Fix these basic problems first before looking for investors
I spent last week listening to 100 pitches for early-stage startups. I’m exhausted.
My angel groups typically invest in roughly 1 out of every 100 applications. That means 99% are passes. For at least half the pitches, it’s obvious within a minute that they’re no-goes, so instead of listening closely (sorry), I started taking notes on the reasons why so many were obvious drops.
Before you waste weeks or months of effort pitching, make sure you’re ready for investors. Here are 5 reasons I noted that were automatic drops, as well as a few additional reasons many were unlikely to go beyond the pitch.
Friends and family will support you bringing your vision to fruition. Grant opportunities and accelerators can help, too. Investors, including angels like me, invest in a completed product.
We’ve all heard stories about entrepreneurs with nothing but a powerpoint presentation (or less) who received millions in funding from investors to build the product. They’re great stories. People win billions in the lottery, too. It just won’t be me or you.
Sure, if Tim Draper happens to be a neighbor or your mother is bff with the CEO of IBM, by all means, pitch them. If your previous startup made a VC firm a billion dollars, their door will be wide open. If you’re the former CEO of DeBeers, finding investors for your jewelry startup will be a snap. For the other 99.997% of startup founders, investors want to see a product, not an idea.
Ideally, that means not just a finished product but customer revenue. Getting to the “in-revenue” stage is without a doubt the most important milestone for finding investors. For many investors, pre-revenue startups are an automatic pass. Some, like me, are willing to consider other types of customer validation such as pilot programs and evaluations. But at a minimum, there needs to be a working product in customer hands before we’ll consider investing.