You have a brilliant idea that you want to get funded.
Maybe your friends and family have told you so. Possibly you just instinctively know that this idea could disrupt markets and engage a healthy stream of customers. Possibly you have run this idea by some of your potential customers and they have told you that it sounds good.
Now all you need to do is get it funded and you are off to a flying start.
You believe the idea is so good that all you need to do is get in front of investors and they will soon see the magic in your idea and hand you over some cash.
Now all you need to do is find some investors and start the ball rolling.
Maybe you started online, looking up investors, sending them invites to connect, or even having a chat. You may have looked up investment events and registered to attend. All you need to do is start a conversation, and see where it leads.
This is the mindset of many I speak to on the funding journey, especially in the pre-revenue/proof of concept phase of the business.
The reality is that attracting funding involves a big degree of preparation.
And if you are not ready for a chat with a funder, it will almost certainly end in frustration.
So, what are the 7 deadly sins that I see in this landscape?
1:You haven’t thought about the idea through the eyes of an investor.
Passion will only get you so far. Not understanding investor motivation and how to position yourself in a credible way is the fast track to failure. If you do not have a 1-page funding summary and a pitch deck, this is the place to start. Without them, it is unlikely that your conversation will go any further than the first contact.
2:You don’t understand the funding process.
Although this varies from country to country; in the UK the funding route has two distinct phases. The first stage is proof of concept and the second is scale-up funding once your concept has been proved. Over 40% of UK businesses fail because there is no market for their service or product. On this basis your only focus at the beginning of a venture is to prove that there is a market for it (Minimum Viable Product, or MVP). On that basis, if you are asking for any more than £200k to develop your MVP you probably have unrealistic expectations of the funding process.
3:You do not have an experienced enough team.
If you are the only person on the team, looking to outsource key parts of the business, you are in shaky territory. Especially if these outsourced partners are responsible for the critical parts of the business. Take the tech platform/website for example. Outsourced partners get time for money. If the investment is for paying them and they don’t deliver: what then? This is especially true if your development team resides in another country. How do you mitigate the risk of them promising high and delivering low, especially if you have paid them upfront and/or have them on a retainer? It is better for early-stage funding to have your key players invested in the company. If they do not have incentives to deliver on time, this will likely be a concern to potential investors. Also, assembling a credible advisory team is something that a lot of early-stage business owners fail to consider. Experience counts, especially in the running of a business.
4:You haven’t considered the tough questions and are unprepared.
Start with this: how did you come to your valuation? I hear many startups talk about an idea, with no patent or protection, tell me they are looking to raise millions. Instantly, I know I am in for a ridiculous conversation. If you don’t even have a live platform, how can you possibly justify a large valuation? Unfortunately, this isn’t the field of dreams: build it and they will come. We are right back to the alarming stat of over 40% of business failing because there wasn’t enough demand. If you can’t prove that people are engaging with your business/platform/idea, you are in for a rough ride in a funding pitch. The big giveaway here is that many startup business owners spend way too much time deflecting from the tough questions as they have clearly not thought them through. This is toxic in a funding pitch.
5:You never get feedback.
Do you know why investors are not interested? Or take the time to ask? I have sat on investment panels and seen the same candidates in different pitch scenarios come on and make exactly the same mistake(s) as they made the first time that I saw them. The belief that, if I speak to enough investors someone will get it eventually, is a huge mistake. If you haven’t taken the time to find out how you could improve your pitch, it is likely to be a long and lonely journey into not getting funded.
6:Your slides are your pitch.
You feel that your slides are all you need to pitch your business and simply read them during your pitch. Without them, you are lost. So, if you reach your big moment and there is a tech problem you are left on stage like a rabbit in the headlights unable to pitch your business. If you cannot pitch your business without any slides, you should not be pitching it at all. Your slides should be a supplement, not a crutch.
7:Me, me, me
All you can think about is how great your business/idea is and believe that the more opportunity you get to talk about it, the better. If you can only get an investor to understand one of the numerous possibilities of how your idea could work, you will hit the motherload. This is particularly apparent in the networking section after the pitch.
But how long do you spend getting to know the investor? What they like/look for in a business? What they think you could do to improve your pitch/funding prospects? What help they know that is available for early-stage businesses? What motivates them to invest?
Networking at funding events I have run or attended can often result in the toxic trail of people with badly formed ideas vomiting unsolicited information at me in the hope that I will get it eventually! If I ask a question and it takes more than 30 seconds to answer, the probability of me wanting to ask another question goes down exponentially with time. Some people will talk for as long as I let them, confusing polite with, please stop.
This is not networking, it’s an ambush!
I advise most of the early-stage businesses I consult with to not seek equity investment. Grant funding is often a better place to start.
Because I was seeing the above mistakes so frequently, I created a pitch workshop.
Here I offer a safe space for people to practice their pitches and get live feedback.
Pitching is a completely separate skill-set from anything else in your business.
Your ability to communicate clearly, concisely, and with confidence is almost always the difference between attracting funding or not.
If you want to test your pitch and/or get tips on improving your pitching skills, you are welcome to get free tips from joining this newsletter, or attending a live event here.