Any investor or venture capitalist quickly learns what to look for as he or she considers making an investment. After one sees a batch of deals, pattern recognition takes over. Investors are looking for big returns and want to hear about ideas but also want to know that the entrepreneur is not naive when it comes to what it will take for success.
Certain triggers will make for an immediate reaction, and not in a good way. In the spirit of cheering for entrepreneurs, here are a few pointers – both what to do and what not to do.
On the “what to do” side I have only one piece of advice: GET ATTENTION. Over the course of my investing career, I have heard phrases like the following:
“Our technology will detect autism in children at an early age.”
“Our technology will disrupt the college choice process.”
“As PayPal is to payments, we are to passport control.”
It doesn’t matter whether or not the money was invested; these entrepreneurs had big ideas and had my attention. The rest was due diligence.
The “not what to do” bucket is a big one but here are a few obvious mistakes that entrepreneurs are prone to make:
- Telling me what I already know. I know the Internet changed the world. I know that big data is big. Don’t start there, start with what I don’t know.
- Pronouncing there is no competition for your idea or technology. It is never true; there is always competition. To say otherwise shows a naive entrepreneur. Go back and do research to identify the competition.
- Proclaiming that your idea will go against Google, Apple, Facebook or many others and make a dent in their growth. It’s too late; don’t say what you will do to those big successful companies with billions in assets. Even if that is your intent, it is not credible.
- Failing to answer the question, “What Is It?” Investors don’t need suspense. By page two or three any investor should know what your idea or product is and understand the space in the world it occupies. Is it software, a drone, an app, a flying car? Just blurt it out early.
- Confusing an Advisory Board with people who will build the company. Having famous people on your advisory board makes for a good PowerPoint but investors know that most advisors don’t help with day-to-day operations. The team that is running the company is more important than eye candy advisors.
Entrepreneurs complain that if they talk to ten different people, they will receive ten different pieces of advice about an investor pitch. My advice is to listen to all ten but make sure you are comfortable with your end product.