How to drive investors away fast Thursday, June 21, 2007
Just like telling your new date that you were late because you had to go to the STD clinic, there are somethings entrepreneurs say that turn off investors.
Sean Wise has a good article here, highlighting five such phrases and why they throw up "red flags".
1. We have no competition
2. Our financial projections are (and/or valuation is) conservative
3. We know more about (software / search / media) than (Microsoft / Google / Fox )
4. This will be our last round of funding
5. If we only get 1% of the market, then we will all be rich
My favourite passage from the piece is
This is what bugs uber-investor and investment media guru, Kevin O'Leary:
"The thing that pisses me off most about pitches is when the entrepreneur values his pre-revenue startup at $10M. I mean, I've seen this movie before and I know how the movie is going to end. They get my money, and I get worthless stock."Hear this almost everyday.
- At 1:51 PM, Hawkeye said...
Once again the generalisation you make is true. However as always there are exceptions which need to be noted. When Amazon.com started up, it really did not have any true competitors. Nor for that matter did microsoft. True, both very quickly did pick some competitors up but they both still maintain market leader positions in their industries achieved by being first and consistently striving to move forward, not always as smartly as they might have hoped, but that does not stop them continuing to develop their products. I bet you would have been a happy wealthy man today had you been in on the gorund floor of either of these startups? Google also comes to mind, though it did have competitors in Yahoo and Microsoft, so perhaps not such a good example.
- At 2:28 PM, Paul Lomax said...
The funny thing for me is that I've seen those 5 comments made about internal business plans and proposals at large corporations... and they're just as good as red flags in those situations!