Chapter 4 - Investor Relationships
IN THIS LESSON
Mistakes to Avoid in Pitch Meetings with Investors
We compiled a list of common mistakes that start-ups make during pitching to investors. We strongly urge you to embrace these insights and avoid the following mistakes that have toppled, undermined and self-sabotaged many start-ups with good ideas. Do yourself a favour and take these seriously. For your convenience, we have organized these common mistakes into four categories.
Mistakes to Avoid: “Too long”
Pitch deck is too long. If it is more than 20 slides, it’s too long. In fact, 10 slides are ideal.
Business plan is too long. It’s better to give a 2–3-page executive summary, in addition to the pitch deck. No lengthy business plans.
Mistakes to Avoid: “Missing something important”
Not being clear about the problem that your start-up will solve.
Not talking about the traction, you have in the market to date.
Not doing a demo
Not understanding the risks to your business
Not articulating the differentiation of your product or service
Not showcasing media coverage that your company has gotten.
Not explaining your assumptions in your financial projections
Not talking about intellectual property (patents, copyrights, domain names, etc)
Mistakes to Avoid: “Naive”
Asking an investor to sign a non-disclosure agreement (NDA). In general, investors won’t sign an NDA.
Unrealistic projections or valuation expectations
Saying that you don’t have any competition. You have competition, even if it’s indirect. You will lose credibility in the eyes of the investor if you claim to have no competition.
Sending an unsolicited email with a pitch deck. It’s better to get a referral.
Pitching a company that is not anywhere in the “interest zone” of the investor.
Mistakes to Avoid: “Unprepared”
Only having the CEO speak at a pitch meeting is a mistake. Investors want to hear from members of the team. They want to know about the experience of the people on your team. If you are the CEO and you’re the only one to speak, it will work against you, no matter how good of a speaker you are.
Not knowing about the addressable market and the percentage you think you can get over time.
Not knowing how much it costs for you to acquire a customer.
Not giving clear, crisp answers to tough questions that investors ask. You should think of all the tough questions you can anticipate being asked. Prepare your answers ahead of time. Investors want to see how quick you are on your feet.
If you avoid these mistakes and prepare well, your pitch meeting will go well often. You will come off as more polished and professional. You will eliminate common hurdles that make it more difficult for start-ups to get investor money. You will set yourself up for success.