The Genesis of New Startups--25 Startup Pitch Mistakes to Avoid

Practically, a pitch naturally takes the form of an entrepreneur or group of entrepreneurs presenting or describing their ideas to prospective investors. There is also an elevator pitch which is simply a very short pitch that describes the idea into a short summary that takes only as long as a short elevator ride.

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Like we all know, a startup is an entrepreneurial venture which is somewhat experimental or newly emerged, a fast-growing business that aims to meet a marketplace need by developing a viable business model around innovative product, service, process or a platform. This article will point out 25 Startup Pitch Mistakes to Avoid.

1. Unrealistic growth projections
Founders know that any financial projection for early stage companies does not makes sense. There are too many variables, which make the projection inaccurate 99% of the time. However, this projection helps investors understand how you think about your business and what are the assumptions that need to hold true for you to grow fast. If you project a revenue growth that is completely out of sync with other startups in the industry, unless substantiated, it brings out a lack of understanding of the space.

2. Unreasonable TAM
It is important to understand the difference between the Market Size and the Total Addressable Market. Investors are reasonably aware whether a market is large enough or not. If you present a TAM that is unreasonable for the industry, it can boomerang and bring out a lack of understanding of the space.

3. Top down approach to market sizing

Assume that, as per Nielsen, 'deliver breakfast in the office' is worth $100mn in India. While Nielsen is correct in their calculation, you cannot use this as the only measure of market size.

Bottoms up is a better approach to paint this picture of sizable opportunity. "If there are 1 million office goers in the city and you can attract 5% of them, you will earn 1 crore a month if you deliver breakfast 20 days a month". This bottoms up approach to market sizing is what makes the cut and shows the true potential of your market.

4. A lot of logos with no revenue

Having Fortune 500 companies listed as customers, makes investors assume that the company is generating meaningful revenue. But if the financials do not corroborate, it can mean either the company's definition of 'customer' is very loose and includes non-paying 'customers', or the company can't charge enough for the product. Both options are equally bad.

5. Fake precision for early stage companies

As an early stage company, please admit if you don't have enough data to measure metrics like CAC, LTV, Churn. Don't try to convince investors with amazing metrics, for e.g. 20x CAC to LTV ratio, based on assumptions or unreliable evidence.

6. Writing the expected valuation

It's OK to quote expected ballpark valuation in a meeting. It's not OK to write the same (raising $4mn at $16mn pre) in your deck. It is naïve and takes away your leverage in the negotiation.

7. Calculating investors' expected returns

It's almost impossible for you & investors to calculate returns from an investment, so early in the life of a startup. Quoting a small number would turn off the investors and a huge number will make them ask more questions about your assumptions. This is definitely not where you should be spending your time.

Your job as an entrepreneur, is to build a huge company. That is what you should be obsessively focussed about.

8. No competition

Saying that you have no competition generally means either you have not done your homework or you are going after a tiny market that doesn't matter. Odds are you have not done a good assessment of competition in your industry. Think strategically and broaden your horizon.

9. 'Hard coded' financials in your presentation

Hard coding numbers in your presentation is a rookie mistake. Linking your sheets with formulae and assumptions allows investors to play with various financial inputs to see how your business model will survive in changing conditions.

10. Team slide is simply a brief bio

This is one of the key slides of your presentation. Investors are bidding for your team and their biggest worry is if you would be able to execute. Make sure you talk about the chemistry, domain experience, past achievements. Mention the complimentary skills of your cofounders and if you have worked together before.

Do not create a sub-standard presentation of your headshots and degrees only.

11. Uninteresting or unrealistic projections

Projecting 5mn revenue in 5 years will not excite any investor. Also, projecting 500mn in 3 years will get you laughed out of the room if you are at zero revenue today.

Avoid assumptions that you won't be able to justify, like 500% growth in revenue with only 30% increase in operating & marketing costs.

12. Lack of understanding of CAC and LTV of your customer

Be ready for questions on your user acquisition costs like what channels will you use to acquire a customer, what costs will you incur, what will be their likely life time value, which areas show most promise with marketing, what is your typical sales cycle duration. Lack of answers for these questions mean that you have not thought through your business plan.

13. Not paying attention to detail

For your legal protection, put a copyright notice at the bottom and add the phrase "Private & Confidential." Include page numbers on each slide so that the investors can easily reference a specific page. Make sure your presentation is a visual treat, not text heavy and does not contain typos or inconsistencies.

14. Not being able to explain the key assumptions in your projections

It feels you don't have a real handle on your business if you can't explain your financial assumptions and projections. If you go unprepared, you will not get a second meeting with the investors.

15. Not articulating why your product or technology is different from a competitor

You will have to explain why your product is different and 10x better than your competitor. You can assume that investors know about competitive products or technology, and you need to have a good response. Don't shoot yourself in the foot with sloppy response.

16. Not being able to tell how you will use the investment capital and how long it will last

Investors want to know how you will use the raised funds and your burn rate (so that they know when you will need the next round of financing). It will also confirm that you know your costs for hiring, marketing, support & admin etc, given their experience with other startups.

17. Not capitalizing your intellectual property

Investors put heavy premium on intellectual property. Be ready for questions on what IP does your company have and how was it developed, whether any previous employer of your cofounders can have a claim on your IP.

18. Lack of direction and long term strategy

You need to have a clear strategy of where your company will be in 5yrs and how you are going to get there. Unrealistic expectations, naïve assumptions will not help you in closing this round.

19. Not understanding the difference between a stand alone deck and a presentation

The stand alone deck tends to be text heavy because you are not there to explain it. It explains certain graphs and other assumptions & ideas.

Your presentation deck should be visually appealing, with maximum 5 words per slide if possible. This will help you make a great presentation as you will not be reading out from your slides (which is the fastest way to put a room to sleep).

Use your stand alone deck only when you can't be there.

Mistakes during the pitch

20. Apologizing before the start

Do not start with 'I'm sorry, this is not what I normally do'.

When you open with this type of sentence, it shows you lack confidence. You have virtually conceded that you won't be able to sell to the investors before you start. It means your team did not plan a good strategy for how to raise money and no one in your team can close a sale as you are the best of the worst on your team. Neither gives any confidence to the investors.

21. Stated a problem that isn't a problem

Frame your problem statement such that it is clear what is the problem. When you say- 'The problem is the same day delivery market and we plan to combat the Amazons of the world', it does not mean anything. Do not assume that investors know what you mean.

22. Reading from the screen

Aside from the juvenile nature of this tactic, if you don't know your business well enough to do a 60-second pitch, nobody would be interested. If you aren't confident enough in your knowledge about your company or your industry to look the audience in the eye, they'll never trust you. Even if you stumble a bit, it is better than reading your pitch to people right in front of you. They stopped listening as soon as you took out your notes.

23. Smelling of Desperation

Do not sound desperate when you pitch. If you come off as this investment is the only way for your business to survive, it seems needy and is unattractive to many investors, and can set you up to be taken advantage of. You'll end up giving away way more equity then you should.

It is better to sound confident and make the investors believe that your startup is a gravy boat that they do not want to miss.

24. Taking Criticism Personally

Most investors are direct and are going to ask you the tough questions. That's a good thing; it means they're thinking about your idea. Don't take feedback or tough questions as personal attacks. They have nothing against you.

25. Worrying about the demo/presentation that just won't seem to work

If anything can go wrong, it will. Be ready for the worst-case scenarios. The demo that you planned, might not work. Keep a video of the demo as backup. Arrive early and get your laptop hooked to the projector before the meeting starts. If the on-screen presentation fails, use the print copies as backup.

If something does not work, move on. Do not kill the effectiveness of your pitch by wasting time.

Johnson ofonimeh

Chemist,Science and Tech blogger. Research enthusiast and chief defender.Blogging is fun and sharing knowledge makes true happiness valid. Have fun while your here.

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