This article was first presented at Google Campus July 11th 2014 and appears on Netocratic.
Fundraising isn’t easy, even if done well, its fraught with all sorts of ambiguity and frustrations. To that very point, I recently wrote a blog post about the fundraising mindset in order to help you set a tone on approaching the process.
That said, there are things you can do to make it go better than others and things you can do to make it go worse… and in the spirit of the ‘Tonight Show’s’ top ten list, below are my top ten things that will likely cause a fundraising fail situation.
Avoid them and learn from your mistakes and you will increase your likelihood of success.
10. Presenting with a style that doesn’t capture the right attention
Yes, being over the top and dropping ‘f bombs’ might get you attention, but is it the right attention? Is it focusing the attention on what your message or just you? Also, what about a boring slide deck? Or a a deck that is missing product shots? Do these represent you well? What if you say your product is simple, but then your deck is really over complicated.. does that sound right?
9. Not having a proper fundraising plan
Fundraising requires research. Find out if your potential investors are even interested in your sector.. have they invested in your competitor? What amount do they typically invest in? Going to someone that is a late stage investor when you are raising a little bit of money is like putting in a minimum order of 10 pizzas when you can only eat one.
8. Not understanding your customer and how to reach them
When presenting or speaking about your customer, do you show a mastery about their issues? Do you understand what makes them tick and why your solution is the one that will likely best serve their needs? Do you also understand how to reach them? Where do they shop? What media do they consume?
7. Unable to demonstrate a real pain for your customer (and how your solution fixes it)
It is always tempting to create something that is useful to you, but is the solution you’ve created really a necessity or just a nice-to-have? Demonstrating a real pain, usually through some form ofcustomer validation, is crucial in making a convincing argument for your startup.
6. Assuming that a general market size study applies to your startup
One of the things you can do to quickly show that you don’t have a full grasp of your market is byshowing a much larger segment than the one you operate in. For example, I’ve seen pitches where an iOS app that is for sports tracking, mentions all mobile users worldwide as their market size… when actually, its more like mobile-sports-tracking-enthusiasts, which is a sub-segment of that bigger pie.
5. Not truly understanding who your competitors are
This one is easy. If you think you don’t have competitors, then you probably haven’t researched hard enough. Rarely are there ideas that no one has thought about, but secondly and perhaps more importantly, sometimes there are substitutes which are ‘good enough’ which you need to be aware of and show how your solution overcomes the momentum that those existing solutions already have.
4. Not knowing your cash needs & cash burn
If you’re going fundraising and you don’t know how much money you need, how long it will take you, to achieve what, and how you will spend it… well, then don’t fault investors if they aren’t impressed with your request for investment.
3. Not explaining why your team is the team that will make this happen
Your team is 99% the reason why your company succeeds, and the idea is probably like 1% (I’m guessing on the numbers, but this guess feels right). If you skim through the ‘why’ of why your team is the right one for this investment, then you’ll likely miss an opportunity to impress an investor. I recently wrote a blog post about how to best think through your team slide here. Also, if you want to learn about how an investor evaluates your team, read this one.
2. Having your existing investor shareholders own more equity than the founders
Toxic rounds that precede the round you are raising for can really negatively affect your fundraising plan. Read about why here. In general, try and make sure that you take investments that don’t jeopardize your future ability to raise follow-on funds.
1. Not reaching out to an investor through an introduction
Lastly, the best thing you can do for yourself is get an introduction to investors that you want to meet. Introductions are great ways to have immediate validation. Here are some other ideas on how to reach out to other investors.
– Bonus – Not learning from your mistakes
Learn from your mistakes. You will make many, and that’s OK, so long as you don’t beat yourself up, understand what went wrong, and then iterate on it. In the words of Einstein – “Insanity is doing the same thing over and over and expecting different results.”
Below is the slide deck that I used to present at Google Campus’s Fundraising Day.