What Not to Say in an Investor Pitch

What Not to Say in an Investor Pitch Unfortunately, there are many different areas where you can fail with a startupâ€"and raising money from investors is no exception. Having founded numerous companies, advised dozens more, and put together more pitch decks together than I can count, I learned the hard way which pitching mistakes are fatal and which ones are survivable. This is why having veteran entrepreneurs in your startup team is an attractive factor for investors; experience is often life’s best teacher. But if you don’t have that knowledge at your fingertips, instead be a student of other startups’ failures. Make sure that your pitch doesn’t reflect inexperience or naivetéâ€"not just because investors won’t touch your startup, but because your survival depends on it. Over my time as an entrepreneur, I’ve identified these as the four most lethal phrases to use when trying to raise money: “We have no competition.” Why it’s a pitch killer: It shows that you either don’t understand your customers or have done a terrible job analyzing the competitive landscapeâ€"and often it means both. With any business, you are either competing against ingrained behavior or against a rival company, and you need to know the balance of that situation better than anyone. Just because you think that you are a “first mover” doesn’t mean that you get a free pass in studying the competitive landscape. In fact, I would argue that you have even more work to do. As a general rule, assume that any idea you’ve heard of has been done before. If there isn’t already a market dominator, there’s probably a really good reason for that. So don’t discredit yourself by presenting your idea to investors assuming that you’re the first one to think of it and assuming that being a “first mover” will give you a huge advantage. Proceed with caution and skepticism about the uniqueness of your solution. Study, research and dig until you find prior failures and have a deep understanding of why they didn’t work. “No one can copy us.” Why it’s a pitch killer: It makes you look ignorant and it also shows arrogance about your development prowess, which is a red flag to investors. If you are a small startup, you are likely working the kind of product or technology that would take GE, Amazon, Microsoft or HP a long weekend to copy. Additionally, in the case of software companies, patents are often not useful because startups are rarely creating new technology as much as applying existing technology in new ways. Plus, enforcing and defending patents is expensive and a massive distraction. “We will be profitable in one year.” Why it’s a pitch killer: Investors don’t expect you to turn a profit quickly, and, in fact, will become highly suspicious of your financial predictions if you suggest a profitability roadmap that defies industry norms. Also, while financial projections never end up being perfectly accurate, they do speak to your ability to estimate labor costs and whether the business will scale efficiently. So don’t make the rookie mistake of giving wildly unrealistic financial predictions. “We are cheaper.” Why it’s a pitch killer: A lower price point is rarely enough to unseat an entrenched leader or differentiate yourself from the competitionâ€"which is why no one with a decent amount of entrepreneurial tread on their tires starts companies from that approach. Undercutting competitors with efficiency improvements and brilliant execution can be one of a few competitive advantages. However, the “we’re going to be cheaper” approach almost always fails because new entrepreneurs typically don’t have appropriate expectations for the actual cost of doing business, the costs of labor, or the length of the sales cycle. And think of it from an investor’s perspective: How sexy is it to be investing in a business that is trying to be cheaper instead of premium? So now you know the worst of what to avoid in your pitch. But the point isn’t just to eliminate these phrasesâ€"rather to also realize why they are a problem and what blind spots they reflect. My point isn’t that a few words will ruin your startup, but that a few bad decisions based out of ignorance will. Seth Talbott has founded numerous companies, including Promedev (which provides lab services for medical providers), AtomOrbit (which helps businesses create mobile workspaces with access to legacy data) and Preferling (which helps users find restaurants based on preferences). Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. YEC recently launched StartupCollective, a free virtual mentorship program.