What is the wrong way to raise capital for a startup? Originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
“Here’s a slide I think might be good,” the CEO said to us.
The CEO had just blown it. I mean completely blown it.
I was working as an Entrepreneur in Residence (EIR) at a Venture Capital firm at the time, and we were sincerely interested in investing in the CEO’s company.
We liked the technology, and…
We liked the engineering team, but…
The CEO was so unprepared that we couldn’t move forward.
I met with the CEO the following week and I asked him why he was so unprepared.
“I didn’t think you guys would invest in us.”
I couldn’t believe what I was hearing.
The CEO had lost before he had started.
Being unprepared is just one of the many wrong ways to raise venture capital. There are many more.
I learned a lot being at that VC firm as I watched entrepreneur after entrepreneur make the same mistakes again and again. Then, when it was my turn in the barrel, I made a few more mistakes of my own.
Here’s my short list of big entrepreneur mistakes in raising Venture Capital. I’ve decided to focus on those small details pitching to investors that might be difference between getting a term sheet and not getting a term sheet.
A. Bringing Your Whole Executive Team to A Pitch
How can this be a bad idea? After all you have a great team, and you want to show it off to your potential investors.
Let’s say you’re presenting to the whole partnership, and you have a one hour time slot. You’ve brought your team of six executives with you to the meeting.
You start your pitch, and you get to the slide about the team. You explain your background and your team explains their backgrounds. Twenty minutes go by before, mercifully, the last of your executives completes telling their story.
The partners have already lost interest and are playing with their iPhones.
Just as importantly, you’ve lost about half the time for your pitch. Now you’re rushed to complete it.
And that’s just the first problem with bringing your whole executive team to a pitch. There are others like…
B. Bringing Team Members That Don’t Add Value to The Meeting
You want to have a less is more mindset going into a VC meeting. You are obviously going to be the focal point, but having someone to complement your knowledge is always helpful.
For example, bringing your VP Engineering is always a good idea if you are the marketing and sales brains of the company. However, bringing your VP Marketing might not be such a good idea.
Only bring executives that are going to actively participate in the meeting. Anyone that doesn’t add value shouldn’t go to the meeting. I know everyone wants to go to these meetings, but it’s a test of your leadership to bring only the right people to a VC meeting.
C. Not Having Backup Slides
Imagine this scenario.
You have knocked it out of the park with your pitch. You can tell the partners are really impressed. Then one skeptical partner asks you a question about your growth that you can’t answer on the spot.
You don’t want to lie, so you say you’ll get back to them.
Did you hear that sound? It’s the sound of the momentum draining from the room.
If only you had prepared that backup slide about your growth plan. Then you could have seamlessly answered the partner’s question and kept the momentum going.
I know this is easier said than done, but you want to have as many questions as you can think of ready to be answered on the spot.
D. Not Having Clear and Easy to Follow Financials
I don’t know what it is, but lately I’ve been seeing more and more entrepreneurs showing graphs for their financial growth.
Now you’ve made it difficult for your potential investors to understand the true financial picture of your company. I know you can always send this information to your investors, but why are you making it difficult for your investors?
Instead, just show a pro-forma spreadsheet of your financials going out for the next five years. You should just be cutting and pasting from the financial plan you are using to run the company. You do have a financial plan, don’t you?
E. Having A Designer Help You Develop Your Deck
You want your slides to look really good. So you hire a designer to help pretty up your deck.
And the deck certainly looks pretty. However, the new format actually makes it more difficult for your audience to follow along.
All you need is a clear message, less text, more graphics set against a simple white background. That’s it. That’s all you need.