10 Mistakes Founders Make When Pitching to Investors (And How to Avoid Them!)
Startup founders – what is one mistake you've made when pitching to investors, and what did you learn from that?
To help you avoid making mistakes when you’re pitching to investors, we asked founders and business leaders this question for their tips.
From simplifying your pitch to leading with the facts and healthy optimism, there are several ways you can craft the perfect investment pitch.
Here are 10 tips for how to avoid mistakes when pitching to investors:
- Simplify Your Pitch
- Set a Realistic Valuation
- Be Ready for the ‘Why’ Question
- Control the Flow of the Meeting
- Start with the 'Why,' not the 'What'
- Not Spelling Out our Go-To-Market Strategy
- Focus on What They Want & Everything Falls into Place
- Do your Investor Homework First
- Avoid Vague Answers & Know Your Numbers
- Lead with the Facts & Healthy Optimism
Simplify Your Pitch
One mistake I made when pitching to investors was not being clear and concise about what my product did. I overcomplicated what my idea was trying to solve because I felt like I needed to come off as really smart to potential investors. I stuffed in jargon and “big fancy words” because I thought investors wanted me to be the most intelligent person in the room.
I learned two things from this: 1) Most investors tend to invest in the founder over the idea and 2) Investors don’t fully understand every industry they choose to invest in, so you don’t need to overcomplicate your idea. I realized I needed to simplify my pitch and showcase more of my passion for the space.
Set a Realistic Valuation
When we first started pitching to investors, our valuation was too high and it turned some investors off. We learned that it's important to be realistic with our valuation in order to attract the right investors.
Be Ready for the ‘Why’ Question
Ted Kennedy suffered a serious blow in 1980 when he didn’t have one basic answer ready for journalist Roger Mudd. The latter asked the fledgling presidential candidate, “Why do you want to be President?” Kennedy gave a nonsensical answer and it did permanent damage to his campaign.
I had a similar experience once when a potential investor, one I desperately wanted to impress, asked me, “Why should I invest in your company?” That was my right-now moment and I flubbed it. I rambled, and I didn’t give a focused answer. I learned after that: be ready to convince people to invest in you. Be ready for that “why” question.
Control the Flow of the Meeting
One mistake people make when pitching to investors as a startup is they don’t control the flow of the meeting. Showing precise control over your allotted amount of time with an investor shows confidence. Investors want to see confidence from someone who is about to launch into a new venture, and they want to hear all your most important pitch points. Make sure you waste no time on small talk and leave time open at the end for questions too.
Start with the 'Why,' not the 'What'
I've helped clients raise millions for their start-ups. One mistake they make often is to start with what they're doing, rather than why they're doing it. Investors are human, and humans are emotional creatures. Start with a story that conveys your 'why', and you'll get your investors into an emotional state that makes them more receptive to the rest of the information you want to share.
Not Spelling Out our Go-To-Market Strategy
Our niche was dental to start with, but we didn't spell out how we would expand to oral and cosmetic surgery next, in order to expand into all of medical in the future. This communicated a smaller total addressable market (TAM). We learned to give a clear map of not only product features and integrations, but industry domain expansion plans.
Focus on What They Want & Everything Falls into Place
Connect with investors that know what they want with clear goals. Then find out what your investors really want. Often they won't come out and say it right away so you have to build trust and rapport. Then relentlessly seek to execute on your investors’ wants. Everything will fall into place if you narrow the focus and execute it well.
Do your Investor Homework First
One early mistake that we made was to pitch everyone. Most investors have a dedicated focus within a specific vertical or company stage. Do your homework first and ensure the investor is in your sweet spot.
Avoid Vague Answers & Know Your Numbers
Avoid vague answers. Seasoned investors have heard it all and don’t appreciate the fluff inside a pitch. Know your numbers and be able to answer all major questions in a sentence or less. The ability to distill information quickly and easily for others is a highly valued skill and investors will take notice if you demonstrate competence in this area. Like many others in my shoes, I was guilty of making these rookie mistakes and the sting of rejection early on in my career made sure I learned my lesson.
Lead with the Facts & Healthy Optimism
Confidence is good, when it's measured. Coming on too strong can be a big turn-off to investors despite common thinking. Being confident is fine and all, but too much of it can make you come off like a pushy car salesman, who doesn't care about the agency of the person they're trying to sell to. Investors do not like this, at all.
Having done this in the past, I've learned to take more time to consider my pitch and never make a definitive promise of success. That may be enough to impress very new investors, but any old hands in investing can easily spot unearned bravado. When meeting with investors, lead with the facts and a healthy and measured optimism. It will serve you far better than accidentally coming on too strong.
