The best time to start a business can be when the economy is down. That’s because entrepreneurs with good ideas will find cheaper land, labour, supplier contracts, and other ingredients that go into starting a business. Angels that back such ventures can earn impressive long-term returns. The downside of a slump, however, is that investors can be more cautious and risk averse. Yet even in hard times, a smart angel will not neglect the opportunity to back a highly promising business.

For the entrepreneur starting up and searching for angels, the pitch is crucial. They need to be expecially realistic about their prospects in what is a tough investment environment.

Seeing experienced people on a management team can help ease investors’ fears about a company’s ability to deal with a tough economy. Angels are reassured if they see someone on board who has been through prior booms and downturns and knows how to manage cash in the downside. Even if this individual is an unpaid adviser, he or she will add to a company’s credibility.

Pitches need to reflect the current market conditions. Entrepreneurs who come across with unsubstantiated market assessments, no competitive analysis, and flimsy marketing and sales plans are unlikely to impress angels. Entrepreneurs should be able to demonstrate an expert knowledge of the market they are about to enter as well as the discipline to follow through with their game plan.

Some sage advice for entrepreneurs is offered by US VC firm Canaan Partners, which has developed a guidebook for entrepreneurs, which is available off its website at http://www.canaan.com/home/partnerships/poptech. The guidebook sets out the basic structure for a successful pitch. According to Canaan Partners, some of the most common pitching mistakes include:

1. Lack of clarity -  Executives should be able to express what the company does in 30 seconds. A presentation should be 30 minutes long without interruptions.

2. Arrogance and megalomania – Don’t bring a team to a presentation and not permit them to speak. “We invest in people and teams. If you brought your team, let them speak, show them off.”

3. Avoiding questions -  Don’t dance around questions, especially if they’re asked multiple times in different ways. Be thoughtful and willing to explain your concerns with the business.

4. No competition – Don’t insist you have no competition. “We have a unique IP that gives us a multi-year lead” is never true. If someone wants to chase you, they can be right on your heels.

5. Not understanding the market – Market-sizing should be top-down and bottom-up. Saying, “we just need 0.1% of the population of China to be a success” ignores the importance of identifying and describing the target customer.

6. Not knowing the numbers – Be able to explain how your company plans to drive 500% revenue growth in its second year. But don’t suggest a valuation.

(Source; NZ Young Company Finance)