8 Things never to say to Investors when seeking Funding

As a tech startup founder, you want to make a good impression on investors. However, some things you say can ruin your chances of getting funded.

Here are the 8 things you shouldn't say, and why:

1. We're the next <Insert Unicorn>

Comparing your startup to big names like AirBnB, Uber, or OpenAI doesn't impress investors. It shows you don't understand your own business well. Instead, focus on what makes your company unique and why you will succeed.

Fun Fact to remember when Seeking Funding:

Unicorn startups are worth over $1 billion. They are rare because they have a unique market fit, strong business models, and can grow quickly. Less than a fraction of 1% of startups become unicorns. As of 2024, there are fewer than 2,000 unicorns worldwide, showing how hard it is to reach such high values.

2. We only need 1% of the market

This sounds easy, but it's a common mistake. Investors know that aiming for 1% often means you'll get 0%. Instead, target a smaller, specific market where you can achieve a meaningful market share.

Pro Tip for Seeking Funding

Speak the investor language and do some homework on your market size:

• TAM shows the full market potential for your product or service.
• SAM narrows it down to the portion of TAM you can target.
• SOM is the realistic market share you can capture.

Investors use these metrics to gauge the growth potential and scalability of your startup. Highlighting these helps investors understand the market opportunity and your strategic focus.

3. Our exit strategy is to be acquired

Early-stage investors don't want to hear about your exit strategy. They want to know you're focused on building a great company. When asked, simply say, "I'm focused on building a great company. The exit will take care of itself."

Fun Fact for Seeking Investments

 Most startups face tough odds: about 90% fail, with 70% going belly up within 10 years. Of the successful ones, less than 10% get acquired, and a tiny fraction—less than 1%—go public through an IPO. Mergers also play a role in their lifecycle.

4. We have no competition

Every startup has competition, even if it's just the old way of doing things. Instead, show that you understand your competitive landscape and how you plan to stand out.

Pro Tip for Seeking Funding

Better to show you understand the market by addressing:

1. Direct Competitors: Companies offering similar products or services.
2. Indirect Competitors: Businesses with different solutions that meet the same need.
3. Status Quo: Customers continuing with their current solution or no solution at all.

5. Forecasts are conservative

Investors don't trust claims of conservative estimates because they're used to startups missing targets. Provide realistic, aggressive estimates instead, as investors will likely reduce them anyway.

Pro-Tip for Seeking Funding

Keep your financial projections clear and reasonable. Showing a cash flow of $250K at year-end is more effective than $239,816.57. Use numbers to build confidence, not add confusion. Simplicity shows your level of business maturity.

6. Investors Must Sign an NDA 

Investors typically won't sign NDAs because they see many pitches and don't want legal risks. Be open with your information; the chances of a competitor using it against you are slim.

7. Our PLG approach is "Build it, and they will come"

This means you don't have a real plan to acquire customers. Investors expect a solid marketing strategy, so develop one. We provide early-stage CMO services to create a winning marketing strategy.

8. Be Honest when Seeking Funding

Never lie to investors. If you don't know the answer to a question, say, "I don't know, but I'll find out and get back to you." Lying destroys your credibility, and you can't get it back.

Seek Funding from Investors with Trial & Error

Increase your chances of securing funding by avoiding these common mistakes. Highlight your company's strengths, understand your numbers, and be transparent with investors.

Remember, it's okay to make mistakes as you refine your pitch. With practice, you'll improve and get closer to your goal.