Fred Wilson wrote an interesting blog post yesterday about the sequence in which a startup should nail the following items:
  1. First the product
  2. Only then the strategy (who is your target market, and how are you reaching them)
  3. Only then the business model (how you charge for things)
Most VCs will ask you about the business model and strategy in your early-stage investor pitch. The true answer: “I do not know yet”. Stopping the discussion there is not a good answer. Making up something and selling it is the truth and the only truth might cost you credibility points.

The middle ground is better. Admit that things are early, and discuss 1-2 strategy/business models scenarios that seem sensible given the stage of development you are at and what you know about the market at the moment. It shows that you are a sane person and a trusted pair of hands as you embark with your investor on an uncertain journey in which everything will deviate from plan for sure.

A bit of ambiguity in your pitch is OK.