Business pitches can go wrong. There are thousands of reasons why a pitch can fail and you can lose an investment. Go on reading to find the most common three ones!
Over the years I’ve seen some startup fails that have made me cringe in pain for the Founders, thinking “No they didn’t!” I truly felt for them. I almost wished the ground would open up and swallow them because that would be less painful.
Several investors over the years have candidly shared faux pas and “no pas” that they strongly recommend avoiding. Here’s just a few of these painful moments and some suggestions on how to avoid falling in to the same traps. Identities have been changed to protect the innocent - and the not so innocent.
Some startups try the “spray and pray” method, sending cold emails, eventually getting a few meetings. Hey, it can work, and some investors are more responsive to it than others. Others get introduced by a trusted connection and this alone merits a “yes” to a meeting. Either of these and many other methods are fine. Where’s the fail? Not finding our anything about the investor before you ask for an intro, send an email or even before you meet. “Robert” - Managing Partner of a VC told me that one of his favorite questions is “So why do you think we’re the right fit for you?” He’s astounded by how many Founders hemmed and hawwed without an answer. He goes even bolder - “What do you know about us?” - the answers are usually more hemming and hawwing with a series of grunts.
Research the Investor/s BEFORE the meeting - look at their portfolio, do they invest in your area? Great! Use that as an opener. Do you have a direct competitor that they’ve invested in? Don’t meet them! Is there a potential collaboration with one of their portfolio companies? Emphasize this! Find trends and themes to their strategy and bring those up in an email or a meeting to show your knowledge and make them feel like you bothered to learn about them. This, by the way, should be the rule of thumb for any meeting - it’s basically what LinkedIn was invented for...
“Heidi,” a Junior Partner at a VC told me about a time she asked a team about their competition, specifically one pretty direct competitor and the CEO answered “Oh they are no competition for us, they basically suck at what they do.” Heidi smiled a bit sheepishly and then proceeded to tell them that she was on their Advisory Board, not as an investor, rather as someone who had extensive industry knowledge about their field and she thought they were actually quite good. The CEO turned a few different shades of red and needless to say, the meeting was over. Could the CEO have known this before? Maybe… But there’s a better way to avoid it:
Don’t EVER diss your competition! Ever! You never know who knows who, who’s connected to whom. Stay factual - “Well Competitor X does XYZ and actually doing quite well with it based on the $15M Round they just closed. We also do XYZ but with a different approach, set of tools, method, which enables us to also do ABC…” Play off the strengths of your competitors to highlight your strengths and then stress your points of differentiation. Dissing someone reflects badly on you and it signals that if you trash talk about your competition - who else are you talking this way about…?
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“Max,” a prominent Angel Investor, says that one of his pet peeves is when a company voluntarily puts their valuation on their pitch deck. “It’s one thing if I ask them about it,” he said, “and there’s a particular answer I’m looking for. But why shoot yourself in the foot and offer up a valuation that might be much lower or much higher than what I’m thinking? This should be a conversation for much later into the due diligence process.” Exit strategies are another thing not to volunteer. Gordon Daugherty says that investors are looking for a large ROI. And if your Exit strategy is planned for too soon or too late, you are signaling that investors will either see a small, fast ROI or a potentially big but very distant ROI. Both scenarios can harm your chances at an investment.
Never volunteer your Valuation or Exit Strategy. And definitely don’t put them on a slide! Rob Go, in a great piece he wrote for Techcrunch, said that the market will dictate your valuation, you should wait to talk numbers. First, get them interested in you and excited and then you can go for a higher valuation - not too shockingly high. If you get pushback, you can always come down on your numbers. Don’t volunteer it, but If you are asked about your Exit Strategy, Daugherty suggests a spot-on response:
“Our top priority is to build a world-class company that is growing and increasingly profitable over time. With that we’ll have infinite options. At some point in time, one of those options might be an acquisition or IPO exit...But we’re not spending energy now modeling various exit options because refining our plans to double our revenue in the next 12 months is far more important. Essentially, our exit strategy results from building a great company.”
I had prepped a group of finalists for a prestigious pitch competition with a hefty prize. One of them gave a great pitch, truly memorable - it seemed that he had the win in the bag. Then came the Q&A. (SMH!) An Investor on the judging panel asked a question that was, in all truth, a bit snarky. Instead of breathing, smiling and answering, the Founder started arguing with him, proving him wrong - and in the process leaving the other judges shifting uncomfortably in their seats. I was so embarrassed and disappointed… The last thing you want to do is to come across as uncoachable and argumentative.
Don’t argue, just don’t. Even if they said something completely off kilter, say “thanks for the feedback, I will check it out.” Even if you’re ready to scream! And then, when you’ve calmed down a bit, see if there’s anything of value to be taken from their comments. Usually, as much as we hate to admit it, there is! And that’s a great reason to follow up with them and start a conversation - thank them for their insight, tell them what you plan to do with it and maybe ask for a meeting to hear more advice?
You have to understand - investors, especially in Silicon Valley, often know each other and they compare notes - if you blow it with one, word might get out. So leave them smiling, not cringing, even if they aren’t the right match for you - they might have a friend who is so end on a high note.
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