Dumb Things Founders Do, Say or Believe

Dumb Things Founders Do, Say or Believe

Summer break is over. Time to get real again. Speaking of which, we’d like to offer a few observations which may help your pitch or strategy and which will hopefully help you move the needle just a bit. Or at least to get real. We do actively mentor at accelerators, and attend pitch events and demo days and host semi-monthly investor breakfasts for entrepreneurs. We don’t claim to have seen and heard it all, but there are a few things you might want to take note of – and a few claims and phrases we’d rather not hear again:

“We have 30+ years experience in ecommerce.” A team of maybe four young co-founders pitching, say, an ecommerce play and claiming to have 30+ years of experience between them. Note to self: most of your team looks as though they’re under 30. Ecommerce itself has only been around for some 20+ years, when most of your teams were still in diapers or hadn’t made his or her debut yet on the planet. Stop it. You’re not fooling anyone.

“Giving Back is baked into our DNA and a big part of our strategy.” We know that that concept is very popular among the current crop of founders. Great. Awesome. Amazing. Good for you. Civic-mindedness should always be applauded. Never make it the first point in your pitch deck. Ever. The concept may be popular among your friends, but important to look at it from a potential investor’s perspective: you’re talking about giving back – while you’re standing in an investor’s office, with the expectation of them (hopefully) giving you money. Do you see a problem or inconsistency here? VCs have LPs to whom they answer. Giving back is great; build a business that brings in revenue first. Give back on your dime, not theirs.

Sustainable. Another catch phrase du jour. There was a company back in the early days of the Second Age of Tech (meaning, post bubble) who had beautiful sustainably constructed offices, meaning that all of the office furnishings and accouterments were (custom) made from recycled material. We’ve seen in decks where founders plan to build sustainable offices. To investors, that means that a larger than necessary part of the funds that they’re parting with will not be put directly into building the company, but into the furniture. Think that investors consider that a good use of funds? Consider this: Ditch the almond milk: why everything you know about sustainable eating is probably wrong. According to The Guardian, “What people don’t know is the environmental damage almond plantations are doing in California, and the water cost. It takes a bonkers 1,611 US gallons (6,098 litres) to produce 1 litre of almond milk,” says the Sustainable Restaurant Association’s Pete Hemingway. Over 80% of the world’s almonds are grown in California, which has been in severe drought for most of this decade.” Not sustainable. For every action there is a reaction. Simple physics.

You know what’s important to consumers? Utility and price point.

Oh, that company with the beautiful, sustainable offices is gone. Hopefully, another company was able to recycle the office furniture.

“We only need to capture 1% of a XX trillion dollar market.” Do not pass go. Do not collect $200. Or investor money. No investor wants to hear that you’re shooting for 1% of your market, or even think that way, as if it’s a good thing. What if your closest competitor is aiming for 15% of that market? Which of you do you think will be around in five years? And yes, you do have competitors. Know who they are. Your potential investors certainly do. You may want to be in the 1%, but capturing that amount of your market isn’t going to get anyone there.

Good reminder for you: Trace Cohen’s 20 things founders say and what investors think

One of our favorite bugaboos: Not realizing the importance of marketing, or believing that founders, none of whom have any background in marketing can a) do it themselves, or b) relegate it to an intern. Startups often consider marketing the ugly stepchild. We’ve said it before: how do you expect to go to market without a marketing plan? Think marketing is an afterthought, or a nice to have or something that an intern can easily handle? Consider this: the power of marketing: Watch your step: why the 10,000 daily goal is built on bad science. According to The Guardian, “An entire industry has been built on the claim that 10,000 steps a day were necessary to be healthy… (The 10,000 step concept, which has become a fitness industry standard), originates from a successful Japanese marketing campaign in the mid-60s. In an attempt to capitalise on the immense popularity of the 1964 Tokyo Olympics, the company Yamasa designed the world’s first wearable step-counter, a device called a manpo-kei, which translates as “10,000-step meter.” Yup, junk science or, worse, that little-known oxymoron – advertising science.

 

And a few notes to self:

!. Non-informative one-page executive summaries are not helpful. And never use mouse type to cram in as much as possible onto one page. Less is more.

2) Do not send a long pitch decks. Anything over 10 pages on first pass will not be read by busy investors. If Airbnb could keep it simple, so can you. Ok, so the first investor they pitched didn’t write the check. Neither will the first one you pitch.

3) Are you really solving a problem or are you making one up?

4) Passion is all well and good, but pay attention to the math. Is your market big enough to pique an investors interest, and what do your financials look like?

 

The founder/investor relationship is a symbiotic one. Each camp needs the other. However, there are more founders than there are investors, so the math is in their favor. Plus, they have the money. Unless you have that outlier that can make all of the difference to that fund. That could be an equation – and game – changer. Be honest. Stay on point. And pitch your company, product and team, as simply, succinctly and as understandably as possible. And make sure it that you really do need the outside investment (The rise of giant consumer startups that said no to investor money), and make sure to get to know your investors. Talk to everyone. Several times. And always have options. Talking doesn’t cost you anything. But money – especially VC – always comes at a price. Onward and forward.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Social media & sharing icons powered by UltimatelySocial
%d bloggers like this: