5 Reasons Why Founders Fail Investor Screening Calls

We were inspired to write this article after a series of bad initial calls with what we expected to be promising companies. The pitch decks looked good, the teams seemed strong and we were keen to find out more. The reality ended up being entirely different — the companies were rejected after the initial screening calls.

It is not easy for startups to get in front of investors and as such, every opportunity to do so should be taken seriously. As the venture capital and angel investor community is relatively small, especially in the emerging markets, a bad call with one investor could become a deterrent for other investors as well.

We have seen founders make 5 key mistakes during initial calls with investors:

Not explaining clearly what their product is and how it solves and existing problem

This is a very easy yet fatal mistake to make. As founders work on their startups and ideas day in and day out, they will know exactly what they are and how they operate. However, we find that some founders struggle to explain clearly what their product is and how it addresses a need in the market. Others, by contrast, do not themselves have a clear vision for what their product, customer or the problem they are solving is.

This is something that can be addressed by the founder by simply practicing explaining their product to non-technical friends and family who are not involved in the startup. In cases where the product, rather than the explanation, is muddled, founders should always take the time to work on streamlining and clarifying their ideas before approaching investors.

Having a bad attitude

Founders may have a brilliant idea but if they have a bad attitude or appear to be stand-offish during the screening call, this will be a red flag. Venture capitalists and angel investors tend to invest at early stages and as such work closely with the founders bringing not just capital but also their expertise. As such, they want to be certain that they pick founders they can work with in the long term. We advocate fully being proud of one’s achievements but arrogance will only lead to a decreased likelihood of investment.

Being coy about the valuation

Founders should always go into the investor call with a valuation in mind. They can work it out by considering how much they are raising and the maximum amount of equity they are willing to give up. Few things are more frustrating to investors than a founder who is unable to communicate a clear valuation for their business!

Not explaining clearly how you differ from your competition

Investors expect founders to be knowledgeable about their competition — including how their startup is different and better than other players in the market. Investors want to see clear differentiation — simply saying that the market is large enough for multiple players is not sufficient. Investors want to hear how your offering is either entirely new or a significant improvement on the existing options— being incrementally better than what is already out there will unlikely lead to venture capital returns and thus will not be a compelling proposition to venture capital firms or angel investors.

Not showcasing the team enough

Any founder should know that their team is their key strength. Investors want to hear about what relevant experience the founding team and the early stage employees have as the quality of the team will be a significant determinant in the decision whether to invest or not. Founders should explain clearly how the team’s experience relates to making the startup a success. Any experience or skills gaps should be identified and founders should explain how they are dealing with them — for example, a tech startup without a technical co-founder will always raise red flags, especially if there is no clear plan for how to get one onboard.

All of the mistakes mentioned here can be resolved with a little preparation and critical thinking before the investor call or meeting. Ultimately, investors want to see that founders are taking the discussions seriously and have come prepared with a well thought out and coherent story. It is frustrating when founders with promising ideas perform poorly in front of investors but, at the end of the day, investors can only make decisions based on what is actually in front of them. Poor performance by the founder will be a strong indicator for a poor performance for the startup.