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VENTURE CAPITAL

5 Dumb Things Investors Want You to Stop Doing

Any of these mistakes will kill a deal. And they're easy to avoid.

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According to the Kauffman Foundation, women-founded businesses account for four to nine percent of venture capital investments. Guys get the rest.

The gender gap is startling, but there’s actually quite a lot we can do about it. I sat in on Jeanne Sullivan’s “How to Get the Wallets Out of Investor’s Pockets” salon discussion at this year’s We Own It Summit in London. Sullivan is a founder and partner at StarVest Partners and serves on the Astia Board of Trustees with me. She also chairs Astia’s NYC Advisory Board.   

Sullivan gives some of the best pragmatic, life-changing advice of any business expert out there, so I was expecting big things.  She and her panelists, Sam Horn, President of The Intrigue Agency, and Adam Quinton, Founder and CEO of Lucas Point Ventures, a Founding Astia Angel, and Astia Global Advisory Board Member, did not disappoint.

All pumped up from the session, I asked Sullivan what an entrepreneur would need to do in order for her to take her own wallet out of her pocketbook.  Sullivan replied, “Start by avoiding the top five dumb mistakes I see way too often.”  Whether you are just beginning your fundraising marathon or you are in the midst, use these five mistakes as your personal checklist.

Mistake #1: Your answer to a financial question is a blank stare

Understanding and living by the financials of business are not a nice-to-have, it’s a must-have skill. If hearing this makes you want to run for the hills, don’t worry. Sullivan truly believes that anyone can learn this stuff. Until you are financially fluent, meaning that you have sharpened your thinking, analysis and ability to articulate the numbers, have someone at your side to support the financial discussion. Remember, you are asking people to invest a lot of money. They have to feel confident that their bet has a shot of paying off.

Mistake #2: No prior thinking or articulation about your go-to-market strategy

While it’s great that your product or service is wonderful and everyone needs it, you have to articulate how you are going to get your offering into the hands of customers. Sullivan says, “Start with how your offering fits into the marketplace to set the stage for your go-to-market strategy.” Don’t stop there. Have definitive metrics on-hand about your customer acquisition and top-line growth goals, and what channel strategies you will use to achieve those goals.  

Mistake #3: You're blinded by product love

“’Let me show you a demo’ is the marker that a CEO is in love with the product and not with the business of the business,” says Sullivan. An investor is putting money into you and your business. Whereas a customer cares about how your product or service makes his or her life better, an investor is looking at you and deciding if YOU are the next big thing. Can you lead the company to outperform the competition in all aspects of the business? The product is only one part of that investment consideration.

Mistake #4: You packed everything including the kitchen sink into your presentation, but you forgot about the packaging.

A “lack of ability to package the product or service” creates all sorts of red flags for an investor.  A great pitch includes a short description of your offering’s unfair competitive advantage. “Include your plans for hiring the team and describe the next steps to execute that will enable you to achieve revenue traction,” says Sullivan.

Mistake #5: Your only assets are a team, a dream, a PowerPoint and a dog

It’s your job to find the right investor for your business. Hone in on angels or VCs that are interested in your industry, your stage of development, and your geographic location. “Often an entrepreneur approaches the wrong investor at a time that is far earlier than appropriate,” says Sullivan. It’s up to you, the CEO, to build the right team of investors and to bring the right technical and business leaders and team at the right time, keep a clear focus on the target market, perfect your business model, and constantly monitor your product pricing and revenue streams. Sullivan urges CEOs to “find a great technical co-founder early in the process. Do not foot-fault on that choice.”  

Sullivan believes that a great CEO “knows what to do and how to do it.” That always means that you don’t go it alone. Sullivan’s parting words: “Orville Wright did NOT have a pilot's license! Surround yourself with an advisory board that can help you take flight.”

IMAGE: pànn. / Flickr.com
Last updated: Aug 7, 2013

Scholar-practitioner, experienced high-tech marketer and advocate for meaningful innovation, PATRICIA FLETCHER is passionate about leveling the imbalanced technology playing field to include all the best innovators. She blogs at www.psdnetwork.com and tweets at @pkfletcher.
@pkfletcher




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