Last week I had the chance to meet with three different companies, all raising their Seed round and pitching me as a potential Angel Investor. First things first, I am not an experienced investor, I just made my fifth investment two months ago and I’ll likely make another one, maybe two this year.
What I am trying to do is connect up with angel investors that are a lot more experienced than me so I can learn from them, and meet with as many startups as I can to get experience hearing startups pitch.
On Thursday I was reflecting on one of the meetings I had with another angel investor and we started to talk about some common mistakes that founders make when pitching investors. This particular investor has spent a lot more time than me meeting with founders every week and evaluating deals so it was interesting to hear more about where a founder might lose him during a pitch.
As a founder myself, I’ve spent years pitching investors, and thanks to Techstars, learned a lot of valuable lessons during our time in the accelerator. Accelerators like Techstars, Y Combinator, 500 Startups, etc. put a lot of focus on helping founders create their pitch deck, structure their pitches, and most importantly, get feedback on their pitch. Before I dive-into what not to do, let me just say that if you are a founder and you’re getting ready to hit the investor circuit, make sure to sit down with someone who knows a lot more than you do about pitching investors, and pitch them. You can learn a lot from this experience. Now onto three common mistakes founders make when pitching investors.
- Not sending a thank you note – this is #1 for a reason and it’s incredibly simple but a big miss if you don’t do it. After you meet with an investor, take a few minutes to send a thank you note. This doesn’t have to be some long elaborate essay, instead just a few sentences thanking them for their time and maybe mentioning something that got your gears turning during the meeting will do.
- Setting your valuation arbitrarily high – if you’re a second or third time founder and had a nice exit in the past, great, you can set a pretty high valuation at Seed. On the other hand, if you are a first time found (like me) you can’t, and if you do, you’re going to turn away a lot of investors who think you’re either a) disconnected from the market in general, or b) arrogant. Convincing an investor that your company is worth $3M – $5M in the Seed stage is possible, convincing them it’s worth $10M – $15M is a long shot unless you have some amazing traction out of the gate.
- Not being humble – here’s something I see get confused all the time. As a founder going into a pitch you should be confident, that’s important, but you can be confident and humble at the same time. Too often founders confuse being confident with bragging and this can very quickly rub investors the wrong way. Investors invest in people, they know things aren’t always going to go well in your startup, they want a founder that can be honest with them when things aren’t going well and being humble from the beginning is the first way to show that you’re capable of doing this.
Okay, so now that you know three mistakes to avoid when pitching an investor, what happens after the pitch? Mark Suster from Upfront Ventures has a great blog post about this topic, aptly titled – I met with an investor, what happens next?
Mark’s post is a must-read and one that I send founders to all the time so if you haven’t read it yet, and you’re out there pitching investors trying to raise money, read it now. Honestly it’s one of (if not the) best posts about fundraising I have ever read.
Happy fundraising and hopefully some of the advice in my post and in Mark’s article can help you on your journey. Who knows, that make or break check for your Seed round could be just a meeting away…