Having been on both side of the table, in the early days of my career first as an entrepreneur seeking funds from investors and later as an advisor/consultant to investors and an investor myself I will try to condense 30 plus years of reality into 15 minutes of real life and real term DOs and DON’Ts
And, having sat through countless pitches, I can attest that many of them fall flat – and it’s not always because of the idea or product. Rather, the biggest red flags have more to do with the delivery and style than content.
Pitching to investors (Angel, VC or others) is no picnic and can end up making you really uncomfortable. The good news is that these are relatively simple pitfalls that can be easily avoided if you prepare for them.
Here are some DO’s and DON’Ts
- Dwelling on the back story (A real turn off): I’ve seen entrepreneurs spend half their pitch times describing what they’ve done in the past and where they’ve gone to school. Yet, the investor is far more interested in what an entrepreneur (founder) is doing today and where they are headed tomorrow. Its fine to offer background that is relevant to why you started this business, but keep it simple to the point (relevant) and short.
- Needing to be absolutely perfect: Don’t stress every last, tiny detail. Yes it’s important to make things great and you can certainly do this by upgrading over time, but good and profitable is better than perfect and never done. Get things done. Be a person who finishes even if it’s not yet perfect.
- Overstressing how great the business is (It’s good to have self confidence but know your limits…): I can’t count how many times I’ve heard an entrepreneur say, “We’ve got tons of traction without any marketing investment,” or “These financial plans are extremely conservative.” The investor is NOT interested in any disclaimers or caveats. They’ve heard it many times. Likewise, keep your descriptions grounded in reality – not every product or team is “world” class.
- Thinking you need a product before you can sell it: Drum up interest and do your research before pushing the sale. You need “customers” before the product! You think you need to have the perfect product finished before you can start selling it. When you can use the boot camp model or pre-sell something to see how many people are willing to buy it before you spend months and months creating something that no one will buy. Yes, you can sell your product before you create it.
- Don’t Bullshit (a real big turn off): For example, if you are asked what your customer acquisition costs looks like compared to the leading market competitor. You probably know your acquisition costs but if you don’t know the competitor’s inside numbers, don’t try to BS out some random guess. What’s a reasonable response? Engage the investor and drive towards getting the data. Here is an example of what you can say; “You know, we’ve heard a few different numbers but have had a really hard time confirming that. What have you heard or can you suggest any people who might be able to check the info we’ve collected so far?” (Pass the ball to their yard…)Good investors usually succeed because they’re able to read people well. Also, since they’ve seen and heard so many pitches, they have lots of real reference data to call you on your bluff.
- The demo doesn’t work (ouch! A real turn off): If you include a demo with your pitch, it needs to work really well. This is critical. And your credibility depends on it! Any technology hiccups (from a problem with your prototype to the internet connection not being fast enough for a smooth demo) are not only unprofessional; they’re a waste of everyone’s time. For this reason, keep the demo simple. A strong product demo doesn’t need to include every potential feature but should take the investor through the key use cases showcasing why you built the product the way you built it.
- Not being open to questions while going through the slide deck (no interaction with the investor): Investors ask lots of questions. That’s how they assess risk and potential. When an investor interrupts your presentation with a question, you may be tempted to get back to the comfort of your rehearsed pitch and slide deck. Instead, take the time to answer these questions as completely and honestly as possible. After all, if you secure funding (with any type of investor), you’ll be entering a long-term relationship with them that will be full of questions, conversations, and give-and-takes. You need to show the ability to listen to other points of view and answer questions without getting defensive. As a consultant that helps both investors and start ups I’m often looking at an incomplete picture when trying to assess an opportunity. Inevitably there will be a question where the data investors are seeking isn’t something the company has yet calculated/tested, or haven’t thought to research or maybe even not as important to their business. For entrepreneurs, these blank spaces are great moments to stray from your standard pitch and really connect with an investor. They’re also pitfalls where I’ve seen some entrepreneurs mess up and hurt their credibility.
- “I’ll Get Back to You”: If you haven’t run the test or you don’t have the data handy or need to crunch numbers in order to tease out a piece of information, that’s totally cool. Investors look for immediate answers and expect it to be top of your mind, but if it’s not, don’t waste 10 minutes looking through your laptop folders or inbox for the email with the stats. Just tell them you’ll get back to them and then do so in a timely anner.
- Educate the investor: There are certainly many things you as an entrepreneur and innovator know about your business maybe better than the investor. If the investor is asking for a piece of information which isn’t very central to the way you think about your company try to find out why the investor is asking this question. This is an excellent chance to help you get inside of the investor’s mind.
- Not finding the right investor: Just because the investor has money to invest, they may not be the right person for your company. Most of the time investors demand too many shares, they most likely want control very early on in a project and sometimes can soon be the ones trying to fire you at the end of the day! If you can find the right investor who is also a business mentor, someone who really believes in what you are doing, that is the real treasure.
- Trust and be trustworthy: It often takes longer to forge new business relationships outside set norms and circles. In some places, newcomers are eyed with suspicion. High social barriers, whether caused by geography, networks, culture, language or distrust, can stifle relationships before they are born. The rate of innovation increases when people break down these barriers and create bridges of trust outside their normal circles. Doing so is crucial because innovation thrives when people contribute different ideas, backgrounds skills and networks.
- Fairness and willing to sacrifice: Often investors and entrepreneurs treat business as a zero-sum game, where one side wins and the other loses. Investors are often the worst at this. However, the most successful venture capitalists know they should treat their entrepreneurs fairly. You can’t innovate alone. You need partners to take on the journey with you. Wise businesspeople have the humility to seek out long-term, positive-sum collaborations with others, and are willing to sacrifice some of their immediate self-interest for long-term gains.
- Pay it forward: Listening is a key to building relationships and assessing needs. You don’t want to be carrying on a monologue in your interactions. Ask questions and keep learning. Create an environment where diverse opinions and talents are valued and where newcomers don’t remain strangers. Take an up-and-comer to lunch. Introduce others to your network. Return phone calls/follow up right away! Become a mentor. You may think you’re getting nothing back, but you are getting something of incredible value: a great reputation. You’ve become an expert, a go-to person, someone others know they can trust and, just as importantly, think of fondly. You also give yourself the opportunity to hear your own ideas aloud, creating the opportunity to assess whether they are still sound practices.
- Is seeking money from investors the only way of funding your start-up? This is not true. Network and get creative. I know so many entrepreneurs who started in debt (anywhere from $5,000 to $100,000) , and built everything with hustle, relationships, building their audience and sweat equity. It’s time to get creative and start thinking like an entrepreneur instead of thinking like someone who works in an office cubicle. Jump out of your box and look at other alternatives such as Crowdfunding and philanthropic funding.
MOST PRODUCTS AND IDEAS FAIL NOT BECAUSE OF THE PRODUCT OR THE IDEA BUT BECAUSE THE MODEL FAILS TO FIND THE RIGHT CUSTOMERS & MARKET FOR THE PRODUCT!
STARTUPS TEND TO CONCENTRATE MORE ON PRODUCT DEVELOPMENT THAN CUSTOMER BASE DEVELOPMENTSIMPLY SAID STARTUPS FAILS BECAUSE THEY CONCENTRATE TIME, EFFORT & MONEY TO BUILD THE WRONG PRODUCT FOR THE MARKET & CUSTOMERS
You need to go where your customers are, and provide what your customers want & need, not where you need to be seen and not what you want to sell!Customer development & the pace of it are the most critical success factors for startups! It is important that startups evaluate how they would need to expand the pace of their customer development with a sound and analytical logical model, not hype!
And now our own pitch: The factual statistics show that almost 90% of startups fail. Various studies suggest this high failure rate is the result of the wrong guidance, untrained founders and startups not getting the right support! We’re here to teach you the key attributes and solutions the “other” 10% want to follow. Learn how to process the ultimate business startup “model” and develop your ideas through what we like to call “building block immersion” with One2StartUp!
(The above list of ideas and suggestions have been compiled by the author for over more than thirty years of working with startups and established enterprises. The learning process is a never ending one, and new ideas, new suggestions and new solutions will be added to this list as we keep on navigating in the universe of innovation. We hope that this list will help you navigate in your own path to success. Enjoy the ride! HT)
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