29 early stage fundraising pitfalls

This is a list of some of the most common mistakes I have come across in my role as a tech VC at Wellington Partners.

As part of my recent workshop at the #Startsummit conference in St Gallen, I presented a few slides with tips covering the fundraising process for early stage startups. The “common pitfalls” slides seemed to resonate particularly well, so I decided to list them here once more.

The full set of slides can be found here: http://www.slideshare.net/vonperger/vc-fundraising-101

As always, comments and feedback are very welcome!

Do you have a clear reason why you need to raise external capital?

It will likely raise concern, if the following points come across regarding your motivation for raising money:

1. Just financing sales or marketing typically does not seem to be the basis of a good fundraising request (developing tech, growing team is better).

2. Getting written about on Techcrunch is only important when your customers/users are reading it (e.g. Producthunt, Github, vs Spotify, Tamoco).

3. The competition having just raised or just being acquired is not a good reason on its own.

4. Not thinking big enough for the long term vision of your company.

5. Raising for more than one idea/one company at the same time.

6. Fundraising plans sometimes lack “phase thinking” and claim profitability in current round of funding.

7. Forgetting Share Options (ESOP) when negotiating pre and post money valuations.

Are you timing your communication well?

It might be seen as a red flag, if you are…

8. Repeatedly pushing back the timeline of “closing the round”

9. Repeatedly changing the “size of the round”

10. Reaching out to (2nd choice) investors very late, often just before running out of cash

Are you reaching out to the right investors in the most effective way?

The following will likely slow down your path to pitching your company in person:

11. Cold emailing partners at VC funds

12. Adding people on LinkedIn after 1 email or even earlier

13. Spelling first names of recipients wrong

14. Not including email and mobile phone in your email footer

15. Blanket emailing several funds (especially when wrong stage, geography, focus)

16. Emailing several people in one fund at the same time

17. Asking for an NDA (typically not applicable for early stage deals)

18. Using a banker for pre-Series A deals

19. Be careful when taking money from “VP of X in Bank Y”-type Business Angels

20. Bluffing with offers from “Tier 1” funds

21. Taking money from later stage VC or Corporate VC too early (especially when they don’t always follow on or deliver on their value add promises)

Are you making it easy for investors to screen and process your information?

You are probably not if you are…

22. Using click-tracking tools for the pitch deck

23. Leaving out definitions of metrics or legends in charts

24. Repeatedly changing the definitions of key metrics

25. Sending vertical A4 books instead of slides with bullets

26. Sending 20+ page presentations in first email

Are you making the most of the call/meeting?

Consider these pitfalls before kicking off the meeting:

27. Failure of live demo due to lack of internet connection

28. Using the wrong name of people in the room

29. Exposing other funds you are talking to when searching for a file in the finder/explorer (while presenting)

If someone can help me with the 30th pitfall I would be grateful:-)