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Washington DC Autumn 2013
Sessions: 2013-11-19 - 2014-03-04
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5 Ways to Scare Off a #Startup Investor Panel
At the Founder Institute we see a lot of pitches. While generally most of our founders eventually knock it out of the park, there are definitely rookie mistakes being made all the time that ultimately scare off investors.
To help our new founders avoid some of these rookie mistakes, I've listed the most common ways entrepreneurs have scared off investors with their pitches.
Will you send your investors running in fear, or seal the deal like a pro?
1. Ignoring the 800 lb gorilla in the room.
There are many great pitch templates and resources out there (here is a collection of our favorites), but that doesn’t mean you can simply swap in your information and go pitch. Every business has very obvious red flags. Identify yours and dispel the doubts, so that the judges can focus on the rest of your pitch.
For example, if you are going after SMBs, then you need to address your customer acquisition strategy head on. If you are a platform, you have to convince the judges how you will get a critical mass of developers using it. Or, if your team lacks experience in your company’s industry, how will your previous experience translate, or can your lack of experience in the space actually be a benefit?
If you don’t know your red flags, then you need to pitch others and get feedback, because they are definitely there.
2. Delivering a “Zombie” Pitch
Investors are judging you just as much, if not more, as the business itself. In their head they are asking questions like, “What is your motivation behind doing this?,” “will you give up if things start getting dire?”, “is this more than just a business project for you?”.
So, don’t just come out and pitch your business - pitch your passion. A pitch competition stage is an opportunity for you to share your vision with a wide audience, and your energy and enthusiasm should reflect that.
“It’s important to see your passion for solving the problem, your passion for the business. At the end of the day, you’re the one who creates the value.”
- Dave McClure, Founder of 500 Startups, at the 9th Founder Showcase
3. Not providing post-funding milestones.
When you were 12 you wouldn’t ask your mother for a dollar without telling her what it was for. So, why would you ask investors for millions without telling them the business milestones their money will be used to acheive? Make sure you outline the specific business milestones your company plans to acheive with the money - general answers like “hiring engineers”, “scaling our platform”, or “12 months of runway” are not sufficient.
“I don’t care what’s going to last for 12 months. That would be like answering ‘How much gas do you need?’ by saying ‘I need enough gas for about 12 hours of driving’. Who cares about 12 hours of driving? Where are you going, and how much fuel do you need to get there?"
- George Zachary, Partner at Charles River Ventures, at the 7th Founder Showcase
4. Giving B.S. Answers to Follow-Up Questions
Too often we see presenters circumvent questions from the judging panel. Instead of giving direct answers, they deliver long, rambling diatribes of company vision and buzzword bingo. In short, complete B.S.
Everyone knows that startups are all about learning - if you don't know something, just say so! But, also explain what you think the answer might be, and how your company in particular can figure it out.
“Since you know your space, you know your user, and you know why your problem is important to solve – you have nothing to fear! I got asked a couple questions I didn’t have answers to and just said, “I don’t know. But I think this is how we’ll find out.” Don’t try to BS your way out of questions. It probably won’t work, and if you do know your stuff, you don’t need to!”
- Nilay Patel, Co-Founder & CEO of Selligy and 11th Showcase Champion
5. Not showing enough product.
This is by far the most common way we’ve seen presenters scare off investors. It seems obvious enough, but still too many companies focus on defining the customer problem, leaving not nearly enough time on the solution.
If you don’t have enough product to show, then you are simply not ready.
So, you ask, how do you do the opposite of scaring off an investor panel? Practice always makes perfect, but for starters, watch the videos of our Founder Showcase winners for tips, read this article from our last Founder Showcase champion, or check out this list of our favorite resources.