10 Mistakes Startups Make When Talking To A Startup Investor
So you’re wondering how to find a startup investor? Perfect, your exactly where you should be. At PitchSkills we help entrepreneurs to find & convince investors.
Before you go ahead and talk to investors, there are a few things you should know. To make it more concrete, a few things you should never do.
Never.
Here are the 10 mistakes startups make when talking to a startup investor:
#1 They don’t know how they will spend the investment
Sure. It’s tough to know how much money you’ll be spending exactly. That’s now what a startup investor wants to know.
They want to know a rough estimate of how you’ll be spending your money. Let’s say you want to raise $500,000 with this startup investor and he/she is asking how you’re going to spend the investment. Your answer should be something like this:
- $100,000 marketing online
- $20,000 marketing offline
- $180,000 sales
- $160,000 operations
- $40,000 overhead
Startup investors don’t want to know every single detail. They just want to understand your strategy.
#2 They mention every detail of their business
You know startup inside out. Great work! That doesn’t mean you should bore your startup investor with every single detail.
Startup investors are usually extremely busy and don’t have a lot of time for you. If you want to make a startup investor excited about your startup, you should keep it short and simple. No unnecessary details.
No product specifications. Only if he or she asks for it of course!
#3 They didn’t practice their pitch properly
When it comes to pitching a startup there is a huge myth going on:
‘I’m a smooth talker. It’s best if I freestyle my pitch’
Never. Do. This.
As I mentioned, startup investors are busy people. They want to get to core if your business case as soon as possible. Don’t waste time with ‘uhh’ and ‘ ehhh’. Practice your pitch and convince the startup investor within 2 minutes!
#4 They don’t know their competition
If you want to destroy your meeting with a startup investor as soon as possible, there are only 4 words you have to say:
‘We don’t have competition’.
Trust me. You’re guaranteed that the startup investor will be leaving within the next 5 minutes. See, it could be true that there is no company which does exactly the same thing as you do. But there is always competition.
Every service or product which (partly) offers the same benefits as yours is one of your competitors!
#5 They don’t know their financials
Although startup financials are usually all based on assumptions, they’re important.
It shows the startup investor that you though about the future, and that you’re capable of making decent projections. Not knowing your financials is another good way to shorten your meeting with the startup investor significantly.
Always prepare your financial projections for the coming 3 years.
#6 They talk benefits instead of features
Many entrepreneurs feel like the technological features of their product are important to mention to startup investors. This is a big mistake.
Instead of telling them how it works, you should focus on what it can do for them. An example:
Don’t say: The new iphone has a 1300:1 contrast ratio
Do say: The new iphone has a breath taking HD screen which you can use to watch the newest movies.
#7 They agree with everything the startup investor says
Most startup investors are former entrepreneurs who did pretty well.
So yes, it makes sense that you have a lot of respect for this person.
However, respecting somebody isn’t the same as thinking of somebody like a guru. It’s okay to debate with an investor. This shows you thought everything through.
Alongside this shows that you’ll stick to your plan instead of switching plan every week.
#8 They tell the startup investor EVERYTHING is great
So your startup is going to be the next AirBnB or Facebook?
Good for you.
Want my advice? Don’t tell this to the startup investor.
Startups who call themselves the next big thing are likely not going to get anywhere. It shows the startup investor that you’re either naive or arrogant.
Being ambitious is great, but being unrealistic is a big nono. It’s perfectly fine to discuss potential risks in your business, actually it shows you’re well prepared!
#9 They focus on the slides instead of the startup investor
When you’re pitching your slides to a startup investor, it’s important to stay engaged with the people in the room.
Many entrepreneurs go into ‘powerpoint presentation mode’ and start rambling all the text they prepared.
Don’t get me wrong, preparing your pitch is a must, but make sure to engage the startup investor and get him or her to talk as well.
#10 They ask startup investors to sign an NDA
Asking startup investors to sign an NDA is a big nono.
The damage of sending an NDA is usually greater than the benefits it can bring.
It tells the investor you’re lacking experience. Alongside, startup investors will simply get frustrated if you bring it up.
Did you like this article? Share it through the buttons below. It would help me a LOT and I would be really gratefull!
PS: Did your startup already raise funding? Check out The Ultimate Pitch Guide, it will prevent you from making expensive mistakes when pitching to investors.
