When you are a startup cofounder, funding is the real deal and finding investors to pull in for your startup becomes a challenge. While you may have the most brilliant startup that’s extremely innovative, disruptive and revolutionary, getting an investor onboard to help you transform your ambitions into reality is crucial. Therefore, when you pitch before potential investors, you should be able to sell your dream to them with passion and conviction.
To help you ensure complete success in attracting investors to your project, StartUp Bahrain provides you with this list of a few quick red flags that investors fear. Next time you present to an investor, make sure your pitch is empty of these:
- Keep your team at a minimum. Make sure that your startup does not have too many co-founders or team members! While sharing profits/equity with individuals who can collaborate together is a great way to get productive heads together, it also entails the risk of bringing on board too many partners (first-time startupers, key team players, family and friends investors) at the seed stage. This could be discouraging for a potential investor.
- Check your overheads! If your overhead (expenses) is high and your profit margins are low, then it’s definitely a red flag for your investors. Trust us when we say that it’s way more desirable to show investors that you’re the master of controlling the cost of your startup better than how your competitor is. It is through this scope that investors see an advantage, potential and sustainability in your startup.
- Do you do a whole lot bunch of things besides your startup? While it’s quite impressive to show your multitasking abilities to people, this however could turn out to be a major red flag to investors. When investors sniff out the fact that your startup is simply a part-time job, they’d be doubtful of your sincerity and seriousness. The main question that’ll be going on around their heads is: are you really available enough to pull it through to what you dream it will become one day?
- Gotta have your marketing and publicity plans figured out. Your investor wants to be certain that you have a robust and workable plan to scale up your business and take it to the next level. So check every bit of your planning and marketing before you pitch. An investor wants to see that you’re actively out there and not huddled up all by yourself in a bubble. As an entrepreneur, you should have already reached out to other clients.
If your plan to grow your business is solely based on paid advertising, then you are certainly not on the right track and will score poorly in the books of investors. What’s worse, is that those potential investors might fear that you would use the lion’s share of their investments to pay for advertising of your business. So you need to show them some alternative PR plans for publicity to gain their confidence.
- Blind faith in the success of your startup is a no no. While it is always good to be optimistic, it is better to be practical and realistic about one’s goals and plans to achieve them. So acknowledge the challenges and share with your investors your plan of sustainability on overcoming these challenges. It is interesting to see how AirBnb and Dropbox had built their businesses worth billion dollars from very little seed money through small and focussed steps. AirBnB, an online rent-a-stay platform started with renting three air mattresses for just $80 which later on expanded to a business which is valued at over $10 billion. On the other hand, Dropbox, a digital platform to store data across two computers also shows us how a billion dollar business could be built up with short-term plans.
- Do not fool yourself, competition will always be there. Some entrepreneurs like to believe that their startup idea is revolutionary and no one else has come up with such a brilliant solution before, thus no competitors at all. Here’s a secret, investors dread it when you tell them there’s no competition. It is unrealistic to tell them that your business will grow unbeaten. Instead, it is good to acknowledge competition and show them how you are working towards beating them.
- Having a technical founder is extremely valuable. If you do not have any technical founders in your business, you are most likely to spend a lot of money to build and maintain your tech-enabled or powered startup. This could be a deterrent. So try and team up with partners who can provide you with adequate technical assistance. Like they say, it’s easier to turn a technical person into a business person than a business person into a technical person. Is that true though?
So next time you pitch to an investor, ensure that you have covered yourself on all the aforesaid points and return home with all the investments that you were praying for! To know more about how to pitch successfully, read StartUp Bahrain and follow us closely!