Many Startups depend on fundraising to survive or grow. Angel investors or Venture Capitalists are a perfect match for startups with rapid production and customer base growth potential. But, the competition for scarce capital is fierce. Founders also tend to get very few chances to woo investors, so getting your investor pitch right the first time is essential. To make a successful pitch there are several mistakes founders frequently make that you must avoid. Let’s explore a few of these mistakes in more detail.
1. Not Building A Strong Network
If your pitch is the first time investors are meeting you and hearing about your startup, you are already at a massive disadvantage. Companies introduced to investors by their colleagues have a much higher funding success rate. Networking creates opportunities for you to get to know investors who will introduce you to other investors, increasing your network and building familiarity.
Networking allows you to understand investor’s priorities; you can also observe their level of focus and commitment. Ultimately you can scout those investors who best suit your company’s needs and let them know you would like to speak with their portfolio companies and founders they have partnered with as part of your due diligence. Get feedback, particularly on how they react to the most challenging times.
Investors like to see the fire in your belly. They love when you ask them questions geared towards expanding your startup, as this demonstrates that you aren’t just there to collect their money. It shows passion and an eagerness to learn and grow as an entrepreneur.
2. Avoid Premature Fundraising
An excellent question to ask angels or Fund Managers in your network is if your startup is ready for their type of funding. They will analyze your company and the benchmarks or metrics it needs to hit before applying. If you have done the crucial validation work to reduce investment risk, then you are on the right track. Early-stage startup investment is quite risky, but unnecessary risk is not acceptable.
Test all your business model’s primary assumptions. Review how your unit economics work when scaled. How will customers react to the solutions you present? Are your customer acquisition costs low enough? Developing traction enables you to prove most of these, but if you can‘t collect the data without funding, seek other means of trialing, testing, and experimenting with upscaling. Always get external confirmation that you are ready. Internal sources may not critique your project objectively enough.
3. Not Emphasizing the Core Details in Your Pitch
If, after your pitch, the Investors still don‘t fully understand your solution and its impact on users, they are less likely to fund your startup. Instead, avoid jargon and use simple everyday language to tell investors a story, practice with something easy to market like the first cellular phone device. Start by outlining the current problems faced by your potential customers, using specific examples like the inability to receive calls on the go with a landline. Then transition to more specific details showing how your product makes a meaningful difference, like how the cell phone solves the landline’s limitations.
If you can demonstrate your solution‘s usefulness to investors and allow them to understand the difference it will make in people’s lives, then you are a shoo-in to securing funding.
4. Ineffective Communication and Branding
Can you imagine someone proposing to their partner with an exquisite engagement ring tackily wrapped in newspaper? Few would fault the proposee‘s immediate rejection of the proposal. A similar effect occurs when founders engage with investors. Aesthetics is essential, and all communication must be clear. A good brand is high-quality, professional, and reliable. You demonstrate your brand in how you present yourself, your deck, your website, your handouts, and your enthusiasm and confidence.
Investors will notice everything about you and your solution, so everything must be presented in a clean, well-designed, and engaging manner. Sloppiness creates doubt because if you cannot handle the little things, how can you be trusted to execute the project with their money?
Finally, practice your pitch repeatedly, get an independent audience to listen, and provide as much feedback as possible. Take constructive criticism well; let it guide your corrections where applicable. Being prepared and knowing your presentation well makes it easy to cope with the audience‘s reactions, questions, and interruptions.
Conclusion
As a Founder, you do not get many opportunities to secure funding from angels and Fund Managers, so you must prepare to maximize opportunities. Avoid the common mistakes of not building an effective network and premature funding searches. Ensure you emphasize core details in your pitch while providing excellent communication. Maintaining high standards in everything you do establishes a strong brand.
There are many other steps founders can take to be better prepared to secure funding. Do your research, exercise patience, and retain an eagerness to learn and engage as you strive to make your dreams a reality.