Top 6 mistakes to avoid when pitching to investors
During the past decade, I have attended many deal screenings at different VC and Angel groups in Silicon Valley. One of my favorite deal screening sessions happens at Keiretsu Forum which is chaired by Randy Williams. During these sessions, Entrepreneurs have about 7 minutes to present to investors and guests.
A brief Q&A session follows each presentation where the investors can direct questions to the entrepreneurs in attendance. However, the neat part happens when the entrepreneurs are asked to leave the room for a discussion among investors who offer candid feedback about the opportunity and the entrepreneur. Below are some of the most common threads of the feedback that I have gathered on each entrepreneur:
Listening Skills: When an entrepreneur comes across as someone who has poor listening skills, investors are left wondering if the CEO listens to understand or listens just to respond. Whoever is meeting with your potential investors should not come across as if they have all the answers. The investors want to feel comfortable that the company leaders will not just listen to input but that they will act on it as well.
Crazy Projection
Keep your financial projections well grounded and supported by reasonable assumptions. I recently met with the EVP of a Japanese company who proclaimed that he expects to generate $1B from the US market within 1 year with a Cloud-based application priced at $12 per month. And to make matters worse, they practically had zero sales in the US in 2013 and they didn’t even have an office yet.
So, the only conclusion I could draw was that these folks had no clue about what’s required to develop the US market. After all, when I was part of HP’s $1B Commercial Channel, we had an army of more than 300 sales, pre-sale, and marketing folks who covered hardware, software, services, and consulting.
No-Brainer
Nothing turns off investors faster than claiming your company is the next Google or Apple and therefore a no-brainer when it comes to investment risk! By definition, any investment has some risk associated with it. So do not position your opportunity as a no-brainer. If these investors wanted no-brainer investments they would just park their money with Apple or Walmart stocks rather than risking it on your idea.
Competitors
Your pitch to investors would be much well received if you knew the competitive landscape for your company. Claiming that your solution is so unique that you have no competitors terrifies most investors. So, research your competitors and present what makes you’re offering unique that’s worth the investment risk.
Barrier to Entry
You need to comfort your investors that you have taken all possible measures to prevent someone else from easily crushing your company. So, be prepared to answer questions about your IP and what measures you have taken to protect it
Finally, be prepared to answer what you plan to do with the money. You would be well served if you remembered that this is not a loan and these investors want to know when they will get their money back plus interest.
3 Pees
The VCs and Angels you are pitching know that the secret sauce of most successful companies is the combination of People, Product, and Process. Granted that 7 minutes is not enough time to cover all these areas, it would help investors to know that they are not just betting on your technology. It helps to convey that you have a well-developed plan to sell your products and services. It also helps to convey that you have surrounded yourself with the best industry talent.
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