What Should I Never Say to an Investor?

"I'm going to be raising capital for the first time — I know what I want to tell investors, but what should I avoid saying altogether?"

October 21st, 2019   |    By: Wil Schroter

More often than not, what we avoid saying to investors is as valuable as what we do say.

With our best intentions, we often shoot ourselves in the foot making lofty assumptions or declarations that investors hear all the time and just start shaking their heads.

Let's avoid that.

These are conservative forecasts

The moment we open ourselves up to saying our estimates are "conservative" we risk the conversation pointing to whether our assumptions are actually "conservative", "aggressive" or just "wild-ass guesses."

All estimates are guesses.

Let's avoid giving them a label at all, and instead say "These estimates are based on our best assumptions across our entire business." Investors would rather know the assumptions are based on what we are most confident in.

Also, whenever discussing forecasts, always focus on individual assumptions, not total forecasts — they are more defensible.

If we just capture 1% of this market...

"Just" capturing 1% of any market that's big enough for 1% to be meaningful isn't easy, so let's not make that sound like a layup.

It also often suggests we're targeting the wrong initial market.

We'd rather explain how we're going to capture a large percentage of a smaller market and work our way up to a larger market in time. It's more conceivable to say "We're going to capture 20% of the all-vegan noncarbonated energy drink market" than "1% of the beverage market".

We're not worried about revenue now

We may be deferring revenue generation a bit, but let's not say we're not thinking about it.

A better response would be "Revenue is incredibly important to us, but right now we're going to exploit some opportunities to drive market share before cranking up revenue."

Investors don't want to think we are blind to revenue, which is ultimately how they will earn a great return on their investment.

Too often "Not thinking about revenue right now" is interchangeable with "We have no idea how this makes money."

In Case You Missed It

What Are Investors Looking For? By understanding each of the key areas that investors react to, you can be better prepared to position your deal to be more attractive. You can also begin to understand why they may not be reacting the way you would expect them to.

How To Find Angel Investors. One of the hardest things to do is get your foot in the door. How do you find angel investors? How do you get angel investors to invest in your startup? Don’t worry, Founders. We’ve got you covered.

Will Investors Fund Just an Idea? Startups get funded at all different stages, from the initial idea all the way up through proven traction. The problem is that the uninitiated don't quite understand what the difference is.

About the Author

Wil Schroter

Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes BizplanClarity, Fundable, Launchrock, and Zirtual.  He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement).  After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do.  He's a seasoned expert at starting companies and a total amateur at everything else.

Discuss this Article

 
Comments
Unlock Startups Unlimited

Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.

Already a member? Sign in

Copyright © 2019 Startups.com LLC. All rights reserved.