6 Mistakes You Need to Avoid When Asking for Investors’ Money
And how you can reset for a successful funding round
Have you ever needed to make adjustments to a marketing campaign a sales presentation or pitch for funding?
As co-founder of three businesses, exporting products and services to three continents and as a poet preparing for a performance. I’ve learnt that changes are not only to be expected, but if you are not making them, you are probably not breaking new ground.
But even so, when going for funding, there are mistakes that should be and can be avoided.
My point here is to describe six atrocious mistakes I’ve made or seen made by other founders and point out ways to reset recover and still get funded.
1. “Yes, But.”
Almost universally, we want to be heard.
Says, Enza Artino
— “Yes, but…” indicates a reluctance to be different or worse still is a defensive stand because you want to be right. Underlying it is a resistance to being open to new ways of thinking.
— “Yes, and…” people are ready to advance, and could leverage new perspectives, innovation and lateral thinking.
You’ll probably get one chance to show a potential partner, team member or funder you are open to their feedback…
Don’t miss your opportunity.
“It feels like your idea has been shot down and into a million pieces leaving you feeling empty”.
The reset? Listen to alternative viewpoints, and that way you build trust with the people you want around you. Trust is the mainstay of cooperation.
2. “We’re the Next Unicorn”.
Amazingly, some founders speak that way.
Being smart and tech-savvy and knowing your industry inside and out is not enough.
For example two business startup founders wanted my help to get funding.
One a tech wizard, the other a business brain, knew their customers’ problems. Their market was global, their business was growing.
But I didn’t agree with their current valuation.
So, for a different opinion, I took them to meet other investors and introducers who are drawn to ambitious founders pursuing a big market.
They wanted to invest in those founders, but at a valuation that takes into account the challenges ahead — as well as the prize.
The founders were astonished to hear that investor say…
“It’s worth nothing now.”
It’s not that founders can’t build significant enterprise value prior to funding, they can and do. And are often in a better negotiating position if they do. It’s that if, as a founder, you can’t see the investor's point of view you may not get funded and then: maybe you’ll fold.
The reset? Demonstrate you are mentally and emotionally ready to go the distance, which means pointing out the risks and the strategy to overcome them. That way, the investor will get that you want to reward your team, and investors, as much as you want to fly high.
3. “We Need Your Money To Start”
You’ve got a patent, copyrighted work, a product description, prototype, an MVP, a cofounder…
That’s a good start.
You have joined the ranks of millions seeking investors’ money.
Now you want a signed non-disclosure agreement because what you’ve got is ‘unique.’
And while you are telling people to trust what you’ve got, perhaps saying ‘we don’t have any competition’ an experienced money investor will know that you are between 2% and 12% of the way to reward them, your teammates and yourself…
If they invest money.
Money investors want to see time, skills, resources, equipment, or advice, being invested and building unstoppable momentum. If they hear excuses like, ‘I can’t start/grow until I have money’ ‘if only I had more time.’ They know those excuses mean you may not follow through and another startup could win the prize you’ve got in mind.
“Entrepreneurship is the pursuit of opportunity without regard to resources currently controlled.”
The reset? Shows investors that you will succeed with them or without them. That means you build momentum in tech development and market acceptance which points to the rewards you want to deliver.
And then you can choose the investor(s) you want to work with.
4. “How Much Do I Get Paid?
As funders we know paying founders is an essential part of the budget. We know founders must have enough income to be happy on the home front.
And despite your concerns about loss of income you’ve been able to earn as an employee, as a founder it makes sense to take a pay cut and allocate that money to budget items that accelerate growth.
The reset? As you build build enterprise value your building your equity value, your capital worth and rewarding your crew.
5. “I Already Knew That…”
Experience as a founder and actively investing in other startups shows me that even bright people, leaders in their field or CEOs can get in the way of their own success.
How do they do that?
They can’t see the need for change.
The danger they face but don’t see is continually reinforcing their current informational ecosystem.
Why?
Well in my case, beliefs, patterns of thought and behaviours that I’ve used to survive and thrive go unexamined. Yet may not serve my new journey. They can become influences that make it harder to stay the course to completion.
‘…talking in, “definitive terms about who we are now … leave little wiggle room for change and growth, creating what Harvard psychologist Dr Ellen Langer calls “mindlessness.”’
The reset? Actively track your communication with co-founders, team members, and funders.
Spot your thinking where it may be holding you back.
Be willing to get off your self created hamster wheel.
6. “I’ve Been Working Years on My Invention — It’s Worth Millions”
Your ‘unique’ technology, IP, book project, performance, or presentation is not the primary point of interest to an investor.
They want to know the quality and quantity of the opportunity. And they know your business model describes the opportunity.
Ash Maurya puts it this way,
Your business model is “the product” of your business, not your invention or innovation.
Yet there is no business model at the beginning, it has to be created, and it will be changed many times…
You must qualify and quantify customer's problems. Get their agreement on a price that provides you the cashflow and profit to grow and continue improving ways of solving their difficulties.
It is vital to understand your ‘unique’ thing that you hold so dearly is a low-level opportunity. It is sobering the way Richard Branson puts this point:
Opportunities are like buses — there’s always another one coming!
The reset? Make the shift from focusing on your past efforts and get on with clarifying the opportunity…
Or catch the next bus.
Remember, all of these mistakes arise from not seeing the perspective of the funders who want a reward…as do you.
We see that when founders and creatives focus on their ability to reset their perspective, they can lead their team from mistakes to a successful funding.
You and I can do that too… and here is a Peak Performance Self-check to help with that.
I like to imagine a clan of people who take ownership of their natural creativity, their ‘thing’. Who use business as a tool and lead to positive global change. And that begins with the ability to quickly check the perspective you are operating from.
