Thursday, 20 April 2017

Music To The Ears Of Younger Generation Ghanaian Entrepreneurs?

Funding plays a key role in the initial successes enjoyed by most start-up businesses that survive beyond their first three years of trading.

Good preparation before meeting potential investors is therefore always critical.

For the benefit of this blog's younger generation readers with an entrepreneurial bent we have culled a page from an article by the witty David King entitled:"10 phrases that make angel investors cringe" that we hope will enable them successfully approach and engage potential funding sources.

Please  read on:

"Startup Grind

David King
Startup Investor/Advisor. Entrepreneur. Ex-Googler. Cyclist/Runner.

Apr 17, 2017.

10 phrases that make angel investors cringe

I’ve seen hundreds of pitches from early stage startups. I’ve invested in some of these startups. I’ve pitched my own companies dozens of times as an entrepreneur. When an entrepreneur can articulate a clear vision for how the future will play out it’s actually quite easy to get behind that.

However, sometimes while articulating a vision for the future, an entrepreneur uses certain phrases or details that I think make a seed stage pitch sound weak.

Here’s a list of things I hear from time to time that I think should generally be avoided in seed stage pitches:

“We’re trying to raise $XXmm…”

You don’t need to bluster your whole pitch, but establishing a sense of confidence can go a long way here. When you use the phrase “trying to raise” it sounds like you’re not quite sure if it’s going to happen and you’re testing the waters.

I think it sounds much better to the ear of an investor to say, “we’re putting together $XXmm to build the company/product to achieve milestone Y”.

    Do or do not, there is no try!

“Our exit strategy is…”

At the time you’re pitching for seed money you should not be planning an exit. I want to hear that you’re ready for the many years ahead where you will be focused on creating value so this exit is just not worth discussing. Sure, sometimes exits happen early. And personally, I’m totally supportive of that.

But when an entrepreneur pitches the exit on the way in it’s a big turnoff. It sounds like someone who is thinking small and is nervous about the opportunity. Be bold!

• “Check out the way this specific feature of the overall product is cool”

Features within the product aren’t interesting. Markets are interesting, people are interesting, products are interesting. If you have to discuss a specialized feature of your otherwise larger product you’re getting lost in the weeds.

That being said, it’s fine to focus your product today on building “just a feature” if that’s the core of what you’re building to deliver value— in fact, I prefer to see this kind of thinking.

• “Our X technology is proprietary…”

I’ve been involved with many companies who have eventually built really interesting technologies, but the starting point is surprisingly never a technology (ok, Google may be the single exception with PageRank). The starting point for a successful startup is about building a product that resonates with users (consumer) or building a sales channel and brand around a product that let’s you sell it (enterprise).

Technology helps each of these get more scale and defend their position over time. That’s not to say you don’t need an app to launch the next Snapchat, but just build out the app and don’t talk about it — it should not be a sophisticated piece of technology when pitching at the seed.

• “We’re going to beat Google/Facebook/Amazon by building X”

While it’s entirely possible that you enter a new fast-growing space and build something that’s really impactful to Google/Facebook/Amazon’s core business, I become extremely skeptical when I hear an entrepreneur use this phrase in a pitch.

The reason being, even when businesses have a large impact on a Google/Facebook/Amazon they don’t do so from a position that looks much like the business they’re competing with.

For example, Facebook is in fierce and fundamental competition with Google for both consumer attention on the Internet and advertising dollars. In fact, they are practically one half of a duopoly of winners of online ad-spend today. That’s competition.

But when Facebook was growing up, it wasn’t claiming to be a better search engine. It was just trying to be the best social network it could be.

Uber may have a large impact on Amazon’s ability to control the last mile delivery which is so strategically critical to their business, but Uber started as a online dispatched asset-light taxi company, not an Amazon killer.

• “We’re like Airbnb for X”

this makes me cautious that this might be a cargo cult startup. Startups that are inventing something new should do so from first principles.

What is it about the world that you have observed that needs to be fixed?

How will you build something that fixes that problem?

Once you have understood the problem deeply and built a solution it won’t look that much like Airbnb any longer. Uber was founded the year after Airbnb, but was never pitched as Airbnb for people who drive cars.

• “Hollywood celebrity X is investing in this round”

Nothing against celebrities per se as I have invested in companies that have chosen to also raise money from Hollywood celebrities — I don’t think it’s a bad thing to have these people involved, but if it’s part of your pitch it’s actually a big turn-off — it sounds like you’re just trying too hard to be cool if you think that involvement of Hollywood celebrity X is material to my decision to invest.

• “We’re trying to hire someone to build the app for us”

While I generally prefer to invest in technical teams who can build stuff themselves, I think there are plenty of great entrepreneurs (even talented technical-entrepreneurs!) who may decide to outsource the development of v1 for a number of reasons, which is totally fine — but if you aren’t “technical enough” to build this then you should be “hustler enough” to figure this out and it should not be a main point of discussion in a pitch.

• “We have 5 founders”

This is probably too many cooks in the kitchen — while there can be rare exceptions, this is a huge red-flag and you should lead with an explanation about why it makes sense for your specific opportunity.

• “We’re going to be co-CEOs”

Just decide who’s ultimately running the thing — the company needs a tie-breaker to move fast — I can’t think of one great company that had co-CEOs.

    If you have other suggestions of things to avoid in pitches, tweet @ me!

    Thanks to Elad Gil and Avichal Garg for contributing to this list.

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