- Today, we're gonna look at what you should never say to investor, things that will make them walk away. Investment killing statements. Yes, we're gonna dig into those investment killing statements. (upbeat music)
This is Raw Startup. We have a full panel of
experienced investors, investors who've done
100s of investments each, and walked away from 1000s. Be aware though, this is a
tough panel of investors. - I tend to walk away, and if it doesn't work,
then we can't invest. - Maybe you should not be considering investing in the startup
in the first place. - The single point of failure is something I never wanna invest in. - Damn! This could get interesting. You might already have lost an investment because of something that's in this video. Well, at least stick around, so it won't happen in the future. With the panel, we did a big brainstorm. Then we voted to find the
worst walkaway statements. So here we are, the nine things you should
never say to an investor. Let's get going. Number nine "I'm a sole founder, "and I don't need a strong team." Most investors do prefer
two or three co-founders, but they'll also back a
fantastic solo founder. However, they will not back people that think they don't need a team. They will not back people that think they can do
everything for themselves. Building a startup is a team spirit. - No matter what they
come to the table with. "I have all this experience," That's great, but you still need to have a strong team around you. So I think that single point of failure is something I never wanna invest in. - Yes, you can be a brilliant founder, but building business as
a team sports, I think, and the sooner we
realize that, the better. Some people are not capable of doing that. Even the founders that decide to go solo because going solo and
not building a team, or denying the necessity to build a complimentary
teams is different things. - Number eight "My founder and I just
met a few months ago." My co-founder at Vivino ties, and I have built businesses
for the past 20 years. That is an incredible strength. - I look for a team, and
if the team just met, that makes me a little
bit nervous as well. If they know each other for a while, they've gone to school, they've grown up together, they've got this relationship, maybe two or three of them, and they each hold some
sort of a unique power in the startup, one's technologist, one's
a salesperson or what not, I think that helps a lot. So I look for teams that
have known each other, have a good background, can work together, can support each other, and you don't have a
single point of failure. - One thing that I love
doing is backing a band that's getting back together again. That phrase to me is
like such a powerful one. You get situations where a
bunch of people did something. Once upon a time, they
ended up scattering, and going off and doing other things. And then a few years later, they decide just like all
the best bank heist movies, they decided they're gonna do one last job and they get back together again. And there's a beautiful
chemistry with people like that. They know what each other does. They can finish off
each other's sentences. They trust each other implicitly. And all of that is very powerful. - Hence they get back together though. So Abba, but that's one, right? - No, I agree. I just, I have this incredible company
of mine that went through several pivots and the front
and center of their fundraising narrative. They made like we've been best
friends for 16 years and we'd been through all of that
together, and we stayed together. And to me it was really powerful. And I would definitely bet on
the team that gets together, given that complex history of. - The fact that , you just met each other. It could be five, you
might get an investment, but let's not make it a
big part of your pitch. It's not a strength. Number seven. This will be a quick flip. We'll have sold the
company within two years. - What we're looking for is people who want to build something really large and really enduring. And so when someone comes to you and in that first half an hour tells you that they're
not going to do that. And that really, this is all about trying to
find a quick exit and make some quick cash. It's just not that exciting. It's not that we won't make money. It's not that I don't believe you. I mean, sometimes I don't because
it's actually quite hard to do that kind of thing. But
even if someone can, and even if I really believe
it's possible that you could build a business that could
be sold in a couple of years time, it's just not going to make
the venture capital business model work. And if it doesn't work, then, then we can invest. - You should think
about building a market. You should think about making
as much revenue as possible and giving yourself as
many options as possible. Because your idea of
selling something a year may not be true. And then you're stuck with
something else which could be, oh, I've got to sit down
and build a business. So it's how do you build
a sustainable business? Long-term to give yourself
as many options as possible. So I think anybody that wants
to sell fast is completely naive about how the world works. - When you think about MNA
activities among startups and larger enterprise it dies down. Because the multiple
revenue multiples that are applied to startups that are
raising capital recently, like not a single company
in that, you know, functioning mind will acquire that asset because it stuffs like, like a Turkey at the moment. So I do think that expecting
that the company will be sold to anyone. If you raise
money as like skyrocketing, multiple is a pretty naive. - If you build a healthy
business, you have options. And then you can show, you
may be able to flip it, or we may do 10 other things with it. Also kudos to Olga for doing
the Thanksgiving reference. That was. - Perfect. - It's actually really hard
and really risky to build something for a quick sale.
What if you build it for that? And it doesn't happen now you've
built something that nobody wants. You should always try and
build an amazing sustainable business. And the rest will come. Number six, we're closing around next week
and have a lot of interest from other investors. Do we really want to create
a pressure cooker here? Let's see what the investors shape. - Yeah. I mean good for you. I mean, now it's harder because
the time lines timeframe, so fundraising are
getting very compressed, but for me, fundraising is a marathon, not a, not a sprint. In general artificially create a sense of urgency is a major turnoff for me, especially if it happens
before the first meeting, I hate feeling, you know, being part of a rapid transaction
and the way I think about it, I'd love to be considered
for lifelong relationships, not for a one night stand. - I'm personally have a high conviction, but low-frequency investor. I would, I would much rather miss something, but then take the time to get
to know someone and a business and a market really, really well. I think it will make me a much
better investor and partner for you in the long run as a founder, because it means I really
know what I'm doing and I know what I'm getting into. And
people talk about doing deals, they talk about trades
they talk about, you know, that transactions. And,
and as I would have said, those words just don't, you know, they, they just don't appeal to me. When someone comes along
and says, look, you've got, you know, X days to decide,
you know, do you do it or not? I tend to walk away. - I guess not they don't like it much. This is also very much about timing, having some sense of urgency
when you're closing the investment is fine, but it shouldn't be a part
of the initial conversation. Number five you need to sign an NDA. Let's keep this simple investors,
almost never sign NDAs. And they have really good
reasons not to it's this idea, really that genius that
everybody needs to sign NDA. - So I have written an entire blog post, which is actually the most read
blog post on my medium about why we don't sign NDAs. So, you know, this is a sort of pet peeve of mine. It just doesn't work having, you know, what you think is a
clever idea. First of all, there will be a whole bunch
of other people who have the same idea. I sort of guarantee it, especially in our market and
the technology industry right now, where so many of the smartest
people on the planet today are involved in what we're
doing and what this, what this market's doing. And secondly, really the winners are almost
always defined by the people who go the distance and he put
the work in and who build the right team and do all of those things. So, so I think the idea that, you know, this idea that you have
an idea at an early stage, that is the difference
between success or failure is, is a pretty naive starting point. It's a waste of time. You know, I think it
just gets in the way of, of you raising a great
round for your company. - To me, it goes to couple points. First is trust. I think that the moment you
encourage an investor sign an NDA from the get go that
indicates a lack of trust. And that might be problematic
in terms of building the working relationships and
with the team element. I think if you really think
that somebody can easily steal your idea and replicate that that probably may be the
team is not that valuable. Maybe you are not the best
people in the world to build this kind of application. And if it's true, so maybe I should not be
considering investing in the startup in the first place. Number four - the product can sell itself. We don't need the sales team. - You know, if you have a super product
and you get adoption from the grounds up, I mean, that's great, right? PLG is, is where it's at. You got to have that,
you got to build that, but it doesn't stop there. And, and there's no way that you
can get the big numbers and the big deals specifically, if it's like an enterprise application, if you don't have a sales team in place, the thing will not grow
inside those big enterprises. It just won't. And I recently had this amazing
company and I was talking to the CEO and they've been sort
of positive on cash since 2017. And I said to him, I said, okay, cool. What, so what's should I do now? And he told me, and I said, really? I said, that's, that's amazing. I said, if you had started it with
a sales team back in 2017, you'd probably have about
a half a billion dollars right now. And he goes, that's crazy
how, and I go, well, this is how I said, you have about 5,000 customers out of like, you know, the top companies in the world
and your biggest contracts, like $80,000. I said, can you imagine how much gold
is sitting there for your sales team to go and talk to
these companies and find those advocates inside the, those companies to grow your install base? Because PLG just doesn't
have advocates that grow big contracts. They just don't and he'll get there, but it's going to take 10 years. - I think the, the idea that a company
doesn't need a sales team is one of the symptoms of
the kind of very engineering centric world that we currently
live in, in, in technology. And I say that as a computer
scientist and former software engineer, right? So I love the fact that that
geeks like me are important finally. But on the flip side, I think there's such a mythos
around how it's all about, you know, the technology
and the product and, and everything else. You know, sales and marketing in particular is, is dumb and stupid and
a waste of time and, and wishy-washy and all the
rest of it. And, and you know, if as a founder, you think this, what I would do is just say, look, think about the company that
you really respect because there presumably are some, and you will find that
they will have sales teams. They may not talk about it very much. They may talk more about their tech. They may put their
engineers on the pedestal, then not so much the sales
people, but trust me, they all have sales people too. And those people are
critical in that success. - Yes, you will need a sales team. Even if you have product
led growth to maximize that potential, you will need a sales team. Number three we just need your money
and we're ready to go. This is about
resourcefulness. I don't care. Just build something. You need a plan B you can
never wait for a specific investor. Investors love founders
that are resourceful. The opposite is a total turn off. - Yeah. I think being an
entrepreneur is all about being resourceful. And if, you are basically saying, I cannot do anything without your money. You're not being very resourceful. Of course you can do it
faster. You can do it easier. You can do it better with my money. I get that. But if you were saying, oh, it's just impossible for
me to get out of, you know, get out of bed without, you know, you writing me a check then. I mean, that really questions to me, how, how desperate you are to do this thing. That's a, that's a pretty big turn off immediately. if someone said that in there, in that early conversation with me. - Two guys from Switzerland contacted me via LinkedIn and asked me for advice. And I said, yeah, why not? I mean, come on. They seemed okay. They're mathematicians. You know, I'll spend 10 minutes with them. I spent an hour with them. I said, where are you? And they go Mexico. I go, why are you in Mexico well
we can't fly in the U S you know, cause they got that band. But if we come to Mexico, we think we can fly in
to the United States and we can get in that way. And they did. And then they went to San
Francisco and then they sat in San Francisco for three weeks and, and they raised 800 K. And I know this because I knew
who they raised it from all all angels, all like, you
know, like three or four or five or six people, including myself after I heard about this. And I'm like, how did you guys do this? And they go, well, we would just go
to like certain We Works. We knew where people would be and we started talking to
people and then those people are introduced to these people. And so there were a couple
of CEOs of companies that are kind of big, big startups. You know, they're like,
they're not unicorn yet, but they're really close to unicorn. Maybe one of them is a unicorn
and their CEO invested. And I know this guy, so I called him. I said, why do you invest? And they go because they're
crazy because they came in here with nothing and they, and they snuck into the United
States in there and they're, and they're, they're, they're showing us their tech
and their tech looks great. And their idea's great. But look at them. I mean, wouldn't you invest
in somebody like this. That's amazing, right? The resourcefulness that these
young kids probably in the early twenties showed
mathematicians to just to get it going. It's amazing. - The point is, there's always something you
can do and you may not be technical. So you may not
have to build the product, but you can pull together some
kind of prototype or you can put together a video
or you can do a survey, we'd go talk to customers
or whatever it might be. And I think it's, again, it
goes back to resourcefulness, the best founders do something
out of what they have, whatever that is. And I think that it's not about
the traction you've actually achieved. It's about the fact that you
decided you were going to do something, whatever that was. And the fact that you're
showing this process of thinking about that and measuring the feedback. And that's you being used by
you to iterate on how you build your product and your company. If you're not willing to do those things, I would sort of question whether
you really have the energy to be a, to be a founder
of a successful company. - We are getting to the top. Number two we have no competition. When I found that there is no competition. It's usually one of two things and none of them are very good. First, no competition very
often means no market. If nobody else finds
this market attractive, maybe there is no
market. It could also be, there is competition and the
Foundry just doesn't get it either way. It's not good. Any market will either have
competition or get competition. Otherwise it's pretty
unlikely. It's a great market. - I think when someone says
that they have no competition, I'm always slightly nervous
because on the one hand you want founders to be fearless and ambitious, but you also want them to
have just a slight edge of paranoia, right? I mean the paranoid
survive and all of that. And if someone says I have no competition, it always makes me think, are you really thinking in a
paranoid enough way about it? You know, if there really
isn't competition now there will be in the future, right? If what you're doing is
valuable and interesting. So it will be, it's always good to find
someone who's thinking around corners and you know, a very flippant there's no
competition makes me worry that you're not that kind of person. - Yes. This is it. We're at the top. Number one anything that isn't true. Yes. We will pitch hard and we will
exaggerate about the future, but we can never say
something that isn't true. It will be found and
the trust will be lost and you can never lose your trust with your investors. - I think I want founders
to believe that what they're creating is unique, solves a
compelling age, old problem. You know, it might not have,
like I said, have a name to it, but they know this is going
to be big and they have these visions of where it could
go. That's all good. But when you go to the market
and you tell somebody, yeah, we do that now. And you
know, they don't do that now. You know, I, I can't go into it. Still figure out which
company I'm talking about. And then all of a sudden you're like. - Is it about blood testing?. - No, no, but I use that
example, but I mean, that's obviously so well
known because of books and documentaries, but I use that example. I go, it feels like this because
we're talking to customers about something that simply doesn't
exist and they're making decisions based upon those
statements that this currently exist when it simply doesn't.
So it, it, it was just sad. And I was so shocked. Yeah. But it's going to do this in
the future and I'm like, fine. Let's say that. Let's not say it. Does it today. - I think it's all good said earlier that the trust is really important between a
company and the investors. And I think that's what
this is all about. Right? So of course, Silicon valley
and the technology industry, you know, involves to some extent setting
slightly ahead of where you really are. And, and, you
know, we call that ambition, right. And we call it aspiration. And that's a good thing. But I think we all know when that, when that goes beyond an
acceptable level and become something, which if it were
exposed, you know, would, you know, undermine the confidence
the other person has in you. And I really think in a while,
it's one of those things, it's a bit like, whatever it
was that someone said about, about pornography. Right. I can't exactly define it,
but when I see it, I know it. And it's, it's, it's,
it's one of those things. I think that people do know
when they've gone too far. And what you're doing, if you go too far is you're
undermining trust between you and your investor. And that's a really fragile, but really important thing. Because today you might think
it's worth sacrificing that trust in order to get their dollar. But later there'll be some of
the situation when they won't trust you anymore
because of what happened. And that will come and bite
you. So, you know, honestly, I really think it's important
that people take that really seriously. - What's Suranga just said
is incredibly important. Don't lose the trust. It's
really hard to win it again. And you will need your
investors in your corner later. So don't lose the trust. Finally, I want to hear
what you have to say. Put it in the comments. What have you said? What have you heard that
made investors run away? If you want more content, just like this, please consider pressing
like and subscribe. So you won't miss any future videos. Thank you very much for
watching Raw Start-up now stop watching and go build something. (music playing in the background)
