There were 581,000 companies created in 2014 and 2015 is expected to be another record-breaking year, with more than 600,000 expected to launch – according to the UK’s Startup Britain campaign.
With banks still unwilling to lend to startups and small businesses, Britain’s alternative finance sector is definitely set to receive an increased amount of attention in the next few years. In fact, NESTA’s most recent research showed the UK’s alternative finance market was estimated to be worth £1.74bn in 2014 and is projected to continue upwards – some forecast the figure to reach £4.4bn in 2015.
One of the most popular methods, CB Insights suggested, was through investors and crowdfunding. Admittedly, when it comes to the latter, founders will have more creative leeway. However, both put heavy focus on someone’s ability to pitch a new product or service.
Having gone for the arguably more difficult attempt of pitching to investors, we rounded up some useful tips from investors about what should never be done – based on some of the most ridiculous things they’ve seen.
The adage “be yourself” is what every entrepreneur should take into account, but, according to Will Hsu, co-managing partner of VC firm Mucker Capital, some take individuality a little too far.
Lesson number one, as odd as it seems, is not to ask investors to burn whatever documents you give them after the pitch.
“One time, an entrepreneur asked me to burn the pitch materials – and wanted proof,” he said. “Even worse, this was not the first or only time an entrepreneur has asked me to do this. In fact, we’ve had multiple entrepreneurs ask if we will burn pitch materials or sign confidentiality agreements, even before meetings start.”
He suggested that while he understood the fear that someone could “steal” a precious idea, these requests addressed one of the biggest problems he saw over and over again in pitch meetings – entrepreneurs often think that the idea they have is everything.
The idea is about one per cent of the project, he clarified. The other 99 per cent is having the knowledge to run and follow through with a business. He stressed, however, that many entrepreneurs become so focused on the uniqueness of their idea and on the need to protect it that they lose focus on building the actual business.
Moreover, he added, asking investors if they will burn materials before a meeting ever starts is “basically a declaration that the entrepreneurs do not expect for the deal to happen. Why would we give someone a deal who is already doubting that they will get it?”
One of the craziest aspects about being an investor, Hsu said, was that he often felt like entrepreneurs were lying in wait to pitch their ideas.
“I was once flagged down during my vacation in a foreign country at five in the morning by a man on a motorbike who wanted to tell me his idea,” he said. “My initial reaction was fear that he was trying to rob me – but I guess trying to get me to part with money for some paper stock certificates could end up much worse.” His second reaction was to wonder whether it was someone he’d met before who he’d simply forgotten.
The founder had recognised Hsu from his blogs and chose that exact moment to pitch the idea for his company. Despite Hsu coming to like both the company and the founder, it is perhaps suggested that stalking potential investors will get your company nowhere.
“There is an appropriate time and place for pitching, and those boundaries should be respected,” Hsu said. “Even if you feel like this is your one chance for an investor introduction, you will start off on the wrong foot if you show disrespect or disregard for the investor’s personal life.”
Read more about pitching ideas:
- How to pitch to billionaire investors like Virgin boss Richard Branson and win
- The secrets to investor and customer pitching
- 5 tips to successfully pitch new ideas to angel investors
His advice was, indeed, to jump on the chance of meeting an investor, but to make it quick and snappy by asking for an email address and sending a proper introduction as a follow-up. If the investor is interested taking time out for a meeting, he or she will reach out, he said.
In another instance, an entrepreneur was sitting front and centre at every presentation he gave for three months. “I have no idea how she got my schedule,” he said.
That may have been fine, but Hsu draws the line at personal space. “It is when entrepreneurs in their excitement end up putting their hands on me, or suddenly taking prototypes or presentations from jackets and bags, combined with stalking, that it creates cause for alarm,” he explained.
It was also noted that a founder bringing his or her significant other into an investor meeting when they had no connection to the business, was a big no-no – especially “when the significant other ends up answering questions and speaking for the entrepreneur”.
His most memorable investor meeting, however, was when the founders showed up wearing dancing panda suits, Hsu said. He claimed they thought this would attract attention and make them stand out. While they would have undoubtedly been memorable, their creativity did nothing to seal the deal.
What a venture capitalist (VC) wants, Hsu said, is for founders to turn up well-prepared, with a strong idea, a strong pitch, and a strong case for how the team could execute the idea. This, he said, did not require dressing up as an animal.
The way entrepreneurs dress when pitching an idea is a subject that pops up quite a lot in the investment world.
VC Steve Brotman, co-founder of Greenhill SAVP, told The Wall Street Journal that he once came across an incredibly distracting piece of clothing worn by an entrepreneur. He suggested that a woman had turned up – something he noted she had done unannounced – dressed in an odd green outfit.
Brotman told her: “You lost me at hello.”
Upon further inspection, and an explanation, she revealed that she was selling a product that had the word “avocado” in it. This, it seemed, was her attempt at dressing up like one.
Long story short, he said he would not make a deal with a woman dressed as an avocado.
But to Brotman, the oddest thing he often came across was when entrepreneurs actually failed to introduce themselves before starting a pitch. A pitch is like going on a date, he said, the first thing you essentially do is give the other person your name. He claimed that many would just give him a business card, while at other times they would go straight into the pitch.
“That’s like going on a first date and saying, ‘Let’s get it on’,” he said. The moral of this story is that investors buy into the people behind the company as well as the actual business. He also added that entrepreneurs – even the seasoned ones – needed to also stop downplaying their experience by stuffing it in the back of the pitch.
For further reference on how not to pitch, view this video of Ali G explaining his idea of ice cream gloves to Donald Trump. Whatever it is he’s doing, don’t do it!
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