August 2, 2011
I have the good fortune of listening to a couple of hundred investment pitches a year. I get to witness a number of awkward and sometimes comical situations (albeit more comical to the audience than the presenter). The interesting thing is that these faux pas are constantly repeated, and with just a little preparation, they could be avoided.
Some of the most common and avoidable dog poo in which I’ve observed entrepreneurs step into while pitching for cash include:
1. We don’t have any competition
If that is truly the case, then there may be a very good reason that nobody competes in your space. Maybe you don’t have a space? I believe the inventors of the fur-lined sink and the portable folding-sport-chair-rifle-gas-grill didn’t have any competition. They didn’t have any customers or prospects either.
Maybe you think there are no competitors because your product or service creates a totally new category. If that is true, it is unlikely that there isn’t an adjacent category with a gorilla that can’t and won’t move into your market – if there is an actual market. If you are wooing someone’s customers, they will see you as a competitor. TV was a total new category when invented, yet it competed with radio and print for an audience and advertisers.
Saying “We don’t have any competitors” isn’t going to make you look like you are a thoughtful, realistic business professional.
2. Our marketing plan is to go viral
That’s not a marketing plan, that’s something for which medical science has created a vaccination, and if they haven’t found the cure it might just be your epitaph.
The odds that you have the ability to break through all the noise, hype and multiple delivery channels in today’s fragmented world of media to gain traction and go viral are about as good as the odds that Lindsey Lohan won’t ever again be in front of a judge pleading for mercy.
Have a marketing plan that creates strategic partnerships, drives revenue, creates lead generation and harvesting programs, and closes revenue-positive deals. Take control of your revenue generation, and don’t sound like you are hoping that your ship will come in just because hope fills sales. This is analogous to a dead calm ocean leaving sails flapping in the wind. Hope is not a strategy!
Good plans that are well-executed put wind in the sails (and sales) and bring ships home.
3. We’re raising money to get a paycheck, raise overhead, pour into R&D or to get a company masseuse
Nope, if that’s the case you’re just talking about raising money. The person who is actually raising money is going to use their proceeds to monetize the sweat equity and R&D they’ve personally invested in the company to date. No one likes to fund administration, overhead, or science projects. Everyone wants to see the founders put their faith and sweat equity behind the idea so that invested money goes to work to scale the revenue generation of your proven idea.
4. What do you mean by ______________?
This is where the blank equals Gross Margins, Net Margins, EBIT, EBITA, COGS, and Unit Economics. Know your financial drivers and have them in the plan. Being able to respond to clarifications of your cost and revenue drivers is a good thing. Not knowing what a potential investor is talking about is bad. Very bad.
5. We are a Google-killer
Or Facebook, Groupon or any-other-next-big-thing company. It is more likely that, instead of being a Google-killer, you are a squashed bug on the windshield of their Ferrari. You’re not the next big anything. You’re you! S0 be the best you you can be, or go work for someone else and be the best them you can be (I think I just made Dr. Seuss smile down from heaven with those prose).
While we’re on the subject of bad investment pitch form, during Q&A, don’t be argumentative. Don’t try and prove you’re the smartest close-minded person in the room. No way you’re going to win that game, because everyone knows the venture capitalist is the smartest close-minded person in the room, which means that the contest was over before it started.
Be thoughtful, know your stuff, don’t make it up as you go. It’s OK to say I don’t know and many questions can be deferred for a later time. Lastly whatever you do, be coachable and don’t be a defensive know-it-all.
That doesn’t sound very hard now, does it?
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