Acquiring funding for your business is one of the toughest, but most rewarding, missions that you will embark on as a startup founder or business owner. The reality however is that the likelihood of getting funded by an investor in your first few stages of business, if at all, are quite slim. Yet despite knowing how tough it is, entrepreneurs and founders often make the same mistakes and sell themselves short.
Avoiding these 10 mistakes will increase your likelihood of getting your first investor meeting and, ultimately, securing the funding to get you off the ground or to the next stage of your business.
Targeting the wrong funds.
Investors are all different. They focus on different stages such as pre-seed, seed, Series A, Series B and in different industries. Some have well publicised investment theses; others adopt a more generalist approach. Your goal as an entrepreneur is to find the right investor for your business and industry. It will be far easier to successfully engage an investor who has invested in your space, and likely has a natural interest or passion in what you do, than someone who has not.
Lack of investor research.
The same extensive research you do on a company before applying for a job is required when searching for the right investor. Build a well researched list who you think will be a match for investment, with intelligence gathered on both the fund, as well as its team members. This is how you set yourself up for success.
Not planning out your approach.
Once the right investors have been identified, it’s time to plan your approach. Taking a systematic approach and utilising various channels will work best. Meeting at events and using warm or friendly introductions are all appropriate. Something to remember is to schedule follow-up calls or meetings once you have made contact.
Not focusing on relationships.
Regardless of the quality and extensiveness of your business plan, you will need to build a relationship with an investor before receiving investment. A deep level of trust is required and conviction that the team will look after the investment. Building relationships take time, so begin early by actively engaging with investors to build trust before you begin your raise.
Not having a sharp elevator pitch.
Keep short (60 seconds or less), sharp and make sure you stand out. Investors and funds see thousands of decks every year, making it tougher to stand out from the rest. The elevator pitch needs to be compelling, covering who you are and why it is such a great investment opportunity. Practice makes perfect, so get going to ensure it’s exciting, leave them with the right questions and most importantly, get you a follow-up meeting.
Not having a sharp intro email.
Long, drawn-out mails will not get read. Keep it concise and to the point to ensure you stand out in an investors inbox, or, at least get an investor sufficiently excited to reply and find out more. Personalisation can help cut through the noise, but spend some time experimenting when you send messages. It’ll help you craft an email that gets their attention.
Being overly persistent.
Remember to put yourself in the shoes of the investor and use the three strikes rule when operating. If your first approach is ignored, a second or third is only appropriate if sensibly spaced. Providing project or business updates is a good way to secure a follow-up meeting. If you do not gain traction after three attempts, it’s time to move on.
Having a substandard deck.
Your deck is the equivalent of your CV when looking for a job. Perfection is not out of the question. If it’s too long (longer than 12 slides) you get to the top of the wrong pile. Make sure it uses visuals if it's too wordy, explains what your business does, looks presentable and uses the correct grammar or punctuation. If necessary, invest in a designer.
Not asking for appropriate feedback.
There is no shame in getting told ‘no’ from investors. Even the most experienced entrepreneurs get turned down multiple times before securing an investment. A “good” ‘no’ will come with some feedback to help you improve your approach for other investors or attain missing information for the next attempt. If they offer access to their network as it may not be the right fit for them particularly, that's a big win! Keep in mind that the feedback is largely based on the first impression.
Trading too heavily off Covid-19.
Be sensitive about your business victory based on the current pandemic. In the end, it has cost many their lives and millions their jobs. If you are pivoting your business model based on the pandemic, do it with caution. Investors look at businesses with a 5-10 year projection and forecast in mind, not 1-2 years.