Beyond the Pitch
The Top 10 Things To Never Say In An Investor Pitch
Your slide deck is ready. You’ve rehearsed your main points. It’s nearly show time. Don’t shoot yourself in the foot. Here are ten statements that are sure to tank any investor pitch:
10. “We haven’t talked to potential customers yet.”
Very few entrepreneurs volunteer this information. All investors ask for it.
Without customer and market validation, an entrepreneur is in deep water right off the bat. It’s surprising how many entrepreneurs are so in love with their idea and product that they believe everyone else will love it as they do.
9. “We don’t have any competitors.”
Usually, entrepreneurs mean that no one is doing exactly what they are doing, but the truth is that there are all sorts of competitors for potential customers’ money and time.
The first line of competition is inertia. Most potential customers are more likely to keep doing what they are doing than change.
Investors look for evidence that an entrepreneur is thinking more broadly about how to educate potential customers on benefits to excite them enough to change their habits.
Entrepreneurs who have investigated the market and thought through how their product may be accepted by customers have a much better chance at moving into due diligence.
8. “This is an opportunity to get in early on this deal.”
Some entrepreneurs try to create a sense of urgency. To investors, it’s a real turn off. Investors aren’t thinking about getting in early. They are thinking about trying to find an investment that will produce a 10-20X return or more in a few years.
In fact, even if investors like a deal, they are likely wanting to see some risks diminished before investing. That’s why investors delay and tell entrepreneurs to come back in six months when they have some milestones accomplished.
7. “We need you to sign a nondisclosure agreement (NDA).”
You’re kidding, right?
There’s no reason from an investor’s perspective to sign an NDA. There is a good reason not to, as an NDA ties investors’ hands for future activity.
Entrepreneurs believe that their products are going to make them wealthy; they want to protect that potential. Investors know that whatever the idea the entrepreneur is talking about, they’ve seen it, or something similar, before and will see it again.
Reputable investors aren’t going to take an entrepreneur’s idea because that isn’t what they do. They invest; they don’t build. Due diligence is the time to request an NDA to cover specific intellectual property (IP) or other types of “secret sauce.”
6. “Our numbers are conservative.”
Everyone listening to an entrepreneur’s pitch knows that the pro forma numbers are guesses and likely to be wrong. Pitch numbers aren’t going to happen, but some numbers will.
Investors want to hear how an entrepreneur is thinking about the opportunity. Is he or she including relevant information based on digging into the market and talking with customers? Can they articulate the critical milestones and dependencies and the capital needs matched to those? At this stage, to investors, the entrepreneur’s thought process is far more important than the numbers on a five-year P&L.
5. “We only need “X” percent of the “Y” market.”
A generalized shotgun approach is just a different way of telling investors that the entrepreneur hasn’t completed the research to understand the problems that the market has and why and how much they will pay to solve those problems. This is the most common “thou shalt not say” that we hear.
4. “Our marketing will be viral.”
This is another lazy entrepreneur excuse for “I haven’t done my homework.” Including every possible buyer says that the entrepreneur hasn’t done the legwork to pare it down to “most likely” and “reachable.”
The assumption is that the company will get lucky and that the market will catch fire and spread around the globe and that any and all customers will come.
Instead, investors want to hear that company founders have worked out a business model and have an understanding of their total addressable market, their serviceable available market and their serviceable obtainable market. Read more on market sizing.
3. “Our CTO, CFO, or CMO has agreed to join the company after we get funding.”
So, this significant member of the startup team is not committed to the company right now?
Investors will wonder if this key person is cut out to be an entrepreneur if they are waiting to have some level of security before they join. A successful startup management team has to be in for the vision as much or more than for the job.
2. “We have several large companies waiting to partner with us.”
Starting a company is all about overcoming, “I’m going to wait.” Investors are looking for CEOs who can push the business forward beyond objections—whether that is in raising funds, gaining distribution partners, or solidifying agreements with early adopters.
In contrast, investors pay attention to entrepreneurs who can say that three of six companies serving the target market have signed on as sales partners or that a supplier of complementary software has agreed to co-development terms. Or better yet, that a customer has signed on as an early adopter and is sharing the bill for some development costs.
1. “We offer a better product at a lower price.”
There is no investor in the startup space who wants to invest in a commodity product. None!
When an entrepreneur tells us that the product is the bees’ knees, BUT the plan is to underprice the competition, that’s a strong indication that the entrepreneur probably hasn’t worked out the cost structure of creating and delivering the product to actual customers.
It also says that the entrepreneur lacks confidence in the product and feels the need to price it lower to capture attention in the marketplace. Or that the company is going after a non-premium market without much upside.
For entrepreneurs, the point of this Top 10 List, of course, is to address these issues long before the investor pitch. That’s what we do in Customer Learning Lab.
If an entrepreneur is doing the right job of market validation and partnership and team building, if he or she has matched critical milestone to a projected capital plan, they won’t be saying things that turn investors off.
Instead, they’ll be building investor confidence.
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