Five Common Mistakes CEOs Make When Raising Early-Stage Capital
This article was published in the Spring 2021 issue
by Tim Cooley, Executive Director, Park City Angels
Raising capital is hard, but if you do a few things differently you may be able to increase your odds of getting the funding you need. I’m the Executive Director for Park City Angels, an angel investment group based in Park City, and I want to help you succeed in raising capital. Every month I screen roughly 100 companies, and together with many of the other investors we filter those down to three companies to take them to our General Meeting. Below are five common mistakes people make when raising venture capital.
Mistake 1 - Expecting Money Today
In the 10 years I have been involved in the venture capital scene I have never seen any company receive funding the day they pitch. This is because there is one or more meetings between the final pitch and when a check is written. The phase after the pitch is known as Due Diligence. During this phase the investors want to get to know more about you financially and how you respond. It is this step that is overshadowed by Shark Tank, which presents the assumption that the company is getting funded that day. It doesn’t.
So what does this mean for you? Relax. Your goal on the pitch is to get to the next meeting, not to get a check today.
Mistake 2 - Say Too Much
Because many entrepreneurs feel like they are getting the check today they tend to over talk their company. They want to take the 10 minute presentation and say nine million things in order to impress the investors. The more you talk the more you come off like you don’t know what you are doing. I have seen too many great companies talk themselves out of investment just because they wouldn’t stop and take a breath. You have plenty of time to tell your story, so be specific with the things you want to share today and leave some information out so they invite you back to the next meeting. That is the goal.
Mistake 3 - Spending Too Much Time Talking About The Solution
This is probably one of the biggest mistakes people make. Everyone loves the thing they built and they could talk about it forever, but when we are looking to invest we are looking for a solution to a big problem in the world. So what we want to hear is how big the problem is and how clearly does your solution solve this problem. There is no need to add extra things to either of these parts. Be very clear and specific. Here are three problems and this is how our solutions solve those three problems. They should be opposites of one another.
Mistake 4 - Story
Most people don’t turn their pitch into a story. It is easy to google a pitch deck order, but difficult to convey the entire company in one cohesive and fluid narrative. I have seen thousands of pitches. Almost exclusively, the CEOs who are able to connect one slide to the next seamlessly end up in Due Diligence. Having struggled with this as well I ended up studying those that pitch and put together a book on how one can actually develop a story into their pitch, The Pitch Deck Book. In the book I walk you through a simple format that can help develop the story and I give you three examples of pitch decks and how to fix them. One of the examples is the exact pitch I used to fail at raising capital. It was so bad, and I had no idea.
Mistake 5 - Asking For Help
When I went out to raise capital, I didn’t ask the right people for help. I just assumed I could go and Google my way to a killer pitch. I didn’t, and most people don’t. There are quite a few groups in Utah where you can go and practice your pitch and get feedback: 1 Million Cups, VCO and people like myself enjoy helping people present their idea in a way that makes it compelling.
Pitching your ideas to investors can be scary, but a good pitch can take you to the next level in a hurry. Steering clear of these five mistakes will help, and Park City Angels is full of people ready to invest in your big idea.
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*Read the latest issue of Silicon Slopes Magazine, Spring 2021