We wanted to know – what can startups and investors do to improve the experience and outcome of meetings they have? In this first blog post we asked startups what turns them off when talking to investors. In a follow-up blog post we’ll highlight the investors point of view. Let us know if you agree in the comments below.
1. Mixed Signals
Fundraising is a hugely time consuming activity for startups that can be unnecessarily prolonged when investors give mixed signals regarding their interest to invest. While we understand that investors are often hesitant to tell a startup no – as they don’t want to miss out on the deal should circumstances change – it is important for the startup to know where they stand. Most entrepreneurs would prefer a quick no with advice/constructive feedback into what they need to improve for the opportunity to become interesting.
Investors are not always clear in communicating to the startup what they need to see in order to make an investment decision. It is very helpful to the startup if investors can clearly articulate which KPIs are important to them – that way the startup has something to work with and knows when it is appropriate to re-approach the investor.
While the days of arrogant investors seems to be more and more a thing of the past there are still some out there who treat startups with an attitude of superiority. These investors are quickly shunned from the startup community. Both investors and startups should approach their relationship as a potential partnership. The best investor understand that startups are doing the hard work and their role is to service them.
4. Poor preparation
A big turnoff for startups is when investors haven’t done their homework in researching the startup’s industry. While startups shouldn’t expect investors to know more about their industry than they do – it’s a bad sign if the investor hasn’t prepared in advance. Furthermore, startups value industry insights based on experience much more than mere opinion. If the investor has no industry insight it should be a sign that a partnership won’t work out.
Investors by nature should have an optimistic attitude. But, especially in Europe, startups often feel like investors are more focussed on what can go wrong/why they will fail, rather than on the potential of the business. We need daring venture capital that embraces the word ‘venture’ and invests in areas that have not yet proven to work out.
Coming soon – 5 things startups do that turn investors off.
Want to read more about this subject? Paul Graham wrote a great post about how to raise money and deal with investors on his blog.