The Small Mistakes of Fundraising
A lot has been written about mistakes founders make in fundraising. The large mistakes — while hard to avoid — are very easy to notice.
In this post, I’d like to shed some light on the smaller, less obvious mistakes I see founders make — the ones easier to fix.
Speak in superlatives
Stating you have 20 years of experience in the high-tech industry tells an investor nothing except about how old you are, and describing yourself (or a co-founder) as a “creative genius” or an “incredible sales-person” doesn’t provide her with enough information to assess your team either. The best way to explain the strengths of the founders is with their past achievements, and evidence — not descriptions — of their skills.
Try replacing “she is an expert in machine learning and natural language processing” with “she worked at Microsoft Cortana’s algorithms team for three years”, or even “she developed the algorithms in our previous startup, which since failed, but our NLP engine identified intent at an accuracy compared to Google Voice”.
As investors attempt to assess the quality of teams all the time, they can easily translate from achievements and experience to skills. If you tell us directly what your skills are, we might not believe your assessment, but if you give us the evidence for such skills, we’ll be happy to draw that conclusion ourselves.
Animated or elaborate slides
While this seems like a minor mistake, I chose to mention it as founders seldom understand how much it impacts their delivery. While animation can sometimes help understand a process or a mechanism, it is downright distracting. If you absolutely must use animation — make sure it runs once or twice but then stops. The worst thing for a founder is to have the investor stare at the animation (or try not to stare, but think about staring) while she is trying to explain her technology or deliver a complex point. The same thing goes for slides that have too much detail — I once found myself extremely distracted by a detailed street image of Manhattan used as slide background, only because I recognized the street I lived in.
Investors learn about as many as 10 new businesses each day, which can create a cognitive burden, making it harder for them to ignore distractions. A good startup presentation should be minimal in design, and not let the investor waste any mind-share on anything except the business itself.
Speaking only to the partner
It’s hard to ignore the hierarchy in VC firms, as partners are often the key decision makers. However, avoiding, ignoring or mistreating the junior team members would hurt your chances every single time.
There is a good chance that the partner in the room hired and trained the non-partner in the room with her, so seeing a founder mistreat or ignore her protege is not likely to get her any more excited about working with that founder or investing in her company.
Moreover, in some firms, principals or VPs also have check-writing power (typically for smaller-check deals), so you might be disregarding the investor that will eventually be leading and sponsoring your investment.
Awkwardly presenting your achievements
Speaking about yourself is never easy, but when speaking to investors, you would serve yourself well by developing a calm, confident voice and learning how to discuss your achievements while neither bragging nor downplaying them.
“I worked at a small company called Google” — Using humor or unnecessary sarcasm could come off ingenuine, arrogant, or suggest that you are uncomfortable with your success. Remember that while you know your personal story very well, the investor in the room is still making up her mind and trying to collect the hard facts about you and dig deeper to understand your contribution in each milestone. The best way to cross this chasm is to be clear and direct.
State the facts: how long you’ve worked at each company, what was your role and what you achieved. When you speak of a strong achievement or pedigree, don’t be embarrassed to smile and show that you are happy about it, it shows so much more strength than humor or sarcasm.
Awkwardly presenting your failures
Failures are often even harder to discuss — and many founders try hard to avoid talking about them.
If the failure is major or recent — such as the closing of a previous startup, consider presenting it upfront and in the first meeting. Otherwise, don’t volunteer your failures, but come ready to discuss any of them if asked or if the topic arises. Most importantly — if you feel that you would do things differently today given the chance, don’t refrain from saying so.
It’s not the pitch
The attempt to create the perfect pitch, or the thought that the perfect pitch will magically get you an investment from any investor you meet, is what often leads to many of these mistakes.
As investors often talk about the importance of the chemistry between them and the founders, it’s easy to think that the perfect pitch would magically generate such chemistry. In reality, most pitches are actually conversations, and while sometimes a bad pitch can ruin, a good pitch can’t cover up for lack of chemistry or a weak business model (at least not in the long run).
If you value your business enough to only work with an investor you connect with, and if you are seeking to test — not force — such connection, then your most accurate description of your self, team, vision and business is the perfect pitch. Unfortunately (or fortunately), a real connection is pretty hard to fake, so it’s better to focus on your content, not presentation.
