10 Mistakes to Avoid When Seeking Investment

The art of the perfect pitch is to know what you’re selling and to sell it well. Looking for investment can be stressful and time-consuming, but the more prepared you are, the quicker and easier it is to close a deal. Here are ten mistakes to avoid when seeking investment in your small business:

1. Contacting Too Many Investors

When looking for an investor, do your research. Not all investors are interested in every type of business or are willing to invest the same amount of money. Talk to your friends, connections, industry associations, local Chamber of Commerce, accountants, and lawyers. Ask for investor recommendations and then learn as much as possible about them.

You might want to research what types of companies they’ve invested in previously and at what stage of business. Usually, this information can be found on the investor’s website, but you could also look at their social media profiles to see who they’re interacting with.

Once you’ve completed your research, target one or two investors you think are a good fit for your business. This step will save you time by keeping your pitches focused and demonstrates that you’ve done your due diligence.

2. Making Your Presentation Too Dense

Find the right balance between providing enough information to investors, but not so much so that they get bored and have little time for questions. If you’ve been given an hour to present to an investor, create enough slides to take you up to the 30-minute point and then leave 30 minutes for questions and answers. This should be around 12 to 15 slides. For more guidance on this step, check out Forbes’ article, How To Create A Strong Pitch Deck For Investors.

Remember to make the slides visual as well as factual. Include results from surveys, product tests, and provide any client quotes or insights you’ve gained. If you have a product or prototype, ensure it’s ready to demonstrate to the investor or hand out samples.

3. Being Underprepared for Questions

Before attending the meeting, put yourself in the investors’ shoes. What questions would you want to ask, as the investor? These might include:

  • How large is your target market?
  • Who are your competitors?
  • Why is your product or service better than your competitors?
  • How much money have you made?
  • What are your plans for growth?

When an investor has questions, make sure you answer them in a calm and collected manner. If they ask a question during the presentation, answer it completely before returning to your pitch. Similarly, have alternate strategies or answers in case an investor disagrees with you. Your relationship with them is likely going to be long-term, so having good communication is essential.

4. Painting an Unrealistic Picture

Of course, investors are looking for the next successful business. But, that doesn’t mean you should paint an unfeasible picture of your business’ future. Be realistic and tell the investor how they’re going to earn back their investment, and in what timeframe. You can add credibility by identifying your rivals and explaining your competitive strategy.

5. Thinking Short-Term

Think about your long-term plans. Do you want to reach 500,000 downloads of your mobile app? Sign a big new distribution deal? Hire a new marketing director to raise your awareness?

Plan achievable milestones and aim for them. It’s better to raise more money than you need, rather than too little. Plus, it’ll make the investment more attractive.

6. Getting Carried Away Talking About the Product

You and the investor are there for one thing, money. By agreeing to meet with you, the investor is assuming that your business is viable. Of course, you should spend the first few minutes explaining your product or service, but your meeting should be focused on the financial opportunity. 

Spend time talking about how much money you’re seeking, the percentage of the business that will represent, the number of investors you would allow, and what you specifically intend to spend it on. An interested investor will ask more about the product if they need to.

 7. Overlooking Your Appearance

When attending a pitch, make sure you look the part. Have a clean, professional appearance, and be aware of your body language. This means trying to maintain eye contact, avoiding putting your hands in your pockets, not fidgeting too much, and so on. The investor will make allowances for nervousness, just lead with confidence.

8. Being Unclear or Unassured

Your presentation should be clear and concise. Avoid using acronyms the investor may not know, bad language, and reading off of cue cards or the presentation itself. Instead, show up with passion and enthusiasm. Communicate your idea, why you think it’s great, and why it’ll be a financial success. If you’re worried about this aspect of your presentation, try practicing in front of friends and family and get their feedback.

9. Forgetting to Provide an Out

You want to show the investor how they’re going to make money, so provide them with one- to three-year projections. Investors don’t want to be your partner for life, they want to make their money and get out. Whether that’s selling to another company, going public, or letting you stand on your own two feet.

10. Neglecting to Seal the Deal

If the pitch went well and you feel like you connected with the investor, then you need to close the deal. To do so, follow up with a phone call after the pitch. Ask the investor if they have any more questions or concerns you can address. You can also ask outright if they’re interested in investing, and schedule a second meeting if so.

Be prepared to hammer out the details quickly and efficiently. The longer you take to respond to questions or requests, the less likely the deal will be sealed. Remember, investors are not only looking at your business but many others. If one of those is quicker to supply details, your deal will be replaced by someone else’s.

Get your Business Plan Reviewed

Looking to approach an investor but feel like your business plan may need tuning up? Check out our Business Plan Checklist and Business Plan Consulting and Review service. We’ll help you prepare effectively for your presentation to potential lenders or investors.

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