What Not To Do When Pitching to Investors (Part 2)

Last week, I talked about some things that are deal-breakers when you’re pitching. With any pitch, of course, you need a viable idea and evidence to back it up, but try to remember that potential investors are listening to your pitch on a lot of different levels; if something feels “off” to them, it can turn them off. As we often say on Dragon’s Den, we invest in people, not ideas. So today I’d like to concentrate on some of the between-the-lines “people” stuff that can really tip the balance negatively even when on the surface, the pitch sounds good.

Don’t over-promise

Of course you’re optimistic about your business proposition. Optimism is key. I don’t know many depressives who’ve made it big as entrepreneurs. But there’s a big difference between being wildly enthusiastic about your own prospects--sometimes even to the point of being delusional--and being cautiously optimistic. When you’re asking an investor to hand over money, cautious optimism is the way to go.

In a business relationship, just as with any other kind, promising something that you can’t possibly deliver only leads to trouble. So if you base your projections on inflated expectations, and six months down the road you’ve only done half the business you said you were going to do—well, good luck with that. Hell hath no fury like an impatient investor, in my experience. However, if your projections have been realistic and your numbers were backed by careful research, you have a much better chance of keeping investors happy.

Don’t whine, plead or rail about all the money you’ve invested

This one may seem self-evident, but you’d be surprised how many people kick off a pitch railing about all the money they’ve spent to date. Sometimes, there’s even a sad sack routine about how this is the last stop on the line and if they don’t get a cash infusion soon, they’ll be ruined.

On Dragon’s Den not long ago, a couple came looking for investors to move forward their adhesive 3D wall art product. The pair had clearly put their heart and soul into their venture, but they had weathered some serious setbacks. In the process, they’d lost several hundred thousand dollars and their home, and the stress was taking a toll on their relationship. Nevertheless, they were determined to keep going.

Whether I thought it was a wise decision for them to keep going or not, I had a great deal of compassion for these people. I know first-hand what it is like to see something you believe in passionately (and have sacrificed greatly to support) heading further and further down a dark road. But I also know that while it’s fine and usually necessary to tell an investor how much money you’ve sunk into a project, going on about your troubles is a terrible idea. You might get sympathy, but you won’t get financial backing that way. Investors are business people, not philanthropists.

Stay tuned for the third and final post in this series next week. In the meantime, what’s your view? Do you have any pitching don’ts of your own—or any surefire techniques that never fail?

Tags: Challenges, Pitch, Startup

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Comment by Allaboutyouvideo Judy Whale on January 23, 2013 at 6:13pm: I agree, Arlene. :) If I were an investor, I would like to hear about the product or service, why it's good and how it could be profitable and spoken with confidence and an upbeat attitude. THEN I would like know how it came to be (hear about some of the obstacles that they've overcome or how they learned to be flexible). :) (Yes, like many of us, I've pretended to be sitting in one of those chairs!)

Hey! That might be a cool idea for the show one day! Invite a group of budding entrepreneurs onto the show to sit with you and help evaluate the investments. Perhaps giving each entrepreneur a bit to invest wisely and if they choose a successful business, they could own a small percentage or win a specified sum, but if they didn't choose wisely, they would loose that bit of investment money and just go away empty handed. Could have a follow up show to see how the investments worked out. Yah, sorry, my brain's on overload again...but was just a thought! ;P

Comment by Giuseppe Rocco Commisso on January 24, 2013 at 12:39am: Hey Arlene, What you mentioned about projections being over calculated sounds like a future in the pits. Theres only one thing that would keep your investors happy and thats profits. Highly doubt they care about whats going on in your personal life (unless Arlene's your partner :o) I could never understand how people break down in the middle of a pitch NEVER SHOW WEAKNESS. How do you feel about under estimating future projections purposely to look like a champ later on in the season ?

Comment by Dr. Henry J. Svec on January 26, 2013 at 11:42am: When investing in a business I'm amazed how you and other investors can find the passion needed to invest in very diverse types of companies. I can only invest in areas that I am extremely passionate about. How do you folks do it? How do you keep track of all of those companies you have a stake in with regard to your emotional or passion for that type of endevour?

Comment by Jane Blaufus on March 21, 2013 at 12:47pm: Make sure you have your story down pat as well before pitching to investors. I am always amazed when I watch Dragon's Den and I see people on the show who cannot articulate what their business is about nor do they know their numbers.

Comment by Tish Heath on April 6, 2013 at 2:18pm: It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt.-- Mark Twain

I try to be concise & a little funny then wait. Let the other person process the information, extra words lead to no.