You’ve worked really hard on your pitch to investors. But what if some of the things you’re saying are actually turning them off?
Here are several things that can be a negative signal to investors:
1) No clear growth trend. If you don’t share information about month over month revenue or user growth, it’s almost impossible for me to say whether I want to invest or not.
How do I know if the business is succeeding without seeing a trend? Be sure to include those numbers and compute a month over month growth rate using a tool like this.
2) Showing irrelevant metrics. Some founders show incredible growth…in numbers that don’t matter.
Whether it’s social media mentions, letters of intent, or some other creative metric, showing numbers like these make me think there is nothing more substantive.
What’s substantive? Customers and product.
Nothing else matters.
3) A focus on patents. Some startup founders talk for 10 minutes about patents and 2 minutes about customers.
To most investors, this will show that the founder doesn’t understand what drives success in software startups. IP is rarely a key driving force in a software company.
You will have to deal with IP assignments and patents eventually. But unless you’re a biotech company, don’t make it the core of your pitch.
4) Mentioning irrelevant awards. If you won a startup pitch contest or Forbes 30 under 30, congrats!
But leave it out of your presentation. Much like presenting irrelevant numbers, mentioning irrelevant awards just makes investors think you don’t have anything more concrete to show.
5) An unrealistic valuation. I am not a stickler on valuation if it’s a good, high growth company.
But more and more, I see seed stage companies asking for valuations of $75 or even $100 million. Sometimes, they haven’t even launched a product!
This just shows me the founder doesn’t understand the market. Fred Wilson of Union Square Ventures has clearly shown that venture firms cannot possibly make money on $100,000,000 seed rounds.
Your goal should be a collaborative relationship with the investment community. You want to make money, and you want them to make money too!
So keep it reasonable! When seed stage companies go much beyond $20-30 million, they’re getting ahead of themselves.
A more realistic valuation would be about $10 million for most seed stage companies with solid growth.
Founders work incredibly hard to raise money and build their companies. The last thing they want to do is torpedo their own pitch!
If you follow the rules above and keep the focus on your product and customers, you’ll impress investors. You may even find them fighting to get in the round.
Best of luck!
More on tech:
The Top 3 Startup Pitch Mistakes
Why I Just Invested in Capbase, The Startup in a Box
The Original YouTube Investment Memo
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