Five mistakes you must avoid when raising investment

2nd July 2020
Securing investment for the idea you passionately believe in is a tough. You’ll have this incredible vision for the future, full of opportunity, reward and excitement. But you know the fate of those dreams lies in the hands of a group of investors. The fact they are willing to see you tells you something, however, you’ll need their buy-in, both to your idea and literally with cold, hard cash.

Unfortunately, there are plenty of pitfalls that could ruin your chances completely.

Countless great ideas go down in flames due to common mistakes made by entrepreneurs. So, we’ll help you seek out and dodge the pitfalls so you’ll avoid stumbling into them.

Here’s the Robot Mascot rundown of the top mistakes made by entrepreneurs during pitches.

1. Avoiding Risk Analysis

As the person driving this pitch, you’ll be tempted to showcase all the opportunities you see for your business. To you, these opportunities are exciting and motivating, and you can’t wait to share them with your potential investors. The problem is that most investors don’t want to hear about all the future opportunities until they’ve explored the current risks. Risk analysis is a vital part of any business plan, but many entrepreneurs skate over it in favour of looking at the plethora of future opportunities instead.

However, if your business plan has a well-researched and comprehensive assessment of the risks involved, investors will be impressed. By showing you understand and have considered all the ways things could go wrong, you’ll demonstrate that you are as concerned about what could happen to their investment as they are. Investors want to know the risks they are taking, and they don’t want to dig for those answers themselves. Make it easy for them and give yourself the best chance of winning their trust.

2. Talking Income Instead of Building Assets

One of the most exciting milestones in your entrepreneurial journey is the point at which your business begins making a multi-million-pound annual revenue. However, when entrepreneurs take their idea to investors, the business plan can often focus too much on this and not enough on how they intend to develop business assets.

Switch your focus to building assets and your investors’ ears will prick up. Those assets will become integral to what your company is worth, so when the investor is ready to cash out, they ensure your backers can get the best return on their investment.

When a business is valued, the formula is typically this – profit x industry multiple. The underlying assets create the multiple, so if you spend significant time developing things like recurring revenue, customer data and a strong brand, you’ll boost the valuation. Building assets is a smarter way to increase your business value and doesn’t rely on bumping up your profit, so when you focus on them when you seek investment, it’ll improve your chances of success.

Investors want to know how you intend to build those assets, what you are prioritising and when you aim to have them ready. Make asset-building a key part of your plans and you’ll capture the attention of would-be backers.

3. Neglecting Proof and Evidence

Proof and evidence are as vital in pitches as they are in the courtroom. Sadly, too many business plans are all about possibilities and devoid of robust proof and evidence. When an investor is learning about your idea for the first time, they need to see commercial viability. This is an area where many talented entrepreneurs can trip themselves up, as they fold possibilities into projections and come up with numbers that just don’t ring true.

Investors want to see evidence that people in the marketplace want the product or service you are building. As you complete your primary research, it’s vital to make the case with evidence from a considerable number of potential customers, backed up by validation from industry experts. You need to conduct statistically viable market research, establishing that people want or need what you are building and that the price you intend to charge is one they’d be willing to pay.

There’s no definitive answer about how much evidence and proof you need to secure investment, but the more you have, the better chance you have of raising funds. If you are trying to raise over £1million, you’d almost certainly need to have actual users already or paying customers. For ideas that require less funding, providing evidence of genuine customer interest, expert validation and survey data to prove commercial viability will help you make the case.

4. Living in Ideas land

Entrepreneurs love talking about ideas, after all, you are visionaries looking at the future and all its potential. Ideas have the power to get people excited, to change the world, to inspire great things. But unless those ideas are implemented, they remain an abstract thing. In a pitch, investors don’t want to deal in the abstract, they want to drill down into details. So, if you have prepared an exciting, thrill-ride of a pitch that showcases your idea but without getting specific, it won’t work.

Details matter to investors. They want to see how you intend to implement your idea, to scale up, develop assets, and run every other part of the business. They need to know that you’ve thought this through, made sensible calculations and considered how you manage each stage of the business development. If you get the right combination of a brilliant idea and clarity on implementation, your pitch has every chance of success.

5. Rushing to Pitch

It’s all too easy to get swept away in the excitement of your ideas and rush to pitch before you are ready. We’ve seen many entrepreneurs hurry to meet investors, believing they’ve got everything they need to secure funding, but falling flat because they are ill-prepared. The reality is that if you go into a pitch with assets you’ve spent time developing, backed up by a strong business plan and credible financial projections, you are much more likely to succeed. Unfortunately, too many great ideas never get going because they are rushed.

Our advice is to spend time developing your fundraising assets and make sure they stand up to scrutiny from those outside your team. If you work with a professional pitch agency like ours, we’ll be there to challenge you and help you find answers to the potential questions your investors may have. An objective view is vital at this stage, and a professional pitch agency can help you to develop assets for your pitch, projections and business plan. Armed with high-standard assets and ready to answer any concerns, you’ll be pitch-ready.

Robot Mascot COO James Church has written a book that delves into every aspect of the pitch and gives you a step-by-step guide to becoming an ‘Investable Entrepreneur’ – it’s due for release later this year.

Sign-up below to be notified as to when you can bag a copy for 99p.

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2020-07-09T21:53:28+00:00July 2nd, 2020|Categories: Pitching, Advice, Investment|