The Red Flags That Can Kill An Investor Deal – And How to White Flag Them
When I set out to write Sticking to my Story: The Alchemy Of Storytelling For Startups, my goal was to help founders by giving them the surefire recipe for what “to do” in their pitch deck. But as I wrote and reviewed my endless notes from nearly 20 years of writing pitch decks and talking to investors – I realized that there was an important thing to talk about – and these were some “DO NOT DO’s” that I had learned from the inner sanctum of investor meetings – or more importantly – what investors talked about after the Founder had left the room.
Here are some red flags that can truly kill your deal before it’s even on the table – and how to avoid them.
Red Flag: Seeming distracted, not really listening
Nobody likes to feel they are competing for your attention, yet in today’s screen-infested world, we far too easily succumb to the addiction of glancing at our screens. I’m guilty as charged too, and have taken to turning over my phone or keeping it in my purse or in another room when I’m in important meetings. I would like to hope this is the case for founders in a VC meeting – but apparently, it’s not.
I once had a VC tell me they saw so many good companies that they always looked for reasons to say “no” rather than “yes”. His biggest pet peeve was if a Founder glanced at their phone during a meeting. This was an automatic red flag for them, and a strikeout. Sounds a bit extreme? Maybe – but they see how you behave during the meeting as indicative of how you will behave in your business. Instead:
White Flag: Be FULLY Present
Do not touch or look at your phone while you’re meeting with them.
And a real pro-tip – actively be taking notes. Otherwise, it’s a glaring sign that you are not being attentive. The CEO should at least appear to be taking notes, even if the CTO or CMO is also there, scribbling furiously. Pen and paper or notebook look more like note taking than taking notes on your laptop – or worse – your phone! For all they know, you are checking email and not listening to them. As one VC partner said, “Until you visibly accept our feedback – i.e. take notes and nod – we don’t think you got it. We need that visual cue.” This shows them that not only are you actively listening, you are nodding, writing, will review later, and have a flexible, coachable mindset, and they might be able to teach you something and contribute more than just money.
Red Flag: Making Excuses when something goes wrong
One of the startups that presented in a pitch session I was at had a sound technology solution that worked mainly in stadiums and broadcasts, that they were hoping to get funding for. Suddenly, when they got to the demo, nobody could hear the “state of the art” sound from the clip they showed of a stadium they worked with – the sound was barely discernible, playing from their laptop, even at full volume. Needless to say, they were mortified and kept apologizing for the poor sound.
I cringed. First of all, it didn’t really sound that bad, it was just low, but after they called attention to it, the investors thought it did sound awful. Second of all, if you have a sound element – you had better be truly prepared to showcase it at its best, otherwise you lose credibility, fast.
White Flag – No excuses – and be prepared
It’s like the old “mustard stain on the shirt.” You spilled something on your shirt, you’re certain that the entire world is staring at your stain, horrified, so you apologize for the stain. And now – it’s all they can see, when they might not even have noticed it before.
So carry a “spare shirt”. Make sure you come with the most advanced portable speakers around! Ditto for a visual-oriented product, high-resolution screen and stellar graphics. Try to set yourself up for success because mistakes happen. And if something doesn’t work – screen resolution, sound, etc. – don’t make excuses for it. They might not have noticed until you drew attention to it. Just keep going. How you react to unexpected turbulence speaks volumes to how you will act when the REAL bumps hit later down the line.
Red Flag – Arguing with the investors
You’re in an investor meeting, pouring out your blood, sweat and tears, talking about your product and how it will change the face of your industry, and the world. And one of the investors says something argumentative, even downright insulting. You breathe in, stunned, your face turns red, and you go in for the comeback of a lifetime – you’ll show them who’s master of your domain!
Stop! Is that really what you want to do? NO!
One of the biggest faux pas I see Founders make is arguing a point with an investor. You might disagree with them, or you might even have proof that they are wrong. Arguing will get you nowhere and will send them running for the hills because if you argue in your first meeting, how will board meetings look?
White Flag – Take it in stride, keep your eye on the prize
As hard as it might be, just sit there, accept the feedback, and try not to take it as a personal affront. They actually might be purposely trying to poke the bear to see how you respond. They will be sitting in many challenging meetings with you for years to come; they need to see how you respond to adversity and criticism. If you can take it from them, then maybe you can take it from customers, partners and other stakeholders.
You can respond, “Great point, I’d love to have some time to investigate and get back to you with some back up information.” This shows you are measured and thoughtful, and invites continuing the conversation. You can follow up later with a note thanking them for their feedback and adding some stats that politely back up your point, or just leave it alone. Better to be smart and funded, than right and penniless.
Written by Donna Griffit.
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