5 common mistakes in 80% of investor pitches

The article is written by Zishuang Cheng on Substack, republished on TheLowDown with the author’s permission. You may reach out to him at zishuang.cheng@gmail.com. 

Recently, I joined the Saison Capital Scout Program and have been involved in working with startups from an investor’s standpoint.

I would like to share some of the things I’ve noticed that may not be immediately obvious to someone sitting on the other side of the table

Takeaways On Common Mistakes

1. Communicating poorly with little context, excessive use of industry jargon, and rushing through the pitch
2. A lack of confidence in your proposed valuation and the quantum
3. Not understanding your audience
4. Failing to follow up
5. Not clearly articulating the problem

Exploring Further

1. Communicating poorly with little context, excessive use of industry jargon, and rushing through the pitch

One of the reasons a lot of startup pitches aren’t easy to understand is because startup founders know the space so well that they jump into the thick of things too quickly without giving the other party context on the space and technology, which would break the flow of the pitch as the investor will have to interrupt to ask questions

Assuming the other party is clued-in on your industry’s speak, be it jargon, especially use of acronyms can bring about confusion at worst and your pitch being interrupted for clarification at best

Rushing through the pitch makes it not only hard to follow, but makes you seem less of an authoritative figure, which at the end of the day, is what you want to be, the subject matter expert

What you should do

Rehearse your pitch, run it through with someone that isn’t on the team, and ideally, not in the industry that you’re working to disrupt either. Record and listen to yourself if necessary

Some common mistakes are:

1. Droning on like you don’t care
2. Speaking too fast like you’re trying to rush through the pitch
3. Not being concise and losing the audience’s attention

2. A lack of confidence in your proposed valuation and quantum

A lot of founders I speak to, (myself included in a previous life) will spend a lot of time obsessing over valuation and the quantum to raise, while this is important, as long as you’re within ‘market rate’, you don’t have to worry about investors being scared off.

What you should do

1. Calculate how much you need and give a healthy buffer (I would recommend 20% at bare minimum, there will be expenses that you have anticipated and things are always more expensive than you think in practise). This demonstrates your ability to plan and manage money. Show that you have a plan on how to spend the money to achieve your milestones.
2. Have a good understanding of what the comparables in the market are for your industry, geography and stage of funding. You want to be able to understand your worth in the market before you can confidently state your price and henceforth, negotiate.

3. Not understanding your audience

Investors, at the end of the day, are people, and most people have one or two interests that they are more naturally drawn to. On the flip side, there are industries / topics that certain investors just either won’t be interested in, or won’t understand. I think this might be why you don’t see a lot of dating apps or women’s beauty startups getting funded, most General Partners are at the age where they are married, and probably long before dating apps were mainstream (although I think this is slowly changing with GPs getting younger), and also most probably male.

During this time, I found myself perking up a lot more when it came to startups working on a space that I understood, and at the same time, a little less interested when it’s a space that I didn’t know much about. While this might be obvious, it’s nothing that I thought would be that much of a factor when I was pitching as a founder

What you should do

If you’re working on a product that isn’t something easily understood by most investors, it might be worth trying to put together an angel round through people in the industry, get traction, then go for institutional capital

4. Failing to follow up

What might come across as disinterest, could be the investor genuinely missing your message through a stack of messages, after all, the inbound message rate is asymmetric. Even when I was a founder, I’ve learnt that following up would increase my response rate, or getting to the next step in the funnel so to speak by 20% give or take

What you should do

Follow up as promised!

5. Failing to articulate the problem

In more than half the pitches that I’ve listened to, founders do not spend enough time articulating how painful the problem is. Unless it’s a problem that is either easily understood, or plain obvious, founders should take the time to help people understand the problem that they’re solving.

What you should do

Describe the problem succinctly and preferably with a use case, back it up with a big statistic, translate that into dollar terms.

Again, test this with multiple people to gauge if the person gets it immediately

Summary

1. Rehearse your pitch, run it through with someone that isn’t on the team, and ideally, not in the industry that you’re working to disrupt either. Record and listen to yourself if necessary. Don’t speak too fast, speak like you care and get to the point sooner rather than later!
2. Calculate how much you need and give a healthy buffer (I would recommend 20% at bare minimum, there will be expenses that you have anticipated and things are always more expensive than you think in practise). This demonstrates your ability to plan and manage money. Show that you have a plan on how to spend the money to achieve your milestones.
3. Have a good understanding of what the comparables in the market are for your industry, geography and stage of funding. You want to be able to understand your worth in the market before you can confidently state your price and henceforth, negotiate.
4. If you’re working on a product that isn’t something easily understood by most investors, it might be worth trying to put together an angel round through people in the industry, get traction, then go for institutional capital
5. Follow up!