This video discusses common mistakes entrepreneurs make when speaking with investors, highlighting phrases to avoid to foster trust and facilitate investment. It emphasizes the importance of smooth communication and understanding an investor's perspective during fundraising conversations.
What this video covers
Let’s face it; for investors, when it comes to investing in companies, it’s all about pattern recognition; it’s about things that they have seen in the past.
Also, there are certain things that you want to say and certain things that you absolutely don’t want to say because they can disrupt that process of you building that relationship, building that trust, and for them to get to know your business inside and out, and for them to also get excited to potentially make that investment that you need. With that being said, let’s get into it.
“You need to sign an NDA.” That’s the typical mistake that first-time entrepreneurs would make, and here’s the reason why. For exploratory conversations, for getting to know each other, be sure to remember that fundraising is not about adding more friction to the process.
“We don’t really know our unique selling proposition yet.” You’re not knowing your unique selling proposition is telling that investor that you have not done your homework. You have not talked to your customers. You have not done that quantitative testing, that qualitative testing via your website, via customer calls, prospective customer calls.
“We have no weaknesses.” That is another thing that you don’t want to tell the investors. There are always going to be certain challenges of building your business, and I always find that you want to approach those conversations coming from a perspective of authenticity, being really authentic and sharing it the way it is.
“This is a sure thing. We can’t fail.” That’s another thing that you don’t want to tell investors because here’s the thing: the market is always going to go up and down. There will be challenges in your company. It’s not going to be a straight line. That doesn’t happen in entrepreneurship. There are going to be certain wins; there are going to be certain failures, and it’s going to be all about your team and how can quickly your team can adapt to whatever is in front of all of you.
“I don’t have an exit strategy yet.” That’s another mistake because here’s the thing. The investor is giving you the money because eventually, they’re planning to get a return on their investment. They’re not going to give you the money to just have it in there forever. So, you need to have an idea of who are those potential players that are going to be acquiring your business?
“We really need the money.” Again, that’s another thing that you don’t want to say because investors want to invest in winners. Investors don’t want to invest in people where they smell that sense of desperation. When you’re desperate, the best thing that you can do is just close the computer, and go to the gym, and disconnect, and do something else. Otherwise, you’re going to disrupt your financing round.
“We know everything; we don’t need your help.” That’s another mistake because when you’re looking for money, you’re not looking for the money itself. You’ve got to turn it around, and you’re going for the actual network that is giving you the money.
“I need a big salary.” That’s another big no-no. When you are starting a company, you are always trying to minimize the cost. Obviously, if the investor starts to see that you’re throwing money everywhere, that you’re paying yourself a crazy salary, that’s going to be a big no-no. That’s actually going to be part of your financial model. So, you really want to put yourself at a minimum. What is that minimum amount that you need in order to pay for your cost of living?
“We’re going to have a big party.” That’s another big no-no. When you’re closing this round, essentially, that’s not a milestone. That is a stepping stone because, at that point, the work is when it actually starts. You’re receiving that money, and that money is coming with expectations.
