Raising money for your startup is a difficult, time-consuming process. Successful entrepreneurs know that gaining investors is just as dependent on what you don't do, as what you do. Here are four simple things to avoid while raising funds.
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 join your journey and make an investment.
There are a lot of things you should do to attract investors. But what should you do to avoid scaring them off?
1. Give A Sloppy Pitch
Discrepancies of this sort are almost always accidental, but call into question an entrepreneur’s ability to be detail-oriented. 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. 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.
“Difficult to work
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 improve 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. 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. Investors will shy away from entrepreneurs who are interested only in investors’ cash and unreceptive to investor guidance and input. This is because investors are genuinely interested in helping entrepreneurs be successful and desire to play a role in that success.
4. Show Ignorance of Your Customer
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.
Instead, do your homework. Know everything there is to know about your target audience. 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. Companies that don’t know their customers rarely succeed.
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Are you an investor? Is there something that would scare you away from a potential business deal? Share it in the comments!
Note: This article was co-written with Lisa Furgison, and first published by Lisa on March 27th, 2014 on Bplans.com. See the original article and hundreds of excellent articles written by Lisa and others at Bplan.com.
Investor photo source: Original article