Whether you’re trying to borrow money from a colleague or land the financial backing of a venture capitalist, there are certain traits that can scare even the hardiest of investors away. Finding startup funds may be one of the toughest things you’ll do as an entrepreneur, so if you have an interested investor you should do everything you can to entice him or her to cut you a check.
There are a lot of things you should do to attract investors. But what should you do to avoid scaring them off?
Rick Coplin works for TechColumbus, a company that offers a variety of services to help startups grow. One of those services is assistance with securing startup funds.
Coplin says there are four major things an entrepreneur can do that will send prospective investors running for the hills instead of reaching for their checkbooks.
1. Give a sloppy pitch
To attract investors, you’ll put together a knock-their-socks-off presentation. You’ll write and fine-tune your pitch dozens of times. Because of these revisions, the likelihood of making mistakes increases. For instance, you might change your sales expectations on your slideshow, but forget to make the change on the hard copies that you hand out. It’s easy to overlook something like this, but it can come across as sloppy, and that scares investors.
“Discrepancies of this sort are almost always accidental, but call into question an entrepreneur’s ability to be detail-oriented,” Coplin says. “Investors easily make the leap from carelessness with slides to carelessness with their money.”
2. Be dishonest or secretive
One of the fastest ways to shut down an investment deal is to be dishonest, Coplin says. The more open you are, the more your investor will trust you and your judgment. Don’t try to over-inflate your connections or your success rate—just be honest.
Being honest also means you can’t keep secrets. Full disclosure is the best way to keep the relationship with your investor healthy and productive. Investors understand that opportunities are improved through the exchange of ideas, so discuss everything from your business model to potential customers.
“Being secretive is a red flag because investors will have a difficult time determining what’s behind the secretiveness,” Coplin says. “Uncertainty equals risk, and investors are about risk reduction to improve odds of success.”
3. Come across as “uncoachable”
Don’t expect an investor to fork over a fistful of cash and check in a year later. Investors have a stake in your success, so expect a relationship to form. The investor will want a say in how money—their money, and the rest of your money—is spent. When these discussions come up, don’t be “uncoachable.” Be open to ideas and willing to take the advice of your investor.
“In short, difficult-to-work-with entrepreneurs are seldom successful in raising funds,” Coplin says. “Investors will shy away from entrepreneurs who are interested only in investors’ cash and unreceptive to investor guidance and input. This is because they are genuinely interested in helping entrepreneurs be successful and desire to play a role in that success.”
4. Show ignorance of your customer base
Don’t underestimate how difficult it can be to attract customers. You want to show your knowledge and experience in the industry, but don’t act like you’ve got customers knocking down your door. You’ll scare investors away for sure.
“Entrepreneurs frequently assume that customers will flock to them and buy their product. Lazy entrepreneurs skip the necessary research into identifying their target customers’ characteristics and buying habits,” Coplin says. “Companies that don’t know their customers rarely succeed.”
Are you an investor? Is there something that would scare you away from a potential business deal? Share it in the comments!
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