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With venture capital raising in the U.S. at a six-year low, it's harder than ever to raise investor capital for your startup. Potential investors are cutting their budgets and waiting before risking their capital. Yet some of the best startups – like Airbnb, Uber, and Square – were founded during market downturns. So if you're an entrepreneur looking for capital in this environment, you may be wondering what your chances of success are.
As a serial entrepreneur and now CEO of Builderall, I've heard over 3,000 pitches and helped founders raise millions. In my experience, seven common mistakes often fail in attempts to raise investment capital. If you're looking to raise money for your startup in this uncertain economic environment, here are some things you should definitely avoid:
Mistake #1: Rushing the pitch
Many founders rush through their pitch, but speed isn't always your advantage in the venture capital world. Your goal is to make key points and make them resonate, not to get your presentation done as quickly as possible.
Think of it like telling a good joke at a party – you wouldn't jump to the punch line before everyone had a chance to understand the setup, would you? The same principle applies when pitching. You want your investors to hang on every word. But that's impossible if you rush things or leave out important information.
One effective technique is to use strategic pauses. Pause for about three seconds between slides or after making an important point to let the point sink in and watch your audience react. Don't be afraid of silence. Patience when presenting can be a powerful strategy.
Related topics: What every entrepreneur needs to know about raising capital
Mistake #2: Trust indicators and key differentiators are ignored
Balancing detail with brevity is difficult, but it's important. There are some key signals you should relay to build trust and differentiate your company from the competition. While most founders want to focus on how great their product is, there are two questions that are arguably more important:
- Why is your team particularly suited to lead this company?
- How does your company stand out from the market?
When it comes to team qualifications, don't be afraid to provide details about years of experience, prestigious university degrees, previous achievements, existing patents, and/or impressive experience at startups or enterprises.
I once coached a founder who was struggling to raise capital. After reviewing his pitch deck, I said, “The problem is you don't have any real startup experience.” He then told me that he and his co-founder sold their last company for $80 million, but he thought that wasn't relevant since it was in a different industry. Let me tell you, your past successes are 100% relevant to whether or not investors trust you with their money.
Next, I can almost guarantee that we've probably seen the great idea you're pitching before. That begs the question of how you're going to execute it differently when you get to market. This is where your current success becomes critical: your existing user base, your early subscribers, recognized patents, and strategic partnerships all play a role. These elements demonstrate that you're not just another idea, but a viable business already making waves.
Mistake No. 3: Talking too much and for too long
I know—that sounds like a contradiction to the first point, but hear me out. Waffling is another fatal mistake. You should plan for a nine-minute pitch, but you don't want to “rush through” those nine minutes. Instead, be relentless about what you include—and what you leave out—so that the pacing feels natural while still covering the key data points that make your business compelling.
I often ask new founders to introduce their startup in just two sentences: what do you do and why should I care? After that, you have less than 10 minutes to explain the market problem, market size, your business model, your solution, your traction, your team, and your request. This means you have to be very specific about what details will tell your story most effectively.
I've seen many founders get nervous and overcompensate by filling the conversation with unnecessary details and filler words. This often has the opposite effect of what they intend. If you talk too much or too fast, investors may think you're not being direct, or they may get bored and lose interest.
Related: 5 Innovative Ways for Entrepreneurs to Raise Capital in Today's Market
Mistake #4: Forgetting who you want to make your offer to
Remember, you're pitching your offer to investors, not prospects. Investors aren't interested in how good your product is; they want to know about your market, your margins, and your differentiation.
I once witnessed a pitch for a young jewelry startup for women where the founder spent the entire time trying to sell me the jewelry. As an investor, I was not the target audience and the pitch was ineffective. Instead of selling me the business, she sold me the product. When they talk to investors, they want to hear about the business opportunity, not the product.
Mistake #5: Undermining your credibility with weak language
This may seem like unnecessary quibbling, but words like “hope” subtly signal uncertainty, and investors don't like to take risks with “hope.” They want clear forecasts backed by data and logic.
Instead of saying “we hope,” use phrases like “we will” or “we plan.” This change will immediately increase the credibility of your pitch. Be clear; your words should convey confidence, not wishful thinking.
Here are a few more examples:
- Instead of saying, “We believe our product will be successful,” emphasize your confidence by saying, “Our product has the best chance of success.” This subtle change conveys certainty and strengthens your selling point.
- Replace “We believe our sales will increase” with “Our forecasts show that our sales will increase.” Not only does this sound more authoritative, it also shows that your assumptions are based on concrete data.
- Instead of saying, “We want to capture 10% of the market,” say, “We are on track to capture 10% of the market.” This adjustment shows that you are actively working toward a clear, achievable goal.
- Change statements like “We expect to launch in the second quarter” to “We will launch in the second quarter.” This slight change conveys certainty and reliability, which are critical to building investor confidence.
These subtle language changes replace hesitation and probability with assertiveness. They emphasize that your pitch is built on credibility and supported by a solid, well-thought-out plan.
Mistake #6: General statements instead of precise data points
When pitching to investors, generalized claims can be a red flag and make investors wonder if you are hiding the truth or lacking the necessary details.
For example, instead of saying, “We have a huge subscriber list,” focus on concrete details like, “We have over 20,000 subscribers.” Not only does concrete information clarify your claims, it also greatly increases your credibility and trustworthiness.
Here are a few more examples:
- Don't say, “Our team has a lot of experience.” Say, “Our team has eight years of experience in this industry.”
- Replace “Our product is very appealing and our customers rarely switch” with “Our product has a customer retention rate of 89%.”
- Instead of saying, “We expect rapid growth,” say, “Our forecasts show 30% month-over-month growth in the fourth quarter.”
- Replace “We dominate the market” with “We currently hold 45% of the market share in our region.”
These changes in wording turn vague claims into solid, data-backed statements that build investor confidence and convey that your pitch is based in reality.
Mistake No. 7: Telling instead of showing
Our final lesson: show, don't tell. Showing something visually rather than with words has a greater impact and is more likely to be remembered. Instead of telling investors, “We have a great user interface,” show the user interface screens and let them decide for themselves whether it's great or not. Instead of saying, “We've grown exponentially over the years,” show a line or bar graph that illustrates your impressive growth.
Another example: Telling investors how much your customers love you is far less effective than showing screenshots of social media posts where your customers rave about you in their own words. Keep this mantra in mind: less talk, more pictures.
Conclusion
To master the art of pitching, you not only need to avoid pitfalls—you also need to craft a story that resonates with investors and builds trust. But by avoiding these seven mistakes, you'll significantly increase your chances of getting the capital you need to take your startup to the next level.
In today's challenging economic climate, you can stand out from the crowd by communicating clearly, showing rather than telling, and making a data-driven case. Investors want to back entrepreneurs who can overcome adversity and make their ventures a success. Continue to refine your pitch, build strong relationships, and show investors why they should invest in your startup.
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