9 Ways to Guarantee That Your Startup Doesn’t Get Funded
Starting up isn’t easy, and securing funding is one of an entrepreneur’s greatest challenges. It takes a solid idea, a cohesive plan, and a variety of impressive skills and traits for an entrepreneur to catch the attention of an investor. Sometimes, the entrepreneur is most challenged in identifying how and where to get started.
Why not get started by thinking about what not to do? To get you wheels turning, we offer up these nine (9) ways to guarantee that your startup never gets funded. Beware!
9 Things You Can Say to Guarantee That You Never Get Funded
1. Never Leave Your Home Office
Everyone has a different working style, and while a home office is not the ideal choice for everyone, it does provide a cost-effective, highly-productive environment for some. But if you have a chance meeting with someone new in your home office, it’s likely a 911 call is going to quickly follow. Clearly, whether you are looking for funding, employees, co-founders, customers, or good vendors, you need to get out and interact with your community. Good places to get exposure are co-working spaces, networking events (for example, at local incubators), and through organizations and alumni associations.
The Investor’s Angle: Two things happen when you approach an investor; they look at your startup, of course, but they also look at you. Investors typically like to offer investment opportunities to entrepreneurs who are active in their respective communities. This can be anything from advocating for entrepreneurs and freelancers like yourself, to becoming a familiar face at local networking events and coworking spaces.
2. Never Develop A Pitch
Not having a pitch for your startup is an enormous mistake. I know what you might be thinking: “I’ve got great presentation skills, and I know my idea. I don’t need to memorize a script.” While it is true that you don’t need to memorize a script word-for-word, it is important to get a handle on the general topics and points that highlight what your startup is all about, and formulate a way to put all of those things into a compelling story that you can illustrate in less than a minute. A good pitch can make you and your idea stand out in a crowd, and subsequently gain favor from investors. Having a written pitch also allows you to make modifications based on feedback.
The Investor’s Angle: At any given moment, there are dozens of entrepreneurs vying for the attention of an investor. It can be difficult to get a meeting with a busy investor at all. Having a pitch that you’ve practiced repeatedly helps you make the most of the chances you get.
3. Make Your Family Sign an NDA
We get it. Your idea is your baby, and by all means it is important to keep that idea protected while it is still young. It can seem dangerous to pitch your idea at any event when the crowd is mostly strangers/ acquaintances. But there’s a harsh reality to face: if you never tell anyone about your idea, how will you ever get anyone interested in it? By all means, use your best judgement when speaking to people you don’t know, but don’t let fear keep you from moving forward. If in doubt, consult an attorney.
The Investor’s Angle: If you’ve caught the eye of an investor, they’ll be interested in seeing what kind of team you can put together. There is a never-ending supply of ideas in an investors world, but there are very few great teams who can bring any of those ideas to life. Do yourself a favor, be prepared to know your limitations on sharing ideas with those who seem interested in working with you. Start with general concepts or processes, and move into details as talks become more serious. Have a confidentiality agreement ready for any time that you feel it is important.
4. Don’t Plan, Just Practice Fearing Failure
It’s pretty common knowledge that entrepreneurs have to wear a variety of hats. One minute they’re a web designer, the next minute they’re a PR professional. Entrepreneurs can’t be experts at everything, but they also don’t have the time to become an expert before taking the next step on a project. Remember: the sooner you start, the more time you’ll have to learn from your mistakes.
The Investor’s Angle: Investors understand how entrepreneurship works, and while they do want to see a clear plan for managing capital and meeting goals, they are not expecting you to know all of the answers. The most important thing is trying, getting feedback, and trying again.
Tell me, if you buy a single lottery ticket, are you instantly convinced you’re going to win?
Right, of course you don’t. Of course your belief that your startup is going to catch fire and become an immediate success, if an important ingredient to making it happen. But investors need something more concrete before they hand over their money. The investors money, at best, is a bridge to being sustained by revenue. They won’t be swayed by an argument that your product is so cool it is bound to make millions.
The Investor’s Angle: The secret here is all about the M&M’s. Nope, not candy coated chocolate (though we kinda wish it was). What we’re talking about here are metrics and milestones. When pitching to an investor, be sure to keep the focus on how you intend to grow your startup, how it will succeed, and most importantly, how you intend to put investment money to good use. Which brings me to the next point…
6. Be Penny and Pound Foolish
Entrepreneurs are cheap-skates. If you can get something for free, why pay? You’ve got the funding, but you have to make it last as long as possible. After all, investment capital is at best a temporary solution – customer revenue is the permanent fix. Until you are funded through revenues, you have to look at your investment capital and calculate your “runway” – how long you have until it runs out.
This advice may seem obvious. But it can be suprising how fast you can waste money when you make the switch from bootstrapping, or draining your own bank account. Beware of signing up for unecessary subscriptions, memberships, or buying outlandish tech gear or gadgets. Does your entire team really need Moleskine notebooks for memos? Ask the important questions like: Is incurring this expense crucial to generating revenue? Is it essential now, or can it be deferred? What will happen if we don’t spend this money?
The Investor’s Angle: Remember, when you take money from an investor, they are buying something from you. Like customers, investors want to see founders being just as careful with investment money as they are with their own, or money that they’ve raised from family and friends. When approaching an investor for funding, be sure to have a detailed plan for how much you’ll need, and how you’re going to spend it.
7. Never Put Skin In The Game
If your idea is such a great one, why haven’t you put down your own cold, hard cash to make it happen? That is completely understandable question for an investor to ask you. If you’re sitting around waiting for an investor to part with their money to “take part in the big win,” you should expect them to ask you how much of your own money you’ve invested.
The Investor’s Angle: Why would I buy something if the owner doesn’t think it’s worth buying?
8. Use a “Warm Body” Recruiting Approach
There are plenty of things to keep in mind when bringing new team members on board. Best friends rarely make great business partners. Instead, use your connections from live networking events and workshops to find individuals who can realize your vision and help move the idea forward. Develop a recruiting process that helps you get the very best people you can.
The Investor’s Angle: Teams deliver results, not plans or prototypes. Before signing over any checks, investors will be looking at the team who will be in charge of delivering success. And afterwards, they are going to expect the team to do whatever it takes to win. Be sure you have the best team you can.
9. Avoid Standards, Avoid Processes
Of course with all startups, things change fast, and often. Pivoting is important. However, it’s also important to focus on having clear processes and standards. From the way that you work with your team, to the ways in which you interact with those who are outside, you should always keep a focus on developing and documenting repeatable processes that allow you to scale.
The Investor’s Angle: Having a ‘stable’ startup is very attractive when it comes to funding. Processes help to show that the team can meet customer demands, scale, and move the ball forward.
Over to You:
Remember, investors can’t invest capital in every startup idea, so you need to do all that you can to prove that your idea is worthy. Once you get funded, you have a responsibility to follow-through and to make the most of the rare oportunity. Are you an entreprener who’s recently been funded? What pitfalls would you add to our list?