The top five mistakes founders make when pitching to investors according to Jack Delosa
Tuesday, May 24, 2016/
According to the Entourage founder Jack Delosa, there’s one golden rule for startups when on the hunt for funding.
“You must make your investors’ money,” Delosa says.
But to do this, he says founders need to view their companies as much more than just money-making machines.
“Your business is an asset, not just a vehicle to generate cash flow and profits,” he says.
“You need to start looking at it as an asset of which profit is only one driver.”
According to Delosa, there are five key mistakes that founders make preventing their startup from raising capital.
1. Not thinking like an investor
Delosa says entrepreneurs should ask themselves three main questions that will always be on potential investors’ minds.
“How might I lose my money? When will I get my money back? And how much money might I make?” he says.
“Initially they will be scanning for any risks, so do your due diligence and assess the risks, have advisors assess the risks and come in prepared to respond.”
2. Going in too soon
It will take at least two or three months for a startup to become investor-ready, he says, and a lot of work is involved in this process.
“I could introduce you to 10 investors today but if you’re not prepared, all you’re going to do is burn those relationships,” Delosa says.
“Don’t go in with grandiose statements about how you’ll be the next Uber by year’s end, but with clearly expressed proof of concept, a strategy to get up and running and details of the team you’ve pulled together to make it happen.”
3. Not bringing back-up
Startups that are on the hunt for outside capital need to build up a strong team of mentors and advisors, Delosa says.
“The people within and around the organisation will be the number one thing on the investor’s list,” he says.
“What mentors and advisors are there that you can engage to build an advisory board?”
4. Having too high a valuation
Delosa says entrepreneurs need to find a balance between doing their company justice and not asking for too much when pinpointing a valuation.
“There is often a discrepancy between the value an entrepreneur is asking for and the valuation the investor thinks the business is worth,” Delosa says.
“You want to be defending a high valuation provided it is still fair and reasonable and representative of the true value of the company, but you don’t want to be arguing such a high valuation that it becomes unattractive as an investment opportunity.”
This involves consulting with your team and outside advisors too.
“You need to do your due diligence before the investor does,” Delosa says.
“Once you’ve prepared your investment strategy, run it by your advisors.”
5. Not presenting an exit strategy
It’s not enough to just present a strong business with traction, founders should also be showing investors when they expect to be making them money and providing an exit, Delosa says.
“To demonstrate that you will be making your investors money, you need to have an exit strategy in place,” he says.
“Nominate a date or a milestone or an event when the investor has the option, but not the obligation, to exit their investment.”
Feel the churn: How to bounce back after losing staff and clients Sue Parker DARE Group founder
“Motivation is a feeling, commitment is a mindset”: Why you should start investing in yourself right now Lisa Stephenson Who Am I Projects founder
How to call your team into action with a winning presentation Emma Bannister Presentation Studio founder
The link between diet and mental health — and how to eat your way to wellbeing Kate Save Be Fit Food co-founder
From interactive videos to AI: The five marketing trends that will dominate 2019 Warwick Boulter Collaboro co-founder
Australia is leading the legaltech revolution, but what does this mean for lawyers, firms and clients? Jodie Baker Xakia founder
Why a video news release needs to be part of your PR strategy Leisa Goddard Adoni Media managing director
Want to catch more customers? Here's how to create a super sales funnel Jovana Vujnic Bumper Leads founder