- every founder thinks their idea is disruptive/revolutionary
- every founder says their financial projections are conservative
- explain your validation & customer traction
- explain the assumptions underlying your projections
- focusing extensively on the product/technology rather than on the business
- misunderstanding the purpose of financial projections; they exist in a pitch deck to:
a) validate the founders understanding of running a business
b) provide a sense of magnitude of the opportunity versus the amount of capital requested
c) confirm the go-to-market strategy (nothing undermines a pitch faster than financial projections disconnected from the declared go-to-market approach)
d) generally discredit you as someone who understands how to build a company; for instance we'll capture 10% of our market, 1% of China, etc. Top down financial projections get big laughs from investors after you leave the room.
bonus) don't show 90% profit margins. Ever. Even if you'll actually have them. Ever.
- avoid false precision by rounding all projections to nearest thousands ($000)
- include # units / # subscribers / # customers above revenue line; this goes hand-in-hand with building a bottom up revenue model and implicitly reveals assumptions. Investors will determine if you are realistic, conservative, or out of your mind based largely on the customer acquisition numbers and your explanation of how they will be achieved.
- highlight your assumptions & milestones on first customers, cash flow break even, and other customer acquisition and expense metrics that are relevant
- thinking about investor money as your money
- approaching the pitch from your mindset (I need money); investors have to be skeptics, so understand their perspective.
- bad investors; it's tempting to think that any money is good money. You can't get an investor to leave once they are in without Herculean efforts and costs (and if you're asking for money, you can't afford it). If you're not on the same page with an investor on how to run/grow the business, you'll regret every waking hour.
- it's their money; tell them how you are going to utilize their money to make them more money
- you're a founder, a true believer. Your mantra should be "de-risk, de-risk, de-risk". Perception of risk is the #1 reason an investor says no. Many are legitimate, but often enough it's simply a perception that could have been addressed.
- beyond the pitch, make the conversation 2-way. Ask questions of the investor (you might learn awesome things or uncover problems) and talk to at least two other founders they invested in more than 6 months ago.