For the last decade, the start-up industry is registering a significant raise every year, and yet, there are the same mistakes being made by most of them (especially when it comes to seeking outside investment).
The initial process includes targeting the right investors, exploring the valuable connections, and doing solid research in order to be prepared the following investor meetings.
But let’s not assume that all this is already done and focus on the TOP 5 fatal sins the majority of start-ups do when meeting investors which leads to sabotaging their fundraising process.
LACK OF CLEAR FUNDING OBJECTIVES
What’s most essential (and most obvious mistake) is to set up a clear goal in terms of outside funding objectives.
There is no investment meeting that doesn’t end up with the question “How much do you need?” And if you begin stuttering and showing hesitation… that’s a death sentence.
So, take account of how much capital you need, from operational costs to required professional services and employee wages, whether it’s for a beta product or some other discrete achievement.
PICKING UP THE WRONG PERSON OF THE TEAM FOR MEETING INVESTORS
Behind each start-up, there is usually a team of at least 2 or 3 people so it is inexcusable to send the one with the worst oratory skills for meeting investors.
Moreover, he/she is the one to present the concept behind the company in the most intriguing and confident way, as well as to connect the dots for potential investors, drawing an irresistible line between the financials and the start-up’s future.
RAISING CAPITAL IN A TROOP
As a continuation of the previous sin, it is very important not to seek fundraising in a troop. Why?
Because, from one hand, the process of seeking fundraising is a very all-consuming activity and it just looks insane to see a team of 2, 3, or 4 people going to every meeting with potential investors. Moreover, that would harm the progress of the company since everyone’s going to meetings and leaving the rest of the important tasks behind.
From the other hand, investors will certainly test the team to make sure everyone is firm and reliable, so if there are more than 2 people from the team during the meeting, there is a bigger chance of oppositions to arise between you and another person.
GETTING UPSET BY CONFLICTING FEEDBACK
Another popular mistake that loads of fundraisers do is to get confused by the investors’ conflicting feedbacks and losing their nerves.
But here is the deal. Based on their prejudice, personal approach, business history, including success or failures of the past, the potential investors will give you diverse feedback.
And, as they are successful and accomplished, their feedback always sounds pretty reasonable. However, if it’s negative or interrogative, try to keep calm and look at the situation as a normal procedure to test you and your company.
FOCUSING MAINLY ON THE FIGURES
Even though it is great (and normal) to be excited about your start-up’s future, most of the young entrepreneurs who are just concentrated on getting all the cash they can today, are usually sentenced to death.
Moreover, if the fundraiser’s lacking a long-term strategy for the next round or a Plan B to remain without this capital, that is a massive red flag for serious investors.
If you actually care about your venture you should focus more on who you partner with than the funds. You should be strategic in selecting investors and presenting the right terms so that you will be able to achieve a lot more in the future.