If you’re an early-stage entrepreneur just heading into pitch mode, I’ve got good news and bad news for you.
The good: It’s been a record year for fundraising. Over the past year, funding for startups overall trended way up. So did funding for companies run by women, and the number of women-owned businesses overall is growing fast.
The bad: An upward trend’s great, but we have a long way to go before companies run by women get funded at the same rate as those run by men. In fact, companies founded solely by women got just 2% of venture capital funding last year. Two percent. Meanwhile, companies founded by women and men got 12% of funding.
What that means: You can only control what you can control — like your pitch. When I talk to founders of early-stage start-ups, I find myself having pretty similar conversations with them about what works and what doesn’t as you pitch your brand-new company to investors. Here are five mistakes I see a lot.
Mistake #1: You focus only on the product
Most early-stage entrepreneurs are (rightfully) hyper-focused on building the product. That’s great. So their pitches are nearly all focused on aspects of their product: “Here’s how it works!” “Here’s why it’s better!” Not so great.
Why? For one thing, it means that conversations with investors and mentors usually include things like, “What if you did it this way?” and “Have you thought of this feature?” and “What about competitors who do it that way?” But feature and functionality conversations aren’t very useful for entrepreneurs at the early stage, usually. Products invariably change as they get in the hands of customers and real-world feedback starts to materialize.
Mistake #2: You forget about the company
Product-focused pitches can also signal to investors that you believe that if you just build the perfect product, a successful company is bound to materialize. But there’s not a big company today that got big doing exactly the same thing they did at launch. It’s the teams that are smartest about adapting, pivoting, and executing that build the most successful companies. Most investors know that.
That’s why I like early stage-pitches that have not just a product roadmap, but some concept of a company roadmap. Just as a product roadmap shows where you’re going with the product, a company roadmap shows how you plan to turn that product into a business.
Things to consider including in your pitch: How will you acquire initial customers? When is the right time to test monetization? What are the next one or two fundraising milestones you’d envision if things go as planned? (These things will almost always change, but it’s smart to demonstrate your early thinking.)
Mistake #3: You talk about the money in terms of how long it will last
Creating a company roadmap allows you to put your fundraising in context, which is always useful for investors. Rather than saying, “We’re raising $1 million to extend our runway for a year” or “We’re raising $500K to hire engineers,” put your capital requirements in the context of the milestone you want to hit with the money. Try, “We’re raising $1 million to prove our user acquisition costs” or “We’re raising $500K to get to a minimum viable product launch.”
Of course, hitting those milestones involves hiring engineers, spending money on marketing, etc. But you don’t need to make your tactical steps the focus of your use of funds. It’s the outcomes the funds are designed to achieve that really matter.
Focusing on your milestones makes it very clear to potential investors what the near-term goals are. It also gets everyone on the same page about when and why the next round may be necessary. Using a timeline, you can show the milestone you’re fundraising for — such as proving your user acquisition costs. Then, you can follow that up by the next inflection point you’d anticipate raising money to pursue afterward if things go as planned — such as scaling sales and marketing.
This stuff doesn’t have to dominate an early-stage pitch — just one or two slides is usually enough to give helpful context around use of funds that can do wonders for clarity and aligning expectations.
Mistake #4: You dwell on the risk
This one’s especially dangerous for women entrepreneurs, because research shows that women get asked different questions by VCs. Men are asked more “promotion” questions. They’re all about potential gains — their “hopes, achievements, advancement, and ideals.” (Example: “How do you plan to monetize this?”)
Women founders, on the other hand, get asked more “prevention” questions. These questions are all about potential losses and risks, with a focus on “safety, responsibility, security, and vigilance.” (Example: “How long will it take you to break even?”)
And focusing on risk is a killer. No matter what their gender, entrepreneurs who focused on questions about potential losses raised seven times less than the entrepreneurs who focused on potential gains. That totaled out to $3.8 million less in funding for every additional prevention question an entrepreneur was asked.
The good news: It’s possible to flip the script. Entrepreneurs in the study who answered a “prevention” question with a “promotion” answer went on to raise higher average funding.
Mistake #5: You pitch the wrong VCs
If you’re in a room with people who don’t invest in people like you, you’re wasting your time. Some VCs don’t invest in companies at your stage. Some don’t have experience in your consumer (if you're launching a consumer product). And have they invested in entrepreneurs who look like you? Start by spending time on Crunchbase looking into potential investors and their history, and focus on building introductions to investors who might be ready to work with you.
Those are the five most common pitching mistakes I’ve seen. So come prepared with a pitch that’s directed to the right people, focuses on the upside and away from the downside, and shows investors you’re the type of founder who can build — and grow — your company into something great.
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