There are volumes of advice on what entrepreneurs should be saying during investor pitches and meetings. Knowing what not to say can be even more important.
Before you walk into that presentation or investor meeting you ought to know your lines, your slides, your data, the questions you’ll be asked by investors, and even the questions you should be asking to stand out and find a good fitting funding partner. Yet, all that can be blown if you make the following mistakes.
1) You Need to Sign This NDA
You might think you have the most unique idea in the world, and that letting it out is the biggest risk to your future. It’s not. At least, it is highly unlikely.
First off, many very savvy investors I’ve interviewed on the DealMakers Podcast are clear that they don’t think that there are really that many truly unique ideas. Somewhere, someone else is thinking of pretty much the same thing right now. Someone else did yesterday. Someone else will tomorrow. The big difference is in the execution and the founding team that can really pull it off.
So, investors can’t sign an NDA because they can’t guarantee they won’t fund a similar idea from someone else. There is also too much legal risk they can’t control. It also shows that you don’t trust them. Typically they would sign an NDA when you go into due diligence with them.
What should be more important is getting your idea out there and funding it before and better than your competition.
2) We Have No Competition
If you have no competition then you definitely don’t need a NDA anyway. Every business venture has competition. Even nonprofits have competition. If you haven’t found them yet, then you probably haven’t done enough research. You are going to look like a total novice and lazy entrepreneur. Who wants to fund one of those?
Inside your pitch deck you should absolutely include a slide with all your competitors or investors will think you are either trying to hide something or not grounded enough about your own market. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
Also never talk poorly about your competition. It is a turn off. Always be respectful as the world is small and those competitors may get big enough to acquire your own business at a price that could be life changing.
3) We Don’t Really Know Our Unique Selling Proposition Yet
You have competition. What matters is knowing what’s unique and better about your business. That’s typically not price. “We are fast, honest, and the best,” isn’t going to fly either. That’s exactly the same pitch as 100 plus other people in your neighborhood.
What’s better about your team and operations? What is better about your product and service? Know it. Own it.
4) We Have No Weaknesses
You’ve named your strengths and unique advantages. You also have weaknesses. You do. If you don’t know them, you are are really not aware. That alone is a big weakness, and probably the most dangerous.
It can take a mentally strong entrepreneur to recognize and admit weaknesses and gaps. Yet, this is a strength in itself. It means you can fix it, find the right help, and overcome them.
5) This is Such a Sure Thing it Can’t Fail
Most startups do fail. In fact 9 out of 10 go out of business. All were ‘sure things’. Even those carefully vetted and well funded by savvy investors fail. The majority of an investor’s bets aren’t going to work out. Only one is likely to be a huge winner.
There are too many variables. Besides, being ready to be an entrepreneur means you have to be ready to fail. You have to be willing to test and try. You’ll always be tweaking. You might even have to start over.
Paint the best and worst case scenario, as well as what you expect. Just don’t try to sell this as a guaranteed win. They know better.
6) I Don’t Have an Exit Strategy Yet
Most investors are purely investing on the basis of achieving a highly profitable exit. Normally sooner rather than later. That’s how they make their money. No investor can go in, without an exit strategy in place.
So, not having an exit strategy or saying you’ll never sell or go public means you don’t have anything to offer them. If that’s really how you feel, equity fundraising probably isn’t for you.
Also never talk about an exit strategy right away as investors may think you are in it for a quick win which shows lack of commitment. Only talk about a potential exit scenario if investors are actually the ones that ask you.
7) We Really Need the Money
Like banks, angels and VCs want to fund ventures that are really on great footing already. Their capital will just amplify the good results.
If you’re begging, it’s a sure sign you are already in trouble. You either aren’t getting the traction for your product, no one else is willing to fund you, or you’ve been mismanaging your money.
Instead, float this limited opportunity from a position of strength and confidence. Even if you’ve only go a month of runway left in the bank.
8) I Just Need Your Money, Not Your Help
If that’s true, then a business loan might be a better choice for your startup. You’ll be giving up a lot for venture capital for it only to be about the money.
Investors also invest this way because they are looking for opportunities that they can really blow up with their expertise and connections. Think the show ‘The Profit’ with Marcus Lemonis. Not to mention this will be really insulting and appear ignorant to your own weaknesses.
The reverse is a much better strategy. You want their help, the money is just gluten free gravy on top.
9) We’re Going to Have a Big Party Now
Even the party hard crew of the past who were living it up in 1999 know what a terrible waste of dollars this is. Investors are probably not the people to pitch just for funding a big fun party. They want a return on the investment. Maybe just find some sponsors for your launch event instead.
Though that doesn’t mean you shouldn’t regularly celebrate all of your accomplishments and milestones. If you make them enough money, your investors might just throw you a nice party voluntarily. Focus on that.
Remember that securing financing is not a mile stone but a stepping stone.
10) I Need a Big Salary
Investors are not in the habit of funding salaries. Definitely not big ones. They are funding R&D, product development and expansion. Not your frappuccinos or stylish NYC studio. Many investors and accelerators have even slashed funding or have relocated to avoid this issue and the amount their founders need. Anything above $150,000 at a Series A financing or Series B financing is a red flag.
You might get something for your office rent (where you may be sleeping for a while) and be able to expense your cell phone and laptop, just don’t think this raise means you’ve made it and you can kick back and buy a fleet of Maseratis.
Source: Alejandro Cremades on Forbes