Have you ever left a pitch and wondered what investors really thought about you? I decided to roll up my sleeves and conduct a nationwide, sector and stage agnostic survey of investors. I insured that I included investors that represented all stages, sectors and geographies.
The survey includes input from seed investors in Georgetown, fashion technology investors in NYC, clean teach investors in San Francisco, enterprise software investors on Sand Hill Road, and investors who focus on European startups.
Without further ado, I offer you the top eight things that make investors cringe:
Twenty percent of investors surveyed stated that entrepreneurs attempted to put their best foot forward when they boasted of (potential) customers and (impending) advisory board members. The problem? It was a lie.
Once investors realized that the entrepreneur had not actually signed the client and/or had only introductory meetings with the hot shot advisory board member he or she bragged about, they lost credibility.
Tip: Honesty is the best policy. It is best to brag about identifying key customers and making initial contact than embellishing and being found out.
#7 Monkey Brains
Twenty percent of investors surveyed stated that entrepreneurs being unorganized was a huge red flag. Entrepreneurs who showed up late for meetings, sent a message that the meeting was not important, or they couldn't prioritize their time. Neither message is a good one. Another way that investors found entrepreneurs to be unorganized is when they did not take the time to research attendees in the meeting.
Sean Schickedanz, Partner at Clean Pacific and investor in OpenTable (NASDAQ: OPEN), ACA Financial, ProClarity (acquired by MSFT), CallTower and USBX (acquired by Imperial Capital) stated, "A company looking for funding can kick start a much more productive conversation by researching the fund they are pitching."
Tip: Do your homework. Know your audience. Show up 20 minutes early, even if it means you are standing outside in the rain waiting to make your grand entrance.
#6 Drama Queens
Twenty percent of investors surveyed stated that they were turned off by entrepreneurs who came across as too emotional or "salesy." The problem with this approach is that it rarely comes across as authentic. Nobody likes to feel like someone is selling him or her a used car.
Tip: Check the melodrama at the door and keep it real.
Thirty percent of investors surveyed stated that entrepreneurs who reacted defensively and were unwilling to accept feedback did not get called back for a second meeting.
Entrepreneurs should walk into a presentation with an open mind. You may not agree with the feedback you receive, but arguing and becoming defensive is a sure fire way to end the relationship.
Tip: Listen with an open mind and be willing to learn.
Forty percent of investors surveyed stated that entrepreneurs who lacked the ability to communicate effectively lost their attention.
Joshua Siegel, Co-Chairman of Georgetown Angels explained, "Entrepreneurs need to stipulate their product or service in the first 20 seconds of a pitch. Back stories are immaterial if people are not paying attention."
Entrepreneurs should focus on effectively connecting with investors and communicating their story.
Tip: Practice. Practice. Practice. Develop a crystal clear story and plan for tough questions so you don't end up rambling, stumped, or speechless.
Fifty percent of investors surveyed stated that entrepreneurs who failed to research their competitors left a bad impression. One investor stated she was pulling up competitors on her computer screen while an entrepreneur was bragging that he had no competition. Other investors found that entrepreneurs who degraded and discounted their competition only made themselves look bad and were setting themselves up for failure.
Entrepreneurs should do their homework prior to speaking with investors, and acknowledge their competitors' strengths.
Tip: Do a basic Google search to find competitors. Be honest and practice humility.
#2 Lone Rangers
Fifty percent of investors surveyed stated that entrepreneurs who failed to assess their skills properly were cause for concern.
Rachel Sheinbein, Venture Partner at CMEA Capital and board member of Arcadia Biosciences, Contour Energy Systems, (Observer) and Solaria Corporation, expanded "A good entrepreneur will bring in expertise when he or she doesn't have all the answers."
Entrepreneurs should know what they don't know. Nobody expects you to know everything. Being vague or flat out denying weaknesses sends the wrong message.
Tip: Be clear about your strengths and weaknesses and be willing to resolve deficiencies.
#1 Financially Challenged
Over 70 percent of investors surveyed stated that entrepreneurs who could not answer basic questions about their business models, financials, or metrics lost their interest.
Shomit Ghose, a Partner at ONSET Ventures where he led investments in Adara, Gridstore, Netseer, Pancetera (acquired by Quantum), Sentilla and Truviso (acquired by Cisco), elaborated, "Silicon Valley is successful not because it's better at creating disruptive technology than anywhere else, but because it's better at creating disruptive business models."
Entrepreneurs should focus on articulating their business model. If you want to win over investors, be prepared to speak about applicable metrics:
Average revenue per user (ARPU) -- revenue generated per each user
Daily active users (DAU)/monthly active users (MAU) -- percent of daily visitors
Conversion rate -- percent of users who convert to paid
Churn rate -- percent of users who cancel or unsubscribe
Retention rate -- percent of users who are retained (inverse of churn)
Lifetime value -- revenue generated during life of client (annualized is best)
Customer acquisition cost -- cost to acquire each customer.
Tip: All entrepreneurs should focus on building a simple financial model to display revenues, expenses, cash levels, and key metrics.
Did I miss anything? Leave a comment and let me know what makes you cringe.