pre-seed funding just like the founder of Rella, focus on building a strong, cohesive team. Clearly articulate your team's expertise in your deck and how their experience aligns with the market opportunity. Share with the investor what they’ve done in the past that makes them a perfect member of the founding team.

Building a Strong Foundation for Long-Term Growth

By prioritizing your team at the pre-seed stage, you're laying the groundwork for long-term success. A strong foundation built on a talented, resilient and dedicated team will enable you to overcome challenges, adapt to changing market conditions, and achieve your growth objectives.

At an early stage, at least 65% of Startups fail at an early stage due to founder conflict

Remember, while projections can be tempting, it's the team that ultimately drives a startup's success.

By focusing on building a cohesive team and effectively communicating your team's potential in your pitch deck, you'll increase your chances of securing pre-seed funding and achieving long-term growth.

Use Score My Deck to rate your team slide and increase the probability of getting a meeting with VCs and Angel investors to kickstart your Startup’s funding round.