Common Faux Pas First-Time Founders Make
Investors meet with hundreds of founders throughout the year, and they range from first-time founders to founders who have launched, failed or exited their ventures; from founders who have no clue how to create an investor deck and value their company, to those who are familiar with the fundraising process.
Since joining Genesia Ventures almost three months ago and having met and/or listened to close to a hundred pitches, I’ve noticed a few mistakes some founders make (the points below are by no means an exhaustive list).
Assuming that investors know everything — Yes, investors have talked to a bazillion startups. Yes, investors have accumulated a fountain of information and knowledge and data, especially if you’re talking to investors who have been investing for years. However, investors come from different backgrounds and industries, and they might not be familiar with the industry and jargons in your sector. Rather than assuming that the person sitting in front of you “must already know about this”, always come into the discussion ready to share important and relevant information and data in a concise manner to make that one-hour meeting count.
Not knowing the investor’s portfolio and investment thesis — when you’ve come up with a list of investors you’re planning to approach, it’s relatively easy to find information on their investments by going to their site and looking at the portfolios section, reading online articles and press releases of startup fundraises, or simply running a search on Google. Although not all investments are disclosed to the public, a majority of the investments usually are. This exercise should give you a better idea of what sectors the investors are interested in and at what stages. For example, if you’re a blockchain company trying to raise $15M, there is little chance that you’ll get any investment from an investor who has no interest in blockchain and only invests in the $100K range. For some founders, it might also be important for him to know that the investor has or has not made an investment in a potentially competing firm.
Narrowing down the list of potential investors to increase your chances of getting an investment could be a daunting but necessary task, especially for first-time founders who are new to the fundraising process; it’s always good to be involved in the community and talk to fellow founders who might be able to offer some insight or even help with introductions.
Not knowing the competitive landscape — nothing screams ignorance like not knowing the competitive landscape in your sector. All founders think their idea is special, and it could be true, but more likely than not, the investor you’re talking to has heard the idea from at least one other person. Not being able to answer who your direct and indirect competition are, or insisting that there is no competition at all, says a lot about how much you know about what you’re up against. Find out and be honest about who your competition is/are and come up with a good strategy to convince investors why you’re the company that will win or be a major player in the market.
While the above are observations of mistakes made by first-time founders, below are some suggestions on how to make the most of your meetings with investors.
Know your tractions — Always have your company’s latest traction off the top of your head, because it’s a good indication that you are keeping track of how your company is doing and growing. Investors will look at other factors, but knowing your numbers is a good sign that you’re keeping track.
Ask for feedback — the best-case scenario after talking to investors and weeks of due diligence is receiving an investment. But in the case that you don’t, the next best thing you can do is to get feedback. Feedback is valuable. Whether you decide to do something or nothing with it, it gives you a look at how investors view your company and where it stands.
You might not always get constructive feedback, but it’s always good to ask. At Genesia Ventures, we try our best to provide reasons for our decision.
Have a clear strategy — when presenting to investors, apart from showing the problem, solution, market size, and traction (where applicable), it’s helpful to also tell investors what your short-term, mid-term, and long-term strategy will be in order to achieve your goals. Founders are often excited to share their vision and big picture with anyone who is willing to listen, but at the same time, investors are interested to learn about the concrete plan of action to achieve the vision.
Not making the above mistakes and taking into consideration the above suggestions will not guarantee a successful fundraising, but it will hopefully make the process more fruitful for both you, the founders, and investors.