While venture capital isn't right for the vast majority of businesses, if you've decided to go that route then I'm going to assume you're doing your homework on how to put together a really great pitch and business plan. I'll leave that heavy lifting to you (although I have included links to four of my favorite pitch decks in this article).
Instead I'm going to tell you what you shouldn't do--or more specifically, say to your potential investors while you're trying to woo them. I'm also going to suggest you develop some VC empathy by going to angel.co and listening to a dozen pitches back to back; see what it's like on the other side of the table. While the pitches on angel.co are more about the problem being solved, you'll get a sense for who is being backed, what works, and how incredibly tedious it is to listen to one pitch after another.
And with that, here are the top 12 reasons to get out the duct tape. Utter two or more of these gems and you're nearly guaranteed to blow your chances of getting beyond the pitch with most investors.
(Send me the ones you've come across that I haven't included!)
- "We've never worked together as a team but we all get along really well."
While there is nothing wrong with pulling together a team with some new members, the more experience the core team has in working together, on prior successes, the more likely it is that you will be seen as reliable and predictable. Many times the funding is about believing in the team more than the idea. I've been in meetings where members of the pitching team actually started arguing amongst themselves. Yeah, that's always a good indicator.
- "All we need is a few percentage points of this muti-trillion dollar market to become the next Uber."
Without a strategy this is just a Hail Mary pass, and it's probably the single most often cited statistic. It's great that the opportunity is large but what's important is, What problem are you trying to solve? How you are going to solve it differently? See Airbnb's first pitch deck to get a sense for how to make a great case for attacking a huge market.
- "If you look at this chart you'll see where the elbow of the J-curve takes off."
This is the second most frequently cited statistic. It always comes in the form of a hockey stick chart that shows exponential growth that's about 4-5 years into the business. Be realistic about your growth expectations. Rocket ships do come along but they burn enormous amounts of fuel. See Dollar Shave Clubs early and late stage pitch decks to see what a rocket ship looks like.
- "We don't have any revenues yet, but that's good because you're getting in on the ground floor. "
Be careful with this. Some investors, especially angels, may want to get in from the outset and are willing to deal with the risk and potential downside. But most investors would rather see a track record and proof before getting in. Do your homework, know your audience! If you are indeed a first mover then check our Reid Hoffman's LinkedIn B round pitch deck to Greylock Partners for a great example of how to deal with this and the next two points.
- "We plan to educate the market. "
See point number 4 above. Many investors do not want to educate markets, they want someone else to do that and then step in when an educated market is ready to buy.
- We have no competition because nobody else has thought of this idea before.
See Points 4 & 5 above! Then come back when you can show there's a need.
- "We have a track record; we've been at this for ten years."
If you've been growing for ten years, or the last five, then great! If you've flat-lined and are looking for the paddles to the defibrillator, good luck. Investors want to see traction. It may not be revenue traction; PayPal waited till it had 4 million users to start generating revenues, but it had traction and a trajectory.
- "We are going to get acquired by Google. "
Who isn't? While it's fine to describe likely exits your job is to show how you have and will continue to grow the business. Savvy investors can figure out the exit as long as they have a healthy, growing business, whose products or services are in demand.
- "We need investment because we're running out of money."
Are you also trying to find a roofer during a windstorm? Clearly you haven't planned well. You either can't manage your cash or can't judge the market. Neither is a good sign.
- "Here's our impressive list of customers and advisors."
Slides with the logos of a few dozen customers are great until you get asked, "So what exactly did you do with American Express?" To which you might reply, "They were interested...well, they signed up for a webinar about our product...well, we're not sure they really attended...but they did sign up!" At which point you can take what's left of your credibility, stuff it into that little tiny fifth pocket in your jeans--you know, the one you can barely fit your fingers in to fish out some change--and go home
- "We do not know what our gross margin, EBITDA, cost of sales, burn rate, etc. is."
Really? What did you think the conversation was going to be about? You will be asked about financials. Be prepared. Say you don't know if you really don't, because the only thing worse than not knowing is making it up and getting caught in a lie. Just don't expect a pass on your lack of basic knowledge.
- We've tried this with friends and family and they LOVE it.
Great, so maybe they should fund it! NO, seriously!
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