When I meet with entrepreneurs, the conversation often goes like this:
We start by talking about the startup idea or problem they are trying to solve.  We spend about a minute on that and then we dive into a product demo.  He starts showing me the product, all the cool widgets, flash effects and interactivity and then I raise my hand and call a (hopefully polite) halt.  I pull him back to the problem definition and often have to drag him back to talking about it because he often wants to go back to showing me how cool the website or product he built is.
Here is the problem with this.  I have not bought into the problem statement yet, but the entrepreneur assumes I have.  And it very much seems like he wants to sell me on the beauty of the execution alone, which I may agree looks really elegant and well done.  However, creating a startup is not just about building the product, it’s about why we’re doing it in the first place. If I don’t agree with that yet, then it doesn’t matter how we execute or what we’re building.
To me, building the product is the most straightforward (out of a potentially chaotic customer discovery process) part of a startup; building the right problem statement is much more important and difficult.  After all, how do you know that you’re building the product to solve the right problem?
By right problem, I mean all those things that are so important to contributing to the success of the startup: big enough market, do users have a big enough want or need, can you monetize, are there competitiors or none, etc. etc.  If, in that first few minutes of problem definition, I don’t believe your problem statement is worth building for, then it’s pointless to keep showing me how great your product is executed.
After I call a halt to the product demo and I explain why, often the entrepreneur looks at me incredulously and tells me you’re the first investor to want to stop looking at the product.  This is frightening to me; are there a crew of investors out there who care more about how cool the product is than why they are building the product in the first place?
My favorite pitches tend to follow a form which I learned in high school about writing compositions.  

With the introductory paragraph, you start broad and then work down to your problem statement which generally is the last sentence in the introduction.  Then the next 3 or 4 paragraphs offer proof of your problem statement.  The last paragraph is the concluding paragraph, which summarizes the key points in defense of your problem statement and usually tries to end with a broader concept.
In a pitch, this starts with a lot of time talking about the problem statement, why we’re doing this and why it’s a great idea to be working on this venture. Once we establish this, we can talk about what they’ve accomplished from a product standpoint.  After we go through that, we go back to the company and widen the discussion to what they’re going to do in the future, and talking about where this company can go from here (and hopefully see the opportunity to grow huge).
These entrepreneurs’ pitches look more like this:

We start broad for about a minute and then we narrow quickly into a deep dive into the product itself.  At the end of the discussion, assuming I haven’t stopped them first, they just ask me how much money I want to contribute and that’s that.
No discussion about the future, no talk about company vision, no assurance that there is a real big opportunity here; just a cool product and someone who wants money to develop it further.
Here’s are the issues:
1. Talking about vision and potential future of the company is important.  It gives you a defining vehicle in which to drive the company forward.  It provides direction internally, and external understanding about what your company is all about.  If you don’t have this, you could be really stuck at some point if your current product isn’t getting traction and you won’t have some sort of map to follow; you’ll be forced to define one on the fly and you might not be able to.
2. If you never talk about the vision, I will never know if you will ever get one.  I have found some people don’t ever get the vision. They can’t ever get their heads out of what they’re doing at that moment. They somehow are missing the strategic gene, and only have the tactical – so they are great sergeants but not generals. But it’s the generals that will build the Googles, not sergeants who can’t advance beyond their rank. That doesn’t mean that sergeants aren’t important; it’s just a problem if they are trying to build a startup which requires someone to think like a general to know if they are working on the right problem.
3. If we never talk about the vision, then I won’t know if you’re aiming for the right opportunity. If all I see is an incremental improvement on what’s out there, or something small like a feature (how ever nifty it is), it’s just not going to get me excited because I need to bet on the next big thing not just another little thing.
4. Here’s another way to look at it. The world contains a whole bunch of problems that you could work on, and a whole bunch of solutions:

So you lightly define a problem, and then you start building and coding because that’s what you’re good at and you want to get cranking. So you crank.
Now, starting with this solution, you’re aiming for some problem:

But your problem definition isn’t complete. It’s nebulous. The problem with this is, if you had a great problem definition, you might actually be spending time on the wrong solution. If you started with a great problem definition, you might actually end up with a better solution than the one you worked on now:

This is because the set of possible solutions can be enormous and unless you define the problem well, you might be wasting time building something which may not be the optimal solution from the right problem! So why not show me that you understand and have defined the problem fully, and then show me that you’re working towards an optimal solution to this problem, versus me feeling unsure that you’re working for the optimal solution to some problem which I’m not sure yet whether you should be working on!
So are we headed for a small business, or the next Google? Talking about your product in detail is nice and important, but I want to hear about why you’re building it in the first place as much as how much you want to demo what you’ve built.