How To Avoid The Three Worst Blunders Entrepreneurs Make In Pitching Investors (2024)

Part of the series “Leading Entrepreneurial Success Today”

Every once in a while, you meet someone who not only knows a tremendous amount about a critical business issue or topic, but also spends hundreds of hours each year sharing as openly and generously as possible what she knows, to help others. Judy Robinett is that kind of giver and expert—an entrepreneurial funding adviser who is also a passionate connector and high-level networker dedicated to helping women elevate their startups and get the funding and business support they need to thrive.

Robinett, dubbed “the woman with the Platinum Rolodex,” has been a CEO, angel investor, and adviser to venture capital firms and startup accelerators. Her first book, How To Be a Power Connector, helps readers leverage their networks into profitable opportunity builders. Her latest book out this month is Crack the Funding Code: How Investors Think and What They Need to Hear to Fund Your Startup.

Crack the Funding Code demystifies the world of angel investing, venture capital and corporate funding and lays out a strategic pathway for entrepreneurs to secure funding in the most effective way.

Here’s what Robinett shares:

Kathy Caprino: Judy, what are the top three mistakes or challenges you see new entrepreneurs experience in getting the funding they need for their new ventures?

Judy Robinett: Most entrepreneurs find the world of corporate investment difficult to understand, much less navigate. Even though corporate funding sources like angels, VCs, and family offices, are actively looking for great businesses in which to invest, they still fund only 1-3% of startupsin any given year. Not because the businesses aren’t solid, but because most entrepreneurs simply don’t know where to look for funding, or how to present their businesses in the best way.

I believe three things separate entrepreneurs whose ideas and businesses get funded from those who don’t.

Information: The number of funding sources is growing—today it includes venture capital firms (VCs), micro or seed-stage VCs, angel investors, super angels, angel syndicates, family offices, equity crowdfunding, online angel/investor “matchmaking” sites, P2P online platforms, grants to startups from corporations as well as state and local governments, accelerators, incubators, and even direct-to-investor blockchain-based fundraising.

Different categories of investors are active at different stages of the funding cycle, and they have specific requirements and guidelines for the kinds of businesses they sponsor. Entrepreneurs need to understand the differences between investors while being able to deliver the universal basics of a solid business plan, a great pitch, and a deal that works for all parties.

Access:The number one way investors find deals is through referrals from people they know, like, and trust. Unless you already know who your potential investors are (or you know someone who knows them), you’re unlikely to get a chance to tell them about your business.

My first book was all about the power of building a robust network, and that skill is even more important when it comes to accessing investor dollars. Your personal connections are the most valuable currency you can have. You need to build a quality network of business connections, and then use them to reach the investors you need.

Expertise:Very few entrepreneurs start a business because they are great at fundraising—or even that great at the mechanics of running a company. Most people start a business because they have an idea for a great product or service. However, without a strong business to offer that product or service, the idea will go nowhere—and without outside funding, the business usually will be doomed to stay small. That’s why smart entrepreneurs look for expertise to help them (1) build the business, (2) run the business, and (3) market the business to the right sources of funding to match its current needs.

I believe that great entrepreneurs should plan their outside funding campaign while they are building their businesses, so they can be more strategic and, ultimately, more effective in finding the funding they will need to grow.

Caprino: What should entrepreneurs do specifically to overcome those challenges?

Robinett: First is to educate themselves as to the process of funding. The great news is that there are lots of online resources that will help them understand who has money and what investors are looking for. Sites like GUST, the Angel Capital Association, the Angel Investor Forum, National Venture Capital Association, and many more, offer free educational material for entrepreneurs.

Entrepreneurs should start looking for potential funding resources early and often. Pick the brains of other entrepreneurs in your area or industry; find out where they went for funding, how successful they were, and (if they’ll tell you) how much equity in the company they had to give up in order to get the money.

I also recommend that entrepreneurs go to local “pitch” competitions to see other businesses that are looking for money and how they present themselves to potential investors.

Second, they should start building their network of potential investors as soon as they start writing a business plan. Almost every large city in the U.S. has some kind of angel investment group: check out their websites, see if you know any of the investors, and see if they’ll have lunch with you. Get used to talking to people about your business and letting them know you are looking for funding. Realize that anyone in your network—family and friends, professional connections—is a potential investor, or may lead you to a potential investor.

Third, they need to prepare themselves and their businesses thoroughly before they fundraise. Investors are going to expect to see a workable business plan, clear financials, and a great pitch that outlines the goal of the business, the composition and size of its target market, and how and when it will reach its financial goals.

Remember, investors are looking for an excuse to say “no” to your proposal, so you need to make sure every element of your proposal is clear, clean, and compelling. Be willing to invest as much time and resources into fundraising as you do into any other vital aspect of your business.

Caprino: In a Forbes interview I conducted some years ago with the then head of American Express OPEN Susan Sobbotton the key differences between men and women in entrepreneurship, she observed several critical differences in how women and men approached their ventures, including that women:

• Were not as comfortable in their ability to scale and grow their business
• Felt a lack of comfort in owning the "numbers"
• Starting the business not as much for the purpose of "making great money" but more from doing work that matters to them
• Feeling less comfortable in their ability to make it a great success

What have you found regarding the differences between women and men and funding?

Robinett: Unfortunately, women still have a long way to go when it comes to getting their share of funding. Even though in 2017 and 2018 women were starting more than 1,800 businesses every day on average, those seeking equity funding were turned down most of the time. According to Pitchbook (a company that tracks capital investment), in 2018 only 9.8% of VC transactions in the U.S. went to companies with a female founder on its team. Luckily, angel investors are somewhat more likely to fund female-led companies: The American Angel Association reports that in 2017 21% of companies that received angel funding had a female CEO.

However, there are a few bright spots. More women are becoming angel investors, and there are more and more angel groups, syndicates, and other investment consortia (Golden Seeds, Springboard Enterprises, Portfolia, Pipeline Angels, and Plum Alley, to name a few) that are focused on funding women-led businesses.

And crowdfunding is a place where being a woman is actually a benefit—recent academic studies indicate that women-led fundraising campaigns on Kickstarter were more likely to be funded because women were perceived as more “trustworthy.”

That said, women who are looking for funding should network actively and see if they can get in front of one of the women-supportive angel groups. In many other cases, they should realize that it’s likely they will be the only female in the room, and they will need to make a strong case for themselves and the opportunity their business represents.

They will need to demonstrate familiarity with their numbers, as well as immense certainty that the business will be successful. And it might not hurt to throw in the fact that companies with women on their executive teams are more profitable.

Caprino: What are thefive most important steps entrepreneurs should take to secure important funding?

Robinett: Here are the most critical steps:

#1. Create a plan for fundraising

Do your research on potential investors in your industry and area. Network—build strong connections that will help you reach the funders you need.

#2: Have a clear business plan and financials (P&L, balance sheet, and cash flow statement)

Put together a great pitch and practice, practice, practice.

#3: When you get in front of investors, realize that every “yes” was usually preceded by a lot of “no’s”

Ask for feedback from every investor so you can get better every time.

#4. Evaluate investors as thoroughly as they are evaluating you

You’re going to be spending years with these people, so you’d better know, like, and trust them.

#5: Before signing any deal, check it thoroughly

Make sure you’re comfortable with what you are giving in exchange for the funding you will receive.

Caprino: What's the one thing they should NEVER do?

Robinett: Take on the wrong investor or the wrong deal because they are desperate for cash. That’s why it’s critical to plan your fundraising as carefully as you plan your business.

Caprino: What about the fears so many entrepreneurs have about moving out of corporate life into entrepreneurship? What do you tell them?

Robinett: Nowadays entrepreneurship is easier than ever: what starts out as a side business can grow into a billion-dollar company if you have a great idea and a great plan to back it up.

There are multiple ways to test your idea and to test the appetite for investment—for example, crowdfunding is becoming a larger and larger avenue for companies to raise capital. Preparation is everything. The key to success is to research your market, test your product or service, go slow, come up with a great plan, research investors, and be realistic if not pessimistic in terms of how long you’ll need to get your business up and running.

Caprino: Any other final thoughts and suggestions?

Robinett: There’s nothing more exciting than landing your first customer or closing your first investor. But as any successful entrepreneur can tell you, that’s when the real work begins: fulfilling orders, expanding the business, meeting sales benchmarks, adding people to your team, and so on. The work ends only when you either close the business or (hopefully) sell it for a large profit so you can do it all again—and use the lessons you learned to be even more successful the next time.

For more information, visit http://www.judyrobinett.com.

For hands-on coaching and consulting help from Kathy Caprino to build greater leadership and career success, visit KathyCaprino.com and tune into her podcast Finding Brave.