In our Alatree’s business reality we deal with startups every day, mostly during their fundraising stage, and we have noticed several common mistakes they tend to make, that prevent them from being successful.
Entrepreneurs often fall in the trap of the impression that they have the best idea for business, that nobody else came up with, and that the investors will find it a holy grail. They forget that the idea remains just an idea, and no investor will take it seriously, unless its execution is properly presented, and the investment requirement justified.
Here are the 3 main tips that we have for startups while pitching their idea:
Whether the idea is about a new technology or another innovation, no matter how versatile it can be, we highly recommend the companies at the early stage to stick to the main problem the company is aiming to solve, and offer only this solution to the market. New features, or expansion into different industries should be taken into consideration but the management should focus first on how the main idea is planned to be delivered and focus on further expansion at later stages.
Entrepreneurs who fell in love with their own ideas can really get into every smallest detail of the offering, knowing every feature, all use cases, or customization possible. But knowing everything about the product or service just means that the company is an expert on the product, forgetting that it also needs to become an expert on what the market’s doing and what the competitors are doing.
It’s extremely important to double and triple check the market: who’s already there, who does offer similar solutions, who will be the actual customers (SAM vs Tam analysis), how to reach them and what will be the cost of reaching them. Good data is not always easily available; hence we recommend consulting with industry experts and including it in the investment pitch.
Entrepreneurs’ perspective on where the market could grow often doesn’t line up with where the market currently is, fuelling moves and investments that are premature hence may not pay off.
The management team, it’s background and track record, are extremely important while pitching to investors, to convince them that the company is able to deliver the idea.
We noticed that hiring a diverse team is a big indicator of success. It’s useful to have a variety of perspectives and backgrounds to ensure the company’s management sees the big picture (not simply what they’re familiar with or naturally attuned to). Also, each function of the company should be filled by well-experienced individuals.
Moreover, fundraising is a full-time job. The success relies heavily on networking, ability to convince potential investors to come on board, and access to potential partners.