Investing in a start-up to me is one of the trickiest things to do as I have been on the losing (and winning) ends of both sides of the table on several occasions.
To me, there is no real difference between the investment of money and investment of time, except for the fact that the latter is normally more painful as time we can never get back. They actually kind of go hand in hand as I have found from my experience that, when it comes to investment, the less time I have to spend babysitting an investment, the less pain I have if I end up losing whatever money I put in.
Let me be clear, on more occasions than not, it has not been my money I have thrown into the pot as I have often leveraged companies with pockets far deeper than mine to put in the lion’s share of the investment, and I have often acted as the liaison, conduit or, oftentimes, ax-man (a saying for the person that tells you NO) to the funding itself. For the purposes of this post, whether I am the one looking for the money, giving the money, or representing the person or company who is cutting the check is irrelevant. What is relevant is, what I have found from my experience, are the many ways people get in their way of their own success and tank the deal.
So here are 7 reasons why I have seen people get in the way of their own success and will not invest in you.
1) You try To Impress
When someone tries to impress me I immediately ask the question (in my head), What is this person trying to hide? I have found that, more often than not, trying to impress is a great indicator of insecurity of either you, or your product or service. If the person is not secure in what he or she is saying, then there is no reason why I should feel any security from the investment side. Bottom line, if you believe in yourself and your brand, there is no reason to sell any fluff. Be authentic and keep it real.
2) You Talk Too Much
One of my top five favorite lines EVER is: The talkers never walk, &the walkers never talk. Remember that saying as it will help you greatly, trust me. When pursuing capital , keep it short and concise. Long enough to engage in meaningful conversation, short enough not to be perceived as a babbling idiot. One other major pointer… Never repeat yourself. I repeat: Never repeat yourself (pun intended)
3) You Don’t Listen
This is another huge one and a huge deal-killer. If you try to close a deal without listening to the person on the other side of the table, odds are you will not get your deal. Bottom line, you need to learn to shut-up and listen . There is a reason why the people you are going to have money, namely, they have succeeded on some level that has put them in the position to be the one being pitched to. Listen to them and learn from them. I have found that some of the greatest lessons and intel I have learned is when someone has explained why they are NOT investing in me (hence the reason for this post)
4) You Overvalue your Brand
Another big one… I made a reference in the last article on pursuing capital about my friend & colleague ,Daymond John from ABC’s, Shark Tank. If you watch the show, you will notice how often people come in with unrealistic valuations, which ends up kicking themselves out of their own deal.
If you don’t have any experience in valuations, I suggest you get some help. A good hint is that if you have no significant sales to speak of, no proof of concept and/or or traction in the market of any kind, your investor may very likely ask for majority control as he or she is taking all the risk. There are always exceptions if you own a novel or proprietary product or service that provides significant enough differentiation to warrant a higher valuation.
As Daymond says, it’s not always about the money he has to invest in you, but the time he needs to spend with you. In my opinion, his efficiency with the way he uses as little time as possible to get squeeze out the maximum level of productivity, is one of the main reasons why he has become so efficient in business. There are many time management tips you can pick up from him if you watch the show closely enough.
5) You Oversell Your Product or Service
Selling yourself out of the deal is very common and a very sad thing to witness. I can’t tell you how many times I have seen someone talk his or her way out of a deal. I used to be the #1 culprit. You need to get a sense of when the person (or company) is ready to move forward. Once you do, you must switch into closing mode and wrap up the deal before you lose it!
6) You Oversell You – Ego
Again, a problem with fluff. I take people over-doing things, particularly over-inflating their egos as unnecessary fluff. The problem with fluff is again, that it infers that you may have something to hide. Tell me about yourself, your product and your service. From there I will determine how great or full of sh*t you are. Think about it. I don’t care if someone has the best brand in the world. Do you really want to spend your time listening to someone talk about him or herself all the time? I sure don’t.
7) You Oversell Your Team
Let your team speak for themselves. If they have the gift of speech then there is no reason why they shouldn’t use that gift. Remember, there is no I in team. Additionally, your team will be a reflection of how little the investor will have to allocate his or her time to babysit you. If your team is strong, very little babysitting will be necessary and your chances of getting the deal will increase exponentially.
That’s it for now. I hope this gave you a bit of a better insight into the things you should not do when looking for a deal or pursuing capital. Again, I have been fortunate enough to learn these from my own experience pursuing capital, as well as from the other side of the table, so I think it has given me a clear perspective from both ends.