By Fernando Berrocal

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In the pursuit of startup capital, every entrepreneur will pitch their concept to potential investors. From email introductions to official presentations, founders and CEOs often use deal-killer phrasing that ends up discouraging potential funding. In this article, we discuss statements that are likely to turn possible funders off–and what to say instead.

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"We have no competition.”

This is a naive statement.  Of course, your startup will eventually face some type of competition in the market.  To believe otherwise will make your leadership appear oblivious to reality. All it takes is a quick Google search to confirm the existence of (at least) somewhat comparable concepts to yours.  So, be straightforward in your conversations.  Be the first to identify your top potential competitors.  Explain how your business is superior.  Treat this dialogue as an opportunity to display awareness of your market; and confidence in your idea.

"Before we explain anything about our business, you must sign a non-disclosure agreement." 

Investors tend to be extremely busy professionals.  They are bombarded with business proposals, sometimes on a global scale.  The vast majority of potential investors will immediately refuse to sign a Non-Disclosure Agreement (NDA).  By asking for one, you are placing a huge barrier between potential funding and your startup.  If you have extremely sensitive information about your business, simply leave it out of the pitch deck.

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"We have a fantastic concept, but we need funding to develop it."  

You need more than a great concept to attract attention.  Investors are approached with good ideas every day–in order to get funded, you must convey the successful application of your product in the actual market.  This includes noting any traction you have previously achieved. Customer purchases, app downloads, website traffic, press attention, strategic collaborations with important players; any tangible result is an example of traction.  The greater your startup’s traction, the greater your likelihood of getting funded becomes.

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"We just started, but within three years we'll have $500 million in sales and $200 million in profits."

When your goal is getting funded, exaggerated phrasing is not your friend.  Such statements only demonstrate that you’re comfortable making unreliable forecasts.  Investors want to see potential upsides in your business–and credible financing numbers. Avoid making assumptions in your estimates that will be difficult to justify in the long run, such as how you can achieve a 400 percent increase in revenue while only increasing operating expenses by 20%.

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"We started the business as a Limited Liability Company (LLC), and we want you to be a part of it."

Most investors don't invest in LLCs.  Instead, they prefer to purchase preferred shares in a C corporation.  This is an industry standard–it is in your interest to comply with this custom.

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"We've only been in business for a few months, but we think it's worth $50 million.”

This is unlikely in any scenario. Investors will not put money into a business whose founders have unreasonable assumptions about its core value.  Take your time making reasonable forecasts, and don’t inflate anything to impress potential funders.  Your credibility is at stake!

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"We're going for a niche market."

Many business concepts target an addressable market that is far too small. Venture capitalists (VCs) and angel investors seek businesses with potential to develop and expand–ideas that can generate a "home run" of profits.  Taking this into account, consider how your concept may augment in relevance, and present it accordingly.

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"Our product will sell itself."

No, it won’t. As a startup owner or stakeholder, investors want to see your enthusiasm towards - and confidence in - attracting consumers.  Experienced entrepreneurs will not be impressed by how special your product is to you or how much faith you have in it. You must demonstrate an understanding of customer acquisition costs; and have a good sense of customer lifetime value.  Accomplish both by presenting a well-thought-out customer acquisition strategy, a collaborative marketing strategy, and evidence that you understand all the related numbers–including lifetime value.

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"Allow me to email you a link to our more than 50-page business plan."

Rather than a business strategy, investors like to see an informative pitch deck.  Focus on composing one that is clear, well-organized, and around 15-20 slides long.  Do not ask investors to download the deck from Google Docs, Dropbox, or another file-sharing site. As a PDF file, attach it to your email when contacting these investors.

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"It's too early to start thinking about a marketing approach."

Investors want to know if you have viable marketing strategies for your product and/or service. How can you reach out to potential consumers at a low cost? What will you do with social media sites like Facebook, Instagram, Twitter, and TikTok? Will you engage in search engine marketing (SEM)?  What about search engine optimization (SEO)? Can you demonstrate that your startup will be resilient in its given market? What actions do you intend to take to get early sales? How much do you expect to spend on marketing in the medium and long-run?

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Skip these “no-go” statements, and you will strengthen any investor presentation.  With better verbiage and methods of dialogue, you can highlight the actual strengths of your startup–instead of distracting from them.

Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

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