Five ways to screw up your startup's pitch
Here are a few common mistakes entrepreneurs make when they're pitching their startup to angels, VCs, and journalists.
Pitching your startup idea to investors, journalists, and random people on the street is a rite of passage for all entrepreneurs. You have to convince hundreds (if not millions) of people that you're building something worthwhile and that they should get on board.
Most pitches fall flat though (the best VCs invest in perhaps 1 percent of the startups that pitch them), and it's often because of simple problems that could've been avoided. Nervous entrepreneurs stray from their story, and arrogant entrepreneurs demand unreasonable valuations and then get laughed out of the room by top-tier angels.
Here are five ways entrepreneurs often screw up their startup's pitch. Avoid these mistakes at all costs:
1. Not having the numbers to back up assertions. Succeeding with a startup pitch requires that VCs and journalists buy in to your assumptions about market size and user behavior. Most entrepreneurs don't lay out a convincing case to defend their assumptions, though. They don't survey and quantify potential users, they skip the heavy market research, and they don't have the proof to show they're onto something big.
In other words, most entrepreneurs don't do their homework. Good VCs always notice. It's a sign of irresponsibility and inexperience. So, please do your homework and come armed with numbers.
2. Telling an inconsistent story. A great pitch is simple and straightforward. It's the story of a problem that needs solving, the opportunities that await once it's solved, the product that will solve it, and the team that will build that product.
Entrepreneurs all too often stray from this story, though. They talk too much about the competition or talk about other problems they think their product will solve. This only serves to distract from the main story.
Don't start creating new story lines in the middle of your pitch. Stick to the main plot and you'll do fine.
3. Not having a demo. The only people who should pitch a startup idea without a demo are proven entrepreneurs with a history of exits. For everybody else, a demo or prototype is essential. Nothing helps a VC understand what you're trying to accomplish like a hands-on demonstration.
There's no reason to start pitching your startup before you've even built a prototype. Resourceful entrepreneurs always find a way to get it done -- you can, too.
4. Coming across as rude and unfriendly. Investing is all about teams and relationships, and it's especially true at the seed stage. Angels and VCs choose investments primarily based on their impression of the team. Are they smart? Do they know their stuff? Can they pull together when times get tough?
Nothing kills a great startup idea like a bad team or a rude founder. Arrogance is fine -- we expect a little bravado from winners -- but if you don't pass the beer rule, you aren't going to get a second meeting.
5. Asking for a ridiculous valuation. I can't tell you how many times an unproven team has come to me with a product that has yet to launch and claims that they're going to raise at a $10 million valuation. I'm still shocked every time I hear sky-high numbers come out of an entrepreneur's mouth.
Startup accelerators, Facebook, falling development costs, and a shortage of engineering talent have all contributed to the growth of startup valuations, especially at the seed stage. The best investors aren't going to accept ridiculous terms, though. They have so many other opportunities with better valuations -- why should they pay your ridiculous price?
Raising a round of funding isn't about getting the highest valuation possible -- it's about getting the best investors possible. I've heard countless stories about how Ron Conway or Marc Andreessen saved one of their companies from the brink of death. These are the type of investors you want on your side.
Don't be greedy with your valuation. Do your research, talk to lots of entrepreneurs, and find an appropriate price point. Don't knock yourself out of the game by asking for too much.