Seeking money to launch or grow a business or startup can be an exercise fraught with pitfalls and frustrations. That’s true no matter what source you are seeking money from, including friends, family, angel investors, venture capitalists, or partners.
Many first-time entrepreneurs approach this process with great optimism and belief in their business ideas, only to fall flat on their faces. Reasons for that failure vary, but the fault often lies with entrepreneurs and founders themselves. Many of them simply haven’t spent enough time studying how to approach investors, including what to do and what not to do.
Entrepreneurs who made early mistakes but went on to successfully launch and grow businesses point to these classic investor mistakes that can torpedo even the best business plans:
Making it all about the money: When approaching investors, you’re not just pitching an “investable” idea and plan. You’re also pitching yourself personally – and your team. Building a true relationship with an investor goes beyond the idea and potential ROI. So it’s important to also focus on selling yourself as someone the investor should be willing to believe in.
Being unprepared: Frankly, this is an unforgivable sin. The entrepreneur, of all people, must have the details buttoned down. Even if you get an investor interested, nothing will bring the conversation to a screeching halt quite like not knowing how much you need to raise and what you’ll do with the money if you get it. Anticipate the tough questions, and prepare your answers.
Asking for an NDA (non-disclosure agreement): Only rank amateurs actually do this. Chances are, you’ll be laughed out of the room if you ask investors to sign an NDA. They review piles of proposals. Their interest is in finding winners, not stealing ideas.
Being overly pushy: Investors accepted the meeting because they saw something in you or your business idea. But if you push too hard, most investors will shut down. Be cool and confident, but not like a used car salesman.
Meeting your best prospects first: Keep in mind that your pitch only gets better with time. You’ll achieve the best odds of success by saving the best for last. Make a note of recurring questions and concerns after each pitch, and revise your materials accordingly. Before you even start pitching, consider sending your draft presentation informally to a few select investors simply for feedback and honing.
Promising too much: Go in with what you know, not what you think you can do. Investors will lose faith in you – that is if they don’t see through you immediately – if your claims sound too grandiose.
Rushing the pitch: As nervous as you might be, try to calm down, and speak from the heart. Speaking more slowly not only allows listeners to register what you’re saying, but it also makes you sound more confident and knowledgeable.
Failing to leave time for Q&A: Slowing down is a good idea, but you must still be aware of the clock. You can’t take too much time and not allow questions at the end. No matter how organized a pitch is, it will fail to answer questions your audience has.
Making it about projections over actual plans: Don’t put a “hockey-stick” graph (one predicting super-rapid growth) in the middle of the presentation and expect everyone in the room to swoon. Projections are usually just guesses that rarely come true. What’s more impressive is your plan to get to the projections you make. Investors know a strategy means a lot more than pretty pictures or charts.
Sounding desperate: People like to invest in, and be connected to, winning projects. If you come across as if this investment is the only way your business can move forward, it seems too needy and will turn off investors. At the very least, it will set you up for having to take a deal that is less advantageous to your needs. In short, you’ll end up giving away more equity than you should.
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