How To Get Laughed Out Of An Investor’s Office

We’ve seen about 50 international startups come through Dat Ventures’ program in the last year, most of which have met with various Boston VC’s and angel investors. Some of these meetings go well. Some are disasters. We’ve learned from the latter that there are a few sure-fire ways to get laughed out of an investor’s office:

1. Wear a suit to the meeting.

Investors won’t take you seriously if you show up to their office dressed like you’re the Wolf of Wall Street. They want to back founders that are up all night coding, not founders that are wasting time ironing their slacks the night before a meeting. Some people swear that an entrepreneur’s chances of getting funded are positively correlated with their level of perceived homelessness. I think your best bet is to avoid both extremes and just wear something completely and utterly unmemorable.

2. Claim that you have no competition.

Never make a competition matrix with nothing but your startup in it.

This is will end poorly for two reasons:

1. You’re probably wrong, there is competition. Which tells investors that you haven’t researched your competitive landscape well enough.
2. In the off chance that there really isn’t any competition, it’s an indication that there isn’t a market for whatever you’re selling. I call this the “Kitten Mittens Dilemma,” where the problem you’re solving is so insignificant that nobody wants your product.

Instead of claiming that you have no competition, show investors that you’ve carefully identified your competitors and understand their value propositions and business models. Then explain how your company is different and what your competitive advantage is.

3. “The market size is $XXX billion dollars.”

“My startup could become the most valuable company in history if everyone on planet Earth were to buy my product.”

If you tell an investor that your market size is anything over $50 billion, they will probably roll their eyes at you. You want your TAM (Total Addressable Market) to be sizable while remaining credible — if you stray onto the wrong side of this line it will convey that you either don’t know how to correctly size a market, you don’t fully understand your business model, or both.

Investors are generally more interested in your initial target market and your strategy for customer adoption in that segment — so impress them with some solid bottom-up market sizing and and a thoughtful go-to-market strategy.

4. Ask them to sign an NDA (Non-Disclosure Agreement).

Many first-time founders think that asking people to sign NDA’s will make it look like they know what they’re doing, but the opposite is usually the case.

Some VC’s see more than 100 decks per week. If they were to agree to NDA requests, it would prevent them from engaging with other startups in the same space as yours. What’s more, it would be nearly impossible for them to remember which ideas they’re able to disclose information on, and which they’re not — leaving them vulnerable to legal repercussions.

Ideas are generally unoriginal and not worth much; the only thing that makes them valuable is market timing and the team executing them. Asking a VC to put themselves in legal danger in exchange for only an idea is a gamble they will never make. If you bring an NDA to a VC, they will conclude that you don’t know what you’re doing and will shift their attention to the hundreds of other opportunities that are waiting in their inbox.

The motivations of angel investors are a bit different than those of a VC. Many angels (super angels being a big exception) are retired business people that primarily want something to discuss over cocktails at the country club. Preventing them from being able to do so by swearing them to secrecy perfectly defeats the purpose of why they invest in the first place.

5. Tell them that you are raising “between $X and $X.”

This is the ultimate hedged bet. You’re essentially saying, “I want $2M, but if nobody is willing to give me that, I’ll take $1M instead.” There is no quicker way to convey that 1) you don’t have confidence in your fundraising ability and 2) that you haven’t thought about how much money you actually need and why. Do your homework before meeting with investors and be able to intelligently explain your company’s runway, burn rate, growth strategy, why you need exactly $X, and how you’re going to spend it.

Wrap Up

The most important thing to keep in mind when talking to early stage investors is that they are primarily evaluating you, not your idea. If you want to impress them, make sure you are straight-forward, honest, and realistic. Trying to exaggerate the potential of your business is a tactic that may work with your parents, but will not work with investors, who listen to entrepreneurs pitch for a living. Your goal during investor meetings should always be the same: get another meeting. You’ll be able to greatly improve your chances of achieving this goal if you avoid the mistakes above.

About Dat Ventures

Founded in 2014, Dat Ventures delivers a 3-month soft-landing accelerator program for international startups in Boston. Dat Ventures connects founders abroad with local US resources to build teams, adapt businesses, and engage with potential customers and investors. Dat Ventures’ mission is to be the gateway for international startups to enter the United States via Boston, while helping generate an economic and cultural impact in their countries of origin.