4 Things You Should Not Say To A Business Investor!
When you are in charge of a venture, there may come a time when you need outside investment. Luckily, there are several people looking to pitch in on a worthwhile business. However, for this to happen, they have to be convinced that your business really is the best one to invest in.
Experienced entrepreneurs know that one should avoid certain statements, expressions, or words when approaching potential investors. Your pitch can be the difference between your getting an investment or not, so knowing what know to do is essential. If you are new to the business or dealing with investors, below are a few examples of what not to say:
- Saying Unrealistic Things
If you are presenting your business for investment, you obviously need some sort of help. That is fine, but it automatically means there is a certain amount of risk involved for the investors.
If you start off by saying that there will be no risk in the investment, you would come across as either untrustworthy or uninformed. Both of these are not qualities that investors want to see in an entrepreneur.
Statistics show that around 50% of startups fail, and ignoring this fact is not going to make it go away. Additionally, you have a legal and social obligation to your investors to be honest and truthful at all costs. Even your lawyers would tell you that your subscription agreements need to have a clause in case of 100% investment loss.
It is better, therefore, to be honest about outlining the risks of investing in your company. Investors are more likely to appreciate honesty and transparency when making their final decision.
2 Cliché Like “We’re Getting In On The Ground Floor”
The above statement is a tired old cliché that is now synonymous with ‘we have no earnings’. Of course, there are some angel investors who genuinely want to be a part of something from the very beginning. They might be ready to take on the risks and bear the losses as well.
However, most investors need to see some proof of decent revenue before they delve into their pockets. So if you’re pitching to a group of potential investors any time soon, do a check and see what kind of investor they are. In any case, using clichés is long outdated. Most investors invest in the hope of getting a share in the profits, not to be a crutch.
“Educating the market” is another cliché which could be investment suicide. Investors are not interested in the ‘if we make it, they will come’ pitch. It may have worked for a few products in history, but catching lightening in a bottle is rare. Most investors would rather not gamble their money on something that consumers may not even understand.
- Talking About Only Needing to Get a Small Market Percentage
You may think it is smart to outline just how large a market your product has, emphasizing that only a small part would make a profit. However, this would cause you to come off as a lazy laggard to an experienced investor. There are market leaders, and then there are market laggards. Investors want to invest in the former, not the latter.
A market leader would seek to capture as much of the market as possible. Small parts of a market are for those who want to secure a niche but a pitch would be different for that. Even a company providing a niche service or product should want to capture the entire limited market.
If you are a startup, you should be focusing on a marketing campaign that gradually rises up as your capacity grows. Thinking of attracting a few customers away from the market leader is usually never a successful campaign.
- Implying that You Need Bailing Out
When an entrepreneur asks potential investors to inject cash into his business, he should not sound too desperate. If he does make this mistake, there won’t be any significantly high investment offers. Plus, the investment you do get, if any, would come with less respect and sincerity. The terms of the investment may also be very much against you.
It’s probably best to start looking for investment before you’re completely wiped out. Frame your pitch in such a way that it looks like you just need a bit of tiding over (without being dishonest, of course). There are several ways in which you could do this, such as outlining a project you want to start. This is certainly better than admitting you need the cash to save the entire company in general.
There are actually several things you can say to turn off your investors. Practicing and researching your pitch before you go in is a good idea, just to make sure there are no gaffes. The examples above are general indicators on what to avoid in order to attract positive investments on beneficial terms.
Sasha Hales is an Ambitious Entrepreneur, Public Speaker, and a Blogger at Nursing CourseworkOnline.co.uk. She has conducted several workshops on how to get investors and how to get the best out of an investment.