3 Phrases You Should Never, Ever Say to Investors
You agonize over your deck and bust your butt practicing your pitch. VCs, on the other hand, are inundated with investment opportunities and have neither the time to dig in depth into your business, nor the motivation to overlook your missteps. With so many more deals rushing at them, they’re essentially looking for a reason to say no to you. Don’t give them one.
Here are a few phrases experts claim can instantly derail your pitch -- no matter what else your business has going for it.
'The Market Is Ginormous'
You may think it sounds impressive to say the market is massive, but what it really says is you haven’t done your research properly. "Any market sizing higher than $100B (actually, I would really be careful starting around $50B ) is simply not credible. It either means the entrepreneur has no idea how to segment the market to find the initial target customer segment (and thus a smaller addressable market) AND/OR the entrepreneur has no idea how to tie his business model to a market sizing calculation. (e.g. if you are selling foodtrucks , you can’t say your addressable market is the total $$$ of food sold by foodtrucks.) Neither one builds confidence," warns Will Hsu, co-founder of accelerator MuckerLab.
Akira Hirai of Cayenne Consulting agrees that half-baked statements like 'Forrester projects our market will be worth $80 billion in three years' will undermine your pitch. "If you are opening a restaurant, it doesn’t matter how big the global market for food is. Similarly, if you develop CRM systems, the global market for software is irrelevant. You need to drill down to the total addressable market - the niche within the larger market that represents actual potential customers you can reach," he warns.
In short, "know everything about your market," as Y Combinator’s Paul Graham has advised.
'All We Need Is 1% of the Market'
Investors are essentially betting on your business, so you want them to know that you don’t have to perform miracles to succeed, right? Sounds reasonable, but it’s totally wrong, according to Hirai. "Investors are not interested in companies targeting only 1 percent of a market. Venture capital firms want to invest in startups that could potentially provide a 10, 20, or even 30 times return on investment. This means betting on companies that are going after a substantial share of their target markets," he writes.
The phrase is the kiss of death, according to veteran startup CFO Ken Kaufman: "If a sophisticated investor hears it, they will shut down any further interest in your business. They may appear to be listening, but they are not."
'Our Product Is Viral'
If your product is so loved that people pass it on, that’s great, but that’s not something you should be relying on -- or touting. No VC wants to hear you’re expecting magic fairy dust to get you customers (and make them money). "Every entrepreneur claims to have a ‘naturally viral’ product. It’s like everyone believing they are an above-average driver. The fact remains that average CTR on Facebook news feed links are around 0.2 percent, which are about the same as banner ads, and certainly no one has ever claimed that banner ads are viral. Until a product has gone viral, it’s not viral," cautions Hsu.
Brendan Baker of Greylock puts it more succinctly: "When people say their product is inherently viral. I say bulls**t."
What are some other investor pet peeves? The links above offer lots more advice on the sort of language you should avoid, while Boston.com’s Scott Kirsner asked around to investors to find out things entrepreneurs say that instantly mark them as amateurs.
What other phrases should entrepreneurs avoid when pitching?