To bring a great idea to market, you need a combination of many things. It takes a great team, the right market, a unique idea or approach, and ultimately, capital.

For many people the hardest part of the journey is raising funding. Getting investors to buy your vision and belief isn't easy. Many early-stage entrepreneurs have found success in building a product that has performed well with early users, but have failed to make the right connection when communicating their story to investors.

For those who have struggled with this part of the journey, there is hope! Raising money is a skill you can improve through experience and practice, just like anything else.

As a serial entrepreneur I've spent my career building companies. My most recent endeavor is Porch.com. To date we have raised $100 million in funding that we have used to scale our innovation and operations. Over the years I have learned firsthand what to do and more importantly, what not to do.

Here are 5 traps every entrepreneur should avoid when it comes to raising money.

1) Not talking with the right investors

The easiest mistake you can make is pitching the wrong people. You need to do your homework and find individuals and groups that actually invest in the space you are trying to enter. Don't settle for anyone that will invest! Focus only on strategic investors and partners that can bring smart money to your company, and those who will add value through things like their network, support capabilities, and other ways that can give your company a competitive advantage.

2) Not clearly explaining the problem your business solves

If you can't explain to someone what problem your business solves and how you plan to make money in a few sentences, you aren't ready to pitch an investor. Simplicity is key. It shows that you have a clear grasp on the problem and an even clearer grasp on the solution. Practice by explaining your business to people to get real feedback. If it's too complicated, you need to do more work.

3) Not explaining the opportunity

Investors want to be a part of companies that have high growth potential and scalability. In your pitch make sure you can convey a sense of magnitude to your idea and it's potential. It's important to show investors you truly understand a market by having a firm grasp on both the short-term need and the long-term potential.

4) Not selling your team and yourself

Your selling points as an entrepreneur don't always have to be about your product--it's also about you. In fact, many investors correctly look at the team make-up as the single most important factor when deciding whether to invest or pass. Investors want to see that you have a unique competitive advantage over everyone else. They need to know what makes you and your team specifically qualified to take their money and use it to win a marketplace. Take time in your pitch to introduce your team and explain what makes them world class at what they do.

5) Not having a plan for what you will do with the money

Investors want to know exactly how and where you intend to invest their money. Are you expanding your operations? Building up internal infrastructure? Planning an acquisition? Whatever it is, be prepared to explain where you will be spending and how long the money will last. Time is money--the quicker you can put the money to work the more likely people will be willing to join.

Published on: Mar 10, 2015
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