Raising money for your startup is a difficult, time-consuming process. Successful entrepreneurs know that gaining investors is just as dependent on what you don't do, as what you do. Here are four simple things to avoid while raising funds.
Whether youโre trying to borrow money from a colleague or land the financial backing of a venture capitalist, there are certain traits that can scare even the hardiest of investors away. Finding startup funds may be one of the toughest things youโll do as an entrepreneur. So if you have an interested investor, you should do everything you can to entice him or her to join your journey and make an investment.
There are a lot of things you should do to attract investors. But what should you do to avoid scaring them off?
1. Give A Sloppy Pitch
To attract investors, youโll put together a knock-their-socks-off presentation. Youโll write and fine-tune your pitch dozens of times. Because of these revisions, the likelihood of making mistakes increases. For instance, you might change your sales expectations in your slide show, but forget to make the change on the hard copies that you hand out. Itโs easy to overlook something like this, but it can come across as sloppy, and that scares investors.
Discrepancies of this sort are almost always accidental, but call into question an entrepreneurโs ability to be detail-oriented. Investors easily make the leap from carelessness with slides to carelessness with their money.
2. Be Dishonest or Secretive
One of the fastest ways to shut down an investment deal is to be dishonest. The more open you are, the more your investor will trust you and your judgment. Donโt try to over-inflate your connections or your success rate โ just be honest.
“Difficult to work
with entrepreneurs
are seldom
successful in
raising funds”
Being honest also means you canโt keep secrets. Full disclosure is the best way to keep the relationship with your investor healthy and productive. Investors understand that opportunities improve through the exchange of ideas, so discuss everything from your business model to potential customers.
Being secretive is a red flag because investors will have a difficult time determining whatโs behind the secretiveness. Uncertainty equals risk, and investors are about risk reduction to improve odds of success.
3. Come Across as โUncoachableโ
Donโt expect an investor to fork over a fistful of cash and check in a year later. Investors have a stake in your success, so expect a relationship to form. The investor will want a say in how moneyโtheir money, and the rest of your moneyโis spent. When these discussions come up, donโt be โuncoachable.โ Be open to ideas and willing to take the advice of your investor.
In short, difficult-to-work-with entrepreneurs are seldom successful in raising funds. Investors will shy away from entrepreneurs who are interested only in investorsโ cash and unreceptive to investor guidance and input. This is because investors are genuinely interested in helping entrepreneurs be successful and desire to play a role in that success.
4. Show Ignorance of Your Customer
Donโt underestimate how difficult it can be to attract customers. You want to show your knowledge and experience in the industry, but donโt act like youโve got customers knocking down your door. Youโll scare investors away for sure.
Instead, do your homework. Know everything there is to know about your target audience. Entrepreneurs frequently assume that customers will flock to them and buy their product. Lazy entrepreneurs skip the necessary research into identifying their target customersโ characteristics and buying habits. Companies that donโt know their customers rarely succeed.
If you would like a copy of this post in PDF form, click the buttion below to have it emailed to you.
Please Email Me the PDF “4 Things That Will Scare Investors Away “!
Are you an investor? Is there something that would scare you away from a potential business deal? Share it in the comments!
Note: This article was co-written with Lisa Furgison, and first published by Lisa on March 27th, 2014 on Bplans.com. See the original article and hundreds of excellent articles written by Lisa and others at Bplan.com.
Investor photo source: Original article
