Today we’re going to talk about what NOT to do when you’re courting investors.
I’ve talked a lot about how to give a good investor pitch and how to find the right investors for you and your business in old videos. What I haven’t done is given you a list of what will ensure you get blacklisted by investors and destroy your chances of getting funding for your business, so here are a few things you should never do when approaching investors.
#1 – Don’t spray and pray. When you’re courting investors, you should never write form letter and blast it out to every single investor you’ve been able to find with a Google search. This is basically spam and nobody likes to be spammed. If you’re courting an investor, you should learn all about her and know if she’s actually likely to invest in your business based on her company stage, investment amount, geography, and industry sweet spots. Not all investors invest in the same types of deals and you not knowing who you should be targeting is a major red flag and will likely get you flagged as a lazy or unsophisticated founder.
#2 – Don’t go in cold and don’t move too fast. Always, always, always, always do everything you can do to get a warm introduction to an investor. Going in cold won’t necessarily get you blacklisted, but you probably just won’t be noticed at all. Once you do have that intro, don’t try to close the deal on the first date. You’re not looking for a one night stand here, you’re looking for a long-term relationship, so you have to do the dance a bit and woo this investor.
#3 – Don’t be ill-prepared. If you go into a meeting with an investor, you need to know your stuff. You shouldn’t be easily stumped by basic questions and you shouldn’t have to defer to someone else because you’re not the numbers guy on the team. You have to be confident and knowledgeable or you won’t be taken seriously.
#4 – Don’t try to bullshit. Knowing your stuff doesn’t mean knowing everything, however. If someone asks a question that stumps you, don’t try to bullshit your way through. Say you’re not sure but will find out and then follow up – go find out and get back to the investor with an answer.
#5 – Don’t ask them to sign an NDA. Most serious investors simply will not sign non-disclosure agreements and you asking them to flags you as a novice. There are simply too many founders with similar ideas out there for serious investors to be willing to open themselves up to that type of liability. An investor is not going to try to steal your idea. Get over it. If it’s really that amazing, you should have protected the IP.
And, #6 – Don’t be greedy. One quick way to come off looking like a jerk is to way over-value your business, or yourself. No investor has time to deal with a founder who thinks his business is worth some huge amount when he hasn’t produced a product or found customers yet or thinks he should be paid an outrageous salary right from the beginning. Be reasonable or you will be quickly sent to the ignore list.