5 Stupid Things Entrepreneurs Should Never Say When Fundraising

Aaron Dinin, PhD
Jul 9, 2020 · 5 min read
Photo by Bermix Studio on Unsplash

During nearly two decades of building venture-backed startups, I’ve had roughly a thousand investor meetings. I’m not sharing that number to brag. Instead, considering how few of those meetings turned into investments, it means I’ve screwed up a lot. To be blunt, I said lots of stupid things that prevented me from raising capital. If you’re fundraising right now, you’re probably saying stupid things, too. Are you able to recognize them?

For me, I didn’t realize how stupid the things I was saying sounded at the time. It took years of experience fundraising and studying venture capital before I finally started understanding why a lot of things I thought would help me raise capital were actually scaring away investors.

I guarantee you’re probably saying some of the same things right now. Or, at the very least, you’ve heard other entrepreneurs say them and thought they seemed compelling. But investors see the world differently than entrepreneurs, and, lots of times, the statements that founders think will make investors excited actually end up doing the exact opposite.

So don’t make the same mistakes as me. Instead, here’s a list of five stupid things entrepreneurs say while fundraising that you need to remove from your pitch immediately.

Stupid Statement #1

“We think these numbers are conservative.”

You were presenting either your financial projections or your market size while trying to demonstrate the size of the opportunity. Nothing wrong with that. It’s good to show investors you’re operating in a space with enough opportunity for growth.

However, at the end of reviewing the market size, you tried to convey how easy it will be to succeed by saying, “And we think these numbers are conservative.” It was your way of implying, “even if we screw up enormously, the market opportunity is so damn big, we’d still stumble into enormous profits that would create huge returns on your investment.”

This founder thinks being an entrepreneur means building a product and then people magically show up to buy it. This founder has no clue about the complexity of customer acquisition, which is actually an entrepreneur’s most important job.

Read more about why investors don’t believe your “conservative” estimates.

Stupid Statement #2

“We’ve got most of our round committed. We’re just looking for our lead investor.”

You’d already spoken with lots of investors. None of them had flat-out said “no.” A handful had even gone so far as to imply they’d be ready to invest once you were moving forward with terms from another investor.

In order to convey all this positive feedback and how popular your deal was, you estimated how much money you thought other investors would give you, totaled that number, and displayed it on a “funds committed” slide. When you flipped to the slide, you proudly said, “We’ve got most of our round committed. We’re just looking for our lead investor!”

With those words, you were telling potential investors that if they agreed to lead the deal, everything else would fall into place perfectly because everyone else had already implicitly agreed to invest.

This founder has spoken with lots of other investors and none of them want to invest. However, the founder is inexperienced and hasn’t learned that investors don’t say “no.” Instead, they say things like: “This is really interesting, keep in touch!” or, “Keep us in the loop about how the round develops,” or, “We could see ourselves investing under the right circumstances.” Even if we were interested in the deal you’re pitching, your inexperience just became a huge red flag.

Read more about the myth of the lead investor.

Stupid Statement #3

“We’ll be cash-flow positive in 18 months!”

You were asked to create a financial projection, but you hadn’t made many sales yet (or maybe none). So you projected your potential revenue by estimating how many sales you think you’ll make each month once you’ve finally launched. To estimate your costs, you calculated expenses based on running your business with a “lean” number of employees who all would agree to take below-average salaries because you’re certain they’ll prefer equity.

When you put the revenue projections alongside the cost estimates, you were shocked (and excited) to see that you’d be generating a profit in less than two years. How amazing is that?

This founder doesn’t understand how expensive it is to run a business, how many people are required, and how long it takes to ramp up customer acquisition. And even if the founder did understand those things and was giving accurate estimates, the founder doesn’t understand the venture capital model. Seed stage venture capitalists don’t want to invest in new businesses that are going to be cash-flow positive in a few months because those aren’t “home runs.” In fact, those rarely return any money.

Read more about how being cash-flow positive scares away VCs.

Stupid Statement #4

“We don’t have any competitors.”

Since you’d never personally seen a product like yours, you were certain it didn’t exist. You might have even done some cursory research online for a couple hours just to be sure, and you couldn’t find a single company that did exactly what yours would be doing. As a result, you were certain your idea was so unique and world-changing that nothing came close to it, and you wanted to be sure investors understood that.

This founder thinks “brilliant idea” are what makes companies successful. Because of that, the team is going to completely ignore whether or not a market opportunity exists and focus entirely on building something they think is cool. They’re going to be wrong, and they’re going to lose all my money.

Read more about why entrepreneurs are too obsessed with their ideas.

Stupid Statement #5

“We’re going to win the market because of our superior product.”

You thought your idea for a product was totally unique because you’d never heard of anything like it. Then you did some research online and discovered lots of other companies trying similar things. But, after looking more closely, you convinced yourself that none of those companies were “doing it the right way,” and that’s why they weren’t succeeding nearly as much as you were going to succeed. You’d found a better way to build the product that consumers would surely flock to.

This founder doesn’t understand the meaning of competition or why people use products. The company is going to only focus on developing a product without ever thinking about how to get customers for it, and, as a result, the company is going to fail.

Read more about the biggest competitor of every startup.

UPDATE (7/14/2020): Apparently lots of other entrepreneurs say plenty of stupid things or like reading about all the stupid things other entrepreneurs have said. Either way, if this list wasn’t enough for you, here’s the follow-up article with 5 (More) Stupid Things Entrepreneurs Should Never Say When Fundraising.

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Aaron Dinin, PhD

Written by

I teach entrepreneurship at Duke. Software Engineer. PhD in English. I write about the mistakes entrepreneurs make since I’ve made plenty. More @ aarondinin.com

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +787K followers.

Aaron Dinin, PhD

Written by

I teach entrepreneurship at Duke. Software Engineer. PhD in English. I write about the mistakes entrepreneurs make since I’ve made plenty. More @ aarondinin.com

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +787K followers.

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