What You Should Never Say To An Investor

there are some things you'll  never want to say to investors   you're likely to think they're smart  but in the blink of an eye you'll cost   yourself a potential investment worse yet  you won't even know why the investor said no   I've raised over 100 million dollars in  venture capital and private Equity funding   and I've helped entrepreneurs like you raise  rounds of between fifty thousand dollars and   a hundred and fifty million dollars I don't want  you to get blown out of the water with investors   that's why in today's video I'll explain what are  the 10 things you can never say to investors why   you can't say them and what you should say instead  and you'll definitely want to hear the 10th thing   because it's the one thing you can never do I  hope you like it hi I'm Brett on my channel I   help early stage startup CEOs like you raise money  and grow your startup so if this sounds like you   then hit the Subscribe button and the Bell so  you get notified every time I release a new video   number one don't tell investors you're the  next Uber investors have tells in other words   they have signals and signs that they take  from the entrepreneurs that they meet with   and they can see from meeting with an entrepreneur  whether or not these things are right or wrong   and the minute you say we're the next  Uber we're the next Google we're the   next Facebook or the next whatever as an  investor you know that's very very unlikely   and I also know that comparing yourself  to Uber or Facebook or whomever you know   tells me that you don't understand your  business well enough because you know what   Uber and Facebook when they raise their money they  didn't say we're the next this or the next that   they were Uber they were Facebook and they had  their own value proposition that was very unique   and guess what you need the exact  same thing if you're going to win   so stop with this thought process of We're the  next Uber we're the next Facebook the next Google   just throw it out of your mind burn it up just  don't even think about that instead talk about   yourself talk about your company what's unique  about your company and why you're going to win   number two don't tell investors all you  need is one percent market share to win   you'll likely lose the potential investment right  there if you say you only need one percent of the   market it sounds great in winning doesn't it it's  a classic mistake you show investors a big total   available Market you say my goodness see look  how big our revenue is with just one percent of   the market it's a no-brainer to invest in us and  you know what happens there goes the investment   the reason is that we only need one percent  story is just not true if you target a large   market and assume you need one percent to win  you'll likely end up at zero percent the reason   is your product strategy your marketing and  your sales strategy won't be specific enough the answer is to Niche down by  reducing your served available   Market Sam to a smaller number so you have  a meaningful market share of the market   number three don't tell investors what your exit  strategy is especially when you're raising early   stage funding again this goes under the  you think you're being smart by saying we   want to be acquired but it's the wrong move  there are a couple reasons why this is true   number one don't you think investors know  what the possible exits for your startup are   this is what they do every single  day so they don't need your help   number two more importantly you shouldn't  be focused on an exit at such an early stage   and stating the obvious even when asked  can hurt your chances of getting funded   it's a trap question because you're focused  on the wrong things in your investors eyes   so what is the right answer to the question of  what is your exit strategy it's cliche but just   say this I'm focused on building a great  company the exit will take care of itself   number four don't tell investors you have any  competition I know your startup is different right   but investors know better they've seen hundreds of  startups just like yours and they know that every   startup has competition period you know what the  competition is it's the old way of doing things   so instead of saying the lazy answer that you  don't have any competition become the expert   on your competitive landscape that's how you add  value and get closer to getting an investment number five don't tell investors  these estimates are conservative   there are certain statements that are red flags  to investors and saying that any Financial   estimate or plan is conservative is at the top  of that list there are a couple reasons for this   First Investors are used to Startup CEOs  making claims and not meeting the claims second   investors know that it's really hard to grow  Revenue as the late Mary Cox or chairman of   the board said to a prospective investor most  startups are horrible at forecasting a revenue and   you'll find that we're no different that's why you  don't want to say your investors are conservative   investors are smart and they've been burned Enough  by startups over the years to know better instead   you want your estimates to be on the realistic  aggressive side why investors are likely going   to reduce whatever you tell them because they're  going to assume you're aiming too high so being   aggressive helps investors see your company in  a more realistic light number six don't tell   investors you don't know how much money it will  take for your startup to become cash flow positive   you should know your numbers period end of story   there are certain numbers and dates you should  always know what the answer is number one you   should know your Breakeven point for Revenue  number two you should know when you will get   the cash flow positive number three you should  know how much investment it's going to take to get   to cash flow positive now I know you're going to  argue with me and say but we're just starting out   how can we possibly know this I get it but you  should take your best estimate based on your   current knowledge of what you think is going  to happen of course you're going to be off   but that's not the point however you need to  be thinking about these numbers from day one   after all don't you think investors are  going to make an educated guess about how   much money you'll need the more you know  the more you plan the more you can help   investors understand how your company works the  better your chance of getting an investment is number seven don't tell investors they need to  sign an NDA this is a direct quote you need to   sign an NDA my co-founder John said to David the  investor we were presenting to it was our second   meeting with David and John's comment took me  totally by surprise but David's response didn't   take me by surprise David looked at our VP of  engineering John and said we can stop right there   I'm not signing an NDA I sat there  stone-faced while I waited for John to reply   I knew that if John didn't say he was okay with  continuing that we would be done for and the   investment would be gone after what seemed like an  hour what was really less than a minute John back   down and the diligence meeting continued investors  as a rule just don't sign ndas they would get sued   right and left if they signed ndas your goal when  you're meeting with investors is to raise money   so I wouldn't hold back if I was you it's the cost  of doing business if your information gets spread   to a competitor now the reality is they won't  change what they're doing trust me on this one   number eight don't tell investors our marketing  plan is build it and they will come the idea that   customers are going to magically find your  product or service sounds great but it never   ever Works ever because it means you don't have  a plan of how you're going to acquire customers   investors expected of a marketing plan so develop  a real plan not a half-assed plan but a real plan   number nine don't tell investors a  joke unless you know it will land   I was in the audience when I heard the VP of  a long since forgotten startup make this joke   slash comment when he was introducing himself  to the partnership of the VC fund where I was an   entrepreneur in Residence he said I'm a reformed  VC and he thought the audience was going to laugh   the vp's joke landed like a lead balloon nobody  laughed you could hear a pin drop the crazy   thing is I've seen other entrepreneurs make this  exact same mistake with with this exact same joke   and I made a similar mistake with a different  joke when I was presenting to the partners at   one of our investors the notorious Donald Ventures  after I made the joke you could hear a pin drop   and that's not the investor response you want to  put it mildly now here's the deal you are really   rolling the dice when you make a joke it's great  when the joke lands but a joke at the wrong time   can kill the momentum you have with a potential  investor so if you're all in doubt just don't   make a joke the other point is that you as a CEO  should recognize from these first two points is   that you have to prepare and rehearse with your  co-founders before you present to any investor   number 10 on our list the final one don't  tell investors anything that isn't the truth   this is the one rule that you can't ever  ever break you always want to be able to   answer any questions investors have on the  spot however you're sunk if you ever ever   lie because your credibility is on the line and  once you've lost it you can never get it back   so if you don't know the answer to an  investor question simply say I don't know   I'll get back to you later today  then get back to the investor ASAP   if this content is resonating with you then please  hit the like button right now now what did you   learn from today's video please put your answer in  the comments column below today's video and if you   have any questions put them in the comments column  too and I'll be happy to answer them for you   now I have one more thing for you today  it's my free startup pitch deck template   it has all the slides that you need to develop an  awesome pitch deck all you need to get it is click   the link below today's video and it's yours for  free and for more great content click on the video   at the end of today's video if you haven't already  then click the Subscribe button to get more great   content for startup CEOs I'm Brett at Brett  jfox.com thanks for watching today take care bye

Channel: Brett Fox

Views: 10,087

Keywords: Brett fox, startups, entrepreneurship, business, startup, venture capital, entrepreneur advice, startup advice, startup feedback, ceo, entrepreneur, entrepreneurs, startup company, founder, early stage startups, early stage, early stage ceo, why early stage startups succeed, technology, vc, silicon valley, tech, angel investors, investors, how to start a business, venture capitalist, investment

Id: tzWew_wPatA

Length: 13min 20sec (800 seconds)

Published: Tue Apr 25 2023