Common Mistakes When Talking To Investors

Common Mistakes When Talking To Investors

As part of our mission to educate entrepreneurs, we usually spend a half hour or more giving feedback to companies who apply for funding regardless of whether we think the company is a good investment fit for CAV Angels or not. This feedback ranges from very specific takeaways (e.g. how to more effectively communicating the company’s value proposition) or very broad (e.g. thoughts on constructing a compelling presentation), and typically, the entrepreneurs are thankful for the constructive criticism.

This exercise, however, has brought to light many things that we think entrepreneurs could generally benefit from hearing directly. Thus, in the spirit of constantly striving to improve, we compiled the below top five tips we think are universally true when talking to investors.

 

No Used-Car-Sales Tactics

Look, if your product is good enough to merit an investment, it should be able to sell itself. Don’t layer on a pushy sales approach because it will only detract from your presentation. Instead, try to let your soft skills shine; personal traits like passion, enthusiasm, and confidence go much further than listing 5 reasons the investor would be a fool to not write a check immediately. The most experienced investors would rather invest in a Class A team with a Class B product than a Class B team with a Class A product.

Don’t Use An “Everything Is Great” Approach

There is no such thing as a perfect product in a perfect market with a perfect team. Period. So when a company is presented as perfect, investors will ask themselves “is the entrepreneur just naïve or being deceptive?” Good investors will do their own research and fact checking, so confront the issue head on before the investor finds out about it on their own. At worst, the issue causes the investor to pass and everyone saves time and heartache; at best, you gain trust and credibility from your potential investor. (It should go without saying that all of the issues should be accompanied with your remediation strategy.)

Avoid Claims You Can’t Back Up

Creating a believable company story depends heavily on verifiability, so make sure there is data to back up all significant claims. Thorough investors are going to independently verify every major ascertain you make, so why not make it easy for them by providing sources and underlying data? The more the investor has to search for verification, the higher the chance they will come to a different (and almost certainly less beneficial) conclusion.

Never Wing A Demo

Live demos can be a phenomenal way to get investors more acquainted with and interested in your product, but never, ever give an unrehearsed demo. Entrepreneurs need to know their product inside and out, and missteps cost both time and credibility, neither of which should be wasted. It’s always a good idea to give your team the demo before an investor to make sure your story is both succinct and accurate. Feel free to err on the side of your demo seeming overly scripted in order to avoid it feeling like it’s off-the-cuff.

Don’t Make Investors Wait for Docs

Serious investors will ask for more documents than simply a pitch deck. This can be anything from articles of incorporation to financial projections to tax filings. Have commonly requested documents like these ready in a “data room”, most commonly a file-sharing site like Google Drive or DropBox where all of these docs reside. There is no reason to make an investor wait for a couple of weeks while you gather these docs; it is a waste of time and momentum, and can easily be interpreted as sloppy preparation. For an extremely comprehensive list of common docs, check out this Angel Capital Association site.