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I have had the luxury of listening to thousands of startup pitches. This gave me a unique opportunity to find not only pitch techniques that work regardless of market conditions, but pitch techniques that consistently fail regardless of company stage, founder experience, and market conditions.
A major misconception that founders have when raising capital is that they have to “convince” venture capitalists to invest. The truth is, most VCs will listen to your problem, solution, team, and traction within minutes of your pitch to determine if they're interested. After that, every action you take, every word you say as a founder, is just an opportunity to give that investor a reason not to invest.
With this in mind, let's take a look at some phrases that always give investors a reason not to invest and destroy founders' chances of raising money.
1. “This company can be sold within five years.”
Turning an idea into a successful startup is difficult. It requires extreme dedication and effort. Many founders believe that explaining to investors how they can get their money back (and promising a short period of time for that return) is appealing, but the reality is that When dealing with a capitalist, they want to see your commitment to building your company. Business he reaches more than 1 billion dollars. When you start talking about selling your company in the short term, here's what you'll find.
- You’re not 100% focused on growing your business.
- You are more interested in money than in the problems your company solves.
The best startups have founders who care deeply about the problems they solve for their customers, not just people trying to get rich.
Claiming that the company can be sold in the short term is a big red flag for investors.
Related: Should you pitch your startup to early-stage investors?
2. “We have no competition.”
Investors quickly become nervous when they hear that there are no competitors. Nowadays, there is no business idea that someone hasn't thought of before. Therefore, if there is no competition, there must be an incredible reason. In many cases, there is no reason why competition should not exist unless there is a recent technological innovation or legal change.
Many founders make the mistake of claiming there is no competition. Because they think of competition not as other solutions to the problem they're solving, but as other companies offering that very product/service. For example, when AirBnb made its pitch, it included Craigslist as a competitor. Craigslist is not in the business of helping people stay in strangers' homes instead of hotels, but the site is a place where you can connect with others and arrange to stay with someone in a foreign city. I can. So it's a viable solution to the problem that AirBnb was solving, and it's also a competitor. Thinking about your competition this way will help you find the right competitors to include in your pitch deck.
Finally, it's essential to reframe the way you think about competitor slides in your deck. Founders often believe that the lack of competitors is a good sign for investors. In addition to raising concerns that you don't fully understand your market, a lack of competitors can tell investors that there's no demand for your product. If no one is trying to make money in your market, the market may not exist at all. This slide is your chance to show (i) that your competitors exist and (ii) how your company is better.
3. “We need you to sign an NDA.”
Venture capitalists don't sign NDAs. As an investor, I can confidently say that once a founder asks for an NDA, the conversation is over. Investors listen to thousands of ideas a year and pick the top 5-10. No investor will sign an NDA and risk not being able to work with dozens or hundreds of companies to hear your proposal.
From a founder's perspective, there is no need to worry about sharing ideas unless there are patent or IP considerations. The reality is that a company's success is based on execution, not ideas. If you have a great idea, you need to believe that you are uniquely positioned to execute on that concept in a way that no one else can. Otherwise, you are unlikely to succeed in any case.
Related article: This is how excess capital can destroy startups
4. “I just need the money.”
Investors dislike backing companies that are not yet on the path to success. When marketing your company, you should never talk about your company like a parked car waiting for gas (money) to start moving. You need to promote your company like a car always racing towards the finish line. If you have more gas, you can go faster.
If there is any indication that your company does not yet have positive momentum and is dependent on capital injections to advance the business, the risks associated with the business increase significantly and most VC conversations end. .
5. “I don’t need a co-founder” or “I just met a few months ago”
Especially at the pre-seed stage, your team is your most investable asset. Anyone can copy your ideas. Investors are looking for teams they believe can execute on their ideas. Ignoring their concerns about team size by claiming you can do it all by yourself or indicating that your team hasn't worked together long calls into question your ability to execute. If your team has flaws, don't try to ignore them. Instead, focus on how to improve them through strategic hiring to ensure your company's success.
Founders disbanding or giving up is the number one cause of startup failure. Although this may seem like a trivial question to you. For investors, the long-term commitment and potential of the founding team is a key consideration when making pre-seed or seed-stage investments.
