5 Mistakes Startup Founders Make While Pitching to Investors
- January 22, 2017
- Posted by: Admin
- Category: Startups
If you are a startup owner, then you are probably excited about your first funding round. However, raising your first round of funding may not be as easy as it seems. A lot of ground work is required in the startup ecosystem, when it comes to making successful pitches, since you need to present all the information in a digestible capsule.
Here are some of the common mistakes that startup owners make while pitching to investors:
#1 Lack of Preparation
Perhaps the number one mistake that startup owners make is the lack of preparation. A “One size fits all” approach is a strategy to funding disasters. Just like customers, every investor is different. Many startup owners are completely unprepared while entering the board room. Business plans are usually not customised to the pitch requirements, and a generic business plan means that the startup owner has to appear in-person to answer all the questions. Hence, being prepared for investors presentations is the best way to ensure that you impress the investors. Study their background, and gauge their mindset and what they are looking for. Customise your pitch to their background, and how this would be a good investment in their portfolio.
#2 Unrealistic Expectations
Several founders have made this mistake of setting unreasonably high expectations. It’s one of the core issues that need to be addressed early on. Startup owners must set reasonable expectations of growth, revenue, profitability and financials, backed up by good market research. Even though your product or service may be unique, build a logic approach to why your assumptions are valid. Setting reasonable and realistic expectations is the first step towards a long-term investor relationship.
#3 The Fundraising Drama
Starting up is definitely an exciting journey. But several founders tend to lose focus on the destination, while getting excited about the journey. The ultimate goal of the fund raising exercise is to signing up the right investors to fund your startup, For this, the startup founders should be absolutely clear with the fundraising requirements. Several startup founders arrive at random ball-park estimates, look-up online to estimate their funding requirement. This is just so wrong!
The best way to estimate your funding requirement is to use the bottom-up approach. Identify where the investments are required, how much funds are required and have a concrete plan in place to justify the “ask”.
#4 Value Proposition
While some of the startups are built on a unique business model, many of them are a “copy-paste” of an existing idea. So many startup founders are inclined to think that their “copy-paste” idea will get funded, because several similar startups have indeed been funded.
The problem with this approach is: the lack of a clear value proposition. Why is your startup different? How is it unique from the rest of the competition? Are you offering the same product/service to a niche segment? Or are you offering a niche product/service to the same market? Having a clear value proposition, product positioning, and product differentiation increases your chance of getting funded.
#5 Lack of a clear strategy
The success mantra for a startup is having the right product, the right team, a clear product need, and a solid action plan. Many startups fail because of the lack of a clear action plan. Lack of a clear action plan leads to confusion, poor or a lack of strategy, leading to higher capital burns and higher startup failures. All startups should have a set of dynamically evolving short-term milestones and a medium-term (read 2-3 years) capital requirements backed up by a clear and implementable strategy, which is subject to a periodic review (usually quarterly).
If you are a startup investor, avoiding these 5 pitching mistakes can drastically increase your chances of a successful fundraising campaign.