Raising Capital… then don’t say that!

When you listen to as many investment pitches as I have, you get a chance to see people create 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, could be avoided.  Some of the most common gems I’ve heard entrepreneurs say while pitching for cash:

1. 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 totally new category when invented, yet it competed with the 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 & harvesting programs, and closes revenue-positive deals.  Take control of your revenue generation, and don’t sound like you’re hoping that your ship will just come in because hope fills sales like a dead calm ocean leaves sails flapping in the wind.  Hope is not a strategy!  Good plans well executed put wind in the sales and bring ships home (or is it winds in the sails)?
   3. We’re raising money to get a paycheck, raise overhead, pour into R&D, or 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 ______________ –  where 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 the former potential investor means when he asked you about them is bad.
   5. We are a Google-killer – (or Facebook, Amazon, 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, most close-minded person in the room.  No way you’re going to win that game because everyone knows the VC your pitching is the smartest, close-minded person in the room, so that contest was over before it started.  Be thoughtful, know your stuff, and don’t make it up as you go; it’s OK to say I don’t know; many questions can be deferred for a later time and appear coachable, not as a defensive know-it-all!

That doesn’t sound very hard now, does it?

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