I have recently started delving into the startup funding world and I have been hanging out with Angel investors and attending as many pitch events as possible. I want to learn the ins and outs of startup investing from both directions. That is to say I want to learn how a startup can GET funded as well as learn what it takes to BE the one doing the funding. I have also been reading a lot and listening to The Pitch Deck podcast, where Angel and Venture Capital investors give advice and tips on how founders can better prepare themselves for pitching their ideas.
I have discovered a couple of recurring items that come up that are automatic turn-offs to investors and yet founders seem to keep saying them. Here are 5 phrases that are sure to dismantle your pitch:
1. I will need you to sign an NDA.
Professional investors see hundred's of pitches and many of them are similar products or services or are trying to solve the same "problem." When you ask an investor to sign a non-disclosure agreement you are basically telling them that you don't trust them as a professional OR worse that you are afraid that your idea can be easily replicated. If it can be copied that easily then most investors are out before you open your presentation software. If they think that you do not trust them to be professional then why would they ever want to work with you. Understand who it is that you are meeting with and be prepared to show your cards if you want investment. Leave the legal paperwork for the closing of the deal.
2. Our app is a Facebook killer.
Let's be honest here. The chances of toppling a giant are so remote, that simply stating it makes you look like a complete lunatic. There is a fine line between confidence and arrogance, and no one likes arrogance. Present your company with determination, but be mindful that exaggeration and presumption can be an immediate deal killer. Tell your story and convince your audience that you are truly solving a problem that needs solving. That will be much more impressive than hypothetical heroic feats.
3. We don't really have any competition.
Please, founders, please stop saying this. EVERY investor hates this statement and still founders say it in their pitch. There is always some form of competition. When the spreadsheet was introduced, a pen and a ledger book were its competition. If you don't think there is competition in your space then investors will assume you haven't actually looked or that you don't have a market for whatever it is you are selling. Either way, investors are likely to walk.
4. Our advantage will be that we are first to market.
When you tell an investor that your BIGGEST advantage is being first to market, you are effectively telling them that the bigger companies have overlooked something and will only need to flip a switch to in order to knock you out. They will tell you that the first-to-market advantage is really only sustainable by bigger companies with many more resources. Find something that is innovative and can set you apart from the competition. Otherwise expect investors to close their checkbook.
5. We value our company at $10 million although we have no revenue.
Realistic valuation is of utmost importance when pitching your company to investors. Talking about a $100 billion dollar market opportunity and valuing your company at a fraction of a percent of that when you have no sales what-so-ever is not going to impress investors. Make sure that you can validate your valuation by demonstrating a proven revenue stream before asking for capital.
Know what your cost of customer acquisition is and show investors how you can successfully grow you revenue regardless of raising capital. And don't use the term "conservatively" when estimating a value that is obviously and grossly overblown.
These are examples of phrases that many investors hear EVERY WEEK. Don't shoot yourself and your startup in the proverbial foot when you get in front of an investor. Also, I want to make it clear that this is NOT my advice. Check out The Pitch Deck podcast and listen to this advice direct from the source. Investors WANT to invest in you, so give them what they want. Now go out there and crush it.
The Pitch Deck podcast is offering a free weekly webinar on learning more about perfecting you pitch and bettering your chances of attracting investors and getting funded. To learn more please visit the Get Funded and Get Going webinar home page.