Thoughts on startups by investors that
fund them & entrepreneurs that run them

5 Ways To Scare Off Outside Investors During Your Pitch

The man stopped talking, finally, summarized his pitch, and thanked us for listening. We sat in stunned silence. He’d treated us – a group of local investors – to a pitch punctuated with detailed stories of how previous partners, an investor, and an attorney had screwed him. He told us he’d finally beaten them back, and was now ready to move forward with his great technology. About 10 years after he’d originally started.

We looked at each other sharing the moment of obvious consensus: no, in fact, nobody in the room (there were 22 of us) wanted anything to do with investing in that business. I thought silently of a phrase one of my daughters uses: “I’d rather be put in a blender.” It reminds me of some classic problems that will scare investors off every time.

  1. Asking the wrong people. Do your homework. Most investors have obvious preferences. Most of the geographic groups want deals in their own area. Lots of investors prefer industries they know, at certain prescribed stages (for angels, usually very early). Our group wants local companies and says so very clearly in the specifications. The related information is almost always easy to find (part of this site’s mission, by the way). If a local group wants local deals, don’t bother to submit from across the country.
  2. Bad fundamentals. Investors want scalability, defensibility, an interesting market, an experienced team, and some way to generate liquidity in 3-5 years.
  3. Victims. That’s the example above. Complaining about past partners, investors, competitors, lawyers, or even plain rotten luck doesn’t usually spark investor interest. Everybody assumes there’s two sides to every story. Investors want new fresh ideas, not battle-scarred victims.
  4. Valuation fantasies. This is a tough one. I’ve been on the other side of this table, raising investment money for my own company, and I know it’s hard to stand in front of investors with an opening offer. But, you can’t look investors straight in the eye with an absolutely preposterous opening offer on valuation. You and your partner, with no startup experience, no revenues, no defensible intellectual property, and no prototypes are simply not going anywhere asking for half a million dollars at a five million dollar valuation.  I’ve seen people get around this problem by not specifying valuation, but that’s hard. It will be negotiated anyhow, so be realistic.
  5. Circled wagons. Investors like people who know what they don’t know and recognize that a good relationship with investors can help. If you know everything, and you can do everything, and want investment from dumb people who have nothing to add but money, you’re going to have a lot of trouble finding those investors. Nobody like to be told to shut up and watch from afar

Written by Tim Berry

user Tim Berry

Tim is the founder of Palo Alto Software and bplans.com, the co-founder of Borland International, and the official business planning coach at Entrepreneur.com. He has been called the "Obi-wan Kenobe of business planning" and "The Father of Business Planning." He is a serial author of books and software on business planning.

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