When you are pitching to a venture capitalist or angel investor, it’s like venturing into a dragon’s lair and attempting to convince the fire-breathing monster to give you one of its golden eggs. It’s a no-nonsense matter and one bad move could end your entrepreneurial ambitions.
Startups often think that once they have an idea, chances are it is rock star worthy and any self-respecting VC will be bonkers not to fork over piles of money to back their venture. Not so. Yes, some people get lucky, most need to work really hard at it.
When you approach the dragons of finance (the investors) and ask them to pour copious amounts of cash into your business, you don’t want to mess around. After chatting to a few VCs and attending, as well as judging, various startup competitions, it has become clear that there are things you just don’t do.
Ever walked out of a pitch thinking “oh they hated me.” If you did one or more of the seven things below, chances are they didn’t quite like your pitch.
Nobody likes a copycat
It is quite simple: VCs want to invest in innovative ideas. If all you are doing is bringing them Facebook for cats, or Twitter for babies, chances are they are not going to bite. Most people defend copycat ideas by using phrases like “we have turned this whole thing on its head, we flipped it.” Essentially you are telling someone to give you money so you can destroy an already working and sustainable business model? Think about that. Innovate, it is that simple. If you are going to attempt a clone, you need to execute it better and innovate in some way.
Non-disclosure agreements (NDA)
These are words that VCs never want to hear. What you are saying is you don’t trust the person you are about to ask for money. Often startups do this in email pitches when requesting a meeting. Truth is, you may or may not have created the next big thing, but trust me on this, the busy dragons will not see you if you make them sign things first. You want their time and money, and there is some ego play here — you need them; not so much the other way round at this stage.
If your entire business cannot be clearly communicated in one sentence, go home startup, you’re drunk. Clarity of thought is incredibly important when pitching your startup. There is great credit to simplicity — some of the most successful companies in the world thrive on it, Google, Apple and to some extent Twitter. If you are vague about what you are talking about, VCs can’t trust you and chances are they won’t invest in you. Brevity is a virtue, be concise. Don’t be a wishy-washy startup.
Every time a startup uses the words “conservative estimate” thousands of VCs around the world are probably taking a drink. So no, don’t say that because to them all they hear is you haven’t the foggiest what you are talking about. This follows on from vagueness: you have to know exactly what you want and how you intend to get it. This is a money game after all and investors want to know you have thought this through. So, have you?
What are you asking for?
It is all good and well to present this fantastic startup to investors and convince them it is a great business but it is all wasted time if you don’t actually ask for anything. So what do you want? A VC once described this scenario to me as applying for a home loan. You get to the bank, show the bank pictures of the house, the area, the ERF size and then walk out. The bank wants to know: 1) How much money you want 2) If you can afford the repayments 3) If not, is the house worth something as security. So startup, what do you want?
Focus: say it with me
It’s good to know that your business can scale, but if it just started, it needs to do one thing really well. Look at Google and Facebook. In the beginning, those companies did one simple thing really well, then they introduced other things once established. Are you a big company trading on Wall Street? No, so focus. If investors sense that there are too many things you want to focus on they get edgy and nobody likes edgy investors.
Target market, heard of it?
Sometimes people get so swept away in the pitch they forget to tell the investors who it is for. Contrary to popular belief, your business is not for everyone. It may end up being used by everyone because of mass popularity, but it is not for everyone. Your investor needs to know that you have done some research about the field and your target market and that you understand that market. If you don’t know who will use your product/service, how are you going to make money?
You can check out some more pitching tips here.