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With U.S. venture capital fundraising at a 6-year low, raising investor capital for your startup has become more challenging than ever. Potential investors are tightening their budgets and adopting a "wait and see" approach before putting their capital at risk. Yet, some of the best startups — like Airbnb, Uber and Square — were born during market downturns. So, if you're an entrepreneur seeking capital in this environment, you might wonder about your chances of success.
As a serial entrepreneur and now CEO of Builderall, I've heard over 3,000 pitches and helped founders raise millions. From my experience, seven common mistakes often derail attempts to raise investment capital. If you're looking to raise money for your startup in this uncertain economic environment, be sure to avoid the following:
Mistake #1: Rushing the pitch
Many founders rush through their pitch, but speed isn't always your friend in the venture capital world. Your goal is to establish key points and let them resonate, not finish your presentation as quickly as possible.
Think of it like telling a good joke at a party — you wouldn't rush to the punchline before everyone has had a chance to grasp the setup, right? The same principle applies when pitching. You want your investors to hang on to every word. But that's impossible if you rush or gloss over crucial information.
One effective technique is to use strategic pauses. In between slides or after making a key point, pause for about three seconds to let it sink in and observe your audience's reactions. Don't be afraid of silence. Patience in delivery can be a powerful strategy.
Related: What Every Entrepreneur Needs to Know About Raising Capital
Mistake #2: Skipping trust indicators and key differentiators
Balancing detail with brevity is tricky, but it's essential. There are some critical signals you should share to help build trust and differentiate your business. While most founders want to focus on how great their product is, there are two questions that are arguably more important:
- Why is your team uniquely qualified to lead this business?
- How does your company stand out in the market?
As far as team qualifications, don't be shy about including specifics on years of experience, prestigious university degrees, previous exits, existing patents and/or impressive startup or corporate experiences.
I once coached a founder who was struggling to raise capital. After reviewing his pitch deck, I said, "The problem is that you have no real startup experience." He then proceeded to tell me that he and his co-founder sold their last company for $80 million, but he thought it wasn't relevant since it was in a different industry. Let me tell you, your previous accomplishments are 100% relevant to whether or not investors will trust you with their money.
Next, I can almost guarantee that whatever amazing idea you are pitching — we have probably already seen it. This begs the question, how are you going to execute differently when you get to market? This is where your current traction becomes crucial: existing user base, early subscribers, accepted patents and strategic partnerships all come into play. These elements demonstrate that you're not just another idea but a viable business that is already making waves.
Mistake #3: Talking too much and for too long
I know — this sounds like a contradiction based on the first point, but hear me out. Blathering on is another fatal mistake. You should plan for a nine-minute pitch, but you don't want to "rush through" your nine minutes. Instead, be relentless about what to include – and what to cut – so the pacing feels natural and you're still covering the key data points that make your business compelling.
I often ask new founders to introduce their startup in just two sentences: What do you do, and why should I care? After that, you have under 10 minutes to explain the market problem, the market size, your business model, your solution, your traction, your team, and your ask. That means you need to be very specific about what details will tell your story most effectively.
I've seen many founders get nervous and overcompensate by filling the conversation with unnecessary details and fillers. This often has the opposite effect of what they intend. If you talk too much or too quickly, investors might think you're not being straightforward, or they may get bored and lose interest.
Related: 5 Innovative Ways for Entrepreneurs to Raise Capital in Today's Market
Mistake #4: Forgetting who you're pitching to
Remember, you're pitching to investors, not potential clients. Investors are not interested in how great your product is; they want to know about your market, margins, and differentiation.
I once sat through a pitch for a young women's jewelry startup where the founder spent the entire time trying to sell me on the jewelry. As an investor, I wasn't the target audience and the pitch fell flat. Rather than sell me on the business, she was selling me on the product. When talking to investors, they want to hear about the business opportunity, not the product.
Mistake #5: Undermining your credibility with weak language
This might seem like needless semantics, but words like "hope" subtly signal uncertainty, and investors are not fond of taking chances on "hope." They want clear-cut projections backed by data and logic.
Instead of saying "we hope," use phrases like "we will" or "we project." This shift instantly ramps up your pitch's credibility. Be definitive; your words should exude confidence, not wishful thinking.
Here are a few more examples:
- Instead of saying, "We think our product will be successful," assert your confidence by stating, "Our product is positioned to be successful." This subtle shift conveys certainty and strengthens your pitch.
- Replace "We believe our revenue will grow" with "Our projections show our revenue will grow." This not only sounds more authoritative but also indicates that your assumptions are based on concrete data.
- Don't say, "We aim to capture 10% of the market;" instead, say, "We are on track to capture 10% of the market." This adjustment demonstrates that you are actively working toward a clear, achievable target.
- Change statements like "We expect to launch by Q2" to "We will launch by Q2." This minor change projects certainty and reliability, which are crucial to building investor trust.
These subtle language changes replace hesitation and probability with assertiveness. It emphasizes that your pitch is built on credibility and supported by a solid, well-thought-out plan.
Mistake #6: Using broad claims instead of precise data points
When pitching to investors, generalized claims can raise red flags, making investors wonder if you're trying to obscure the truth or lack the necessary detail.
For example, instead of saying, "We have a huge subscriber list," focus on concrete details like, "We have over 20,000 subscribers." Specifics not only clarify your claims but also significantly boost your credibility and trustworthiness.
Here are a few more examples:
- Don't say, "Our team has a lot of experience." Say, "Our team has eight years of experience in this industry."
- Replace "Our product is very sticky, and our customers rarely leave" with "Our product has an 89% customer retention rate."
- Instead of "We anticipate rapid growth," say, "Our projections show 30% month-over-month growth in the fourth quarter."
- Swap "We dominate the market" with "We currently hold 45% of the market share in our region."
These changes in phrasing turn vague assertions into solid, data-backed statements, which help to build investor confidence and convey that your pitch is grounded in reality.
Mistake #7: Telling instead of showing
Our final lesson: show, don't tell. Depicting something visually instead of through words will have a greater impact and be more likely to be remembered. Instead of telling investors, "We have a great interface," show the interface screens and let them make the determination themselves about whether it's great or not. Instead of saying, "We've grown exponentially over the years," show a line or bar chart illustrating your impressive growth.
One more example: telling investors how much your customers love you is far less impactful than showing screenshots of social media posts where your customers are raving about you in their own words. Keep this mantra in mind: less talk, more visuals.
Bottom line
Mastering the art of pitching involves more than just avoiding pitfalls — it's about crafting a narrative that resonates with investors and builds trust. However, by avoiding these seven mistakes, you significantly increase your chances of securing the capital needed to take your startup to the next level.
In today's challenging economic climate, precise communication, showing rather than telling, and delivering data-backed arguments will set you apart. Investors want to back entrepreneurs who can navigate adversity and drive their ventures to success. Keep refining your pitch, build strong relationships, and show investors why your startup is the one to bet on.
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