by Aniket Day |
The growth of entrepreneurship in India, coupled with a growing economy conducive to innovation and technology advancement, has paved the path for an entrepreneurial boom in the country. One of the primary reasons why a lot of people shied away from the less traveled road of entrepreneurship was the lack of financial resources. But that is not the case anymore. A large network of angel investors, venture capitalists and independent funds are now ready to invest into ideas that have the ability to make money.
Let us have a close look at how it works. You set up a start-up, build a product and start selling to customers, only to find out that you need more money to run the show. You need more human capital; costs are soaring even more than you expected or you are simply running out of money. So what should you do next? ‘Exiting’ at this point will hurt you and your aspirations badly. So the only alternative is to arrange for funds. But where do you get the money from? Angel investors, venture capitalists, seed funds and other operatives are there. But the question is – how do you pitch to them?
I have been an adviser and investor at various early-stage start-ups and I have noticed a common syndrome everywhere. Entrepreneurs commit some common mistakes while pitching their business ideas to investors. For an entrepreneur, there are various factors that lead to the success of a venture- profits, growth, social media presence, partnerships, etc. But for an investor, there is just one pointer that indicates success – the return on investment or ROI. Will they be able to recoup their investments? How long will it take? Is there an opportunity to exit?
As an entrepreneur, you have to deal with those queries and more. So try and avoid these 6 initial pitfalls while pitching your business idea to an investor.
1. Talking too much about potential
Every business has potential, but that is not a differentiating factor. You must aim to be disruptive and show how you can grow exponentially. Those are the key factors that the investors look for. But at times, passion may cloud the perspective. Instead of focusing on the opportunity size, focus on developing a competitive advantage. This will give you an edge over others with similar ideas that are lost in the sea of potential.
2. Facts and numbers don’t sell alone, stories do.
I have noticed a large number of people who correlate statistics to success. Ever wondered why some movies and books gross billions of dollars? It’s simply because people connect to stories. So keep the presentations focused on realism. If you are selling a health product for children, don’t start the discussion with child obesity rates in India. Instead, say something like, “Imagine if your loved one were to face health issues at a young age…” Always establish a sense of familiarity and trust.
3. Idolising your business plan
I have seen too many plans falling through just because the entrepreneur was not willing to change or tweak his/her idea. When I made my first pitch to an investor, competing against 50 other business ideas, he didn’t like what I had to say. He countered me with a changed business model, which basically threw junk at my plan. But in the long run, I saw that being flexible and having an open mind to learn things can help you bring more moolah and success.
4. Lack of focus
In Bangalore, I have noticed that far too many people are starting up. That’s a good thing, but also a bad thing. People creating products and services are in search of a market instead of designing something to solve market requirements. After all, it is an economic fundamental – demand has to be met with supply. Instead of second-guessing, you should go out there and understand your potential market. Talk to customers, engage with them and find out what needs/requirements have to be solved.
5. Optimism glut
Being optimistic is a key trait of an entrepreneur. However, too much of optimism can kill your realistic views. Being over-optimistic about sales, adoption rates and development can leave you in shackles. This needless optimism in financial forecasts could underestimate the case and hinder you from achieving key performance milestones that will help the business raise capital and surpass break-even.
6. Lack of humility
The golden rule every entrepreneur must swear by is that you are not the smartest guy in the room. So accept advice; be grateful for the investors’ time and remain gracious even if they decline to fund your project. The entrepreneurial circles are small in India. If you burn one bridge now, the rest of them could fall like dominoes sooner or later.