You’ve got a great idea. You’ve done all the paperwork to start your company. You’ve found some cash to support that idea and you’re building the product/service and running out of cash and needing support and customers…..
Does this sound like you? It’s where a lot of founders end up. It’s not wrong, nor is it impossible to overcome, but there are some typical mistakes that founders/entrepreneurs tend to make. Check out this list to see what you can do better.
1. Malapert: “I know everything about this company from start to finish”
You certainly do, except you might not. If you have never done marketing or finance or operations or HR…whatever your specialty, there are probably functional areas of business that you are less well versed in. Asking for help or hiring professional consultants or services in these areas, is not only a good idea but it shows your future investors that you are able to discern where you are weak and get help. Surprisingly, many entrepreneurs do not, they make mistakes, reinvent the wheel, burn cash and disappoint their investors. If you spend your money wisely, even if you have to spend money on something you “could” do yourself, sometimes it’s better to get someone else to do it. Which leads to the next deadly sin.
2. Officiousness: “I can do it all, don’t need anyone’s help”
While you could do everything, the question you need to ask yourself is should you. If you are the expert in the process or the product and you are busy working on the CRM system because you think it’s easy and you can do it faster, you’ve done one before, etc. etc., it may be time to ask yourself if clerical work is the best use of your knowledge and skills. At times you may have to roll up your shirt sleeves and do some of this work, but could you hire a student or an intern to do it just as fast with your oversight and leave your time open for cultivating the big sale you need? Which leads us to the third deadly sin of being in the weeds.
3. Meticulousness: “I know all the details and can answer any question completely.”
Rarely does anyone who is asking about your business want to know everything you know about the answer. They often want to know the answer from their perspective in about 2-3 sentences or less. Not detecting the purpose of the question or the perspective or the context of the questioner can cause you to over-answer in minute detail. Not only does this lose your audience and they quit listening and politely wait for you to finish, but they will often not ask you anything else. Thus if an investor asks you how sales are going, they do not want a month by month detail of all the clients you brought in. They want to know the % growth, and the annual revenue you have or the monthly revenue so far if your company is under a year old. Due diligence is when you share the grim and picky details. So this tells us the next deadly sin of over selling.
4. Intensity: “I really love this company and I’m going to make you love it too.”
We know you love your company. We love that you are so passionate. However, we have our own passions and trying to get us to adopt your passions is not an effective way to engage. In fact you can chase a potential customer or investor away. If you appear overly nervous, pushy or aggressive about your company to potential investors or customers, they can sense a neediness for approval and may worry that you are not as successful as you say you are. You need to relax and enjoy yourself and your company. Gauge a client or investor interest and adapt your responses to agree with the level of inquiry. If they follow up and ask for more information, you then have a green light to give more details. Pace yourself and work with the questioner. Which then leads to the fifth deadly sin of vagueness.
5. Vagueness: “I’m only going to tell you a tiny bit because I don’t want you to steal my idea.”
While being protective of your company and the company secrets, responding with vague or incomplete answers can leave your future investors wondering if you really want their involvement. If they actually ask about something that is proprietary, you can ask if they are serious about wanting to know and offer an NDA in later conversations. This is a way for you to gauge their seriousness of investing. If they decline the NDA, you can simply state that this is proprietary information and tell them as much as you can say without revealing secrets. However, if they ask what your revenue is and you say “enough” that is not a sufficient answer and would probably cause any investor to question your need for their help. Which leads to the 6th deadly sin, not understanding how to talk to investors.
6. Misinterpretation: “Not understanding the perspective of investors”
When an investor requests information about your company, they are often, at first, interested in the 2 minute elevator pitch. If your company is in their investment industry interest area, they may ask for more information. If they are not interested, they may thank you and move on or just chat for a few minutes then leave. If you ask them what industry they like to invest in, how they normally invest, how much they normally invest, you will gain valuable knowledge and quickly learn if they are potential investors for you. Without context you may be trying to sell someone who invests only in biotech in your beverage company, wasting your time and theirs. You don’t want to do that because investors know one another and talk to each other. You can get a reputation quickly for not being ready for this investment process if you are not careful. Leading to the last deadly sin.
7. Naivete: “I need money so I’m going to go out and meet some investors.”
There is a process and an expectation for new start-ups to follow the process. Investors don’t have time to waste on talking to someone who isn’t ready to quickly and succinctly respond to their questions in an appropriate way. Going out into that space without help and before you are ready is a dangerous game fraught with pitfalls you may be unaware of. Get help from a mentor, your incubator or someone who is ready to walk you through the process who can keep you from making mistakes. For example, do you know the answer to this question: “What should I say if an investor asks me what my longterm plan for my company is?” If you don’t know, don’t go asking for money until you get help.
Venture Connects helps start-ups with the investment process. We have a trademarked process that gets founders ready and then we can introduce you to our network of investors. We are proud of our five years of successful introductions and 50 satisfied clients.
Written by Terri Friel
Tags: advice, Chicago Business Startups, Entrepreneur, Founders, idea, investor, knowledge, lessons, mistakes, money, network, perspective, process, sins, startup, success, Terri Friel, VCVetted, Venture Connects