Five Misconceptions Of New Entrepreneurs
May 13, 2010
Here’s five quick misconceptions I see of new entrepeneurs who I have been running into at technology conferences, which I thought I’d share to hopefully help some of those folks out there avoid lengthy (and often fatal) issues with finding funding for their ventures.
- Investors fund business plans, all 100 pages. Ummm. There’s still a common misconception by entrepreneurs (no doubt, propagated through many a business-plan writing competition or class in business school) that venture capitalists fund business plans, and the better (and longer) the business plan the more like you’ll get funded. I have yet to meet an investor who decides to talk to an entrepreneur because he’s handed a 100 page business plan and full analytics. On the other hand, I have known hundreds of entrepreneurs who have been funded on a PowerPoint (and their experience).
- You gotta sell your company like it’s life insurance. You know the type — the person who just can’t take no for an answer, who hard sells you and pitches you nonstop, who seems to have learned their sales skills from life insurance and encyclopedia sales. Trying to get investors interested in your company is not a game of high pressure sales, it’s closer to getting that first date; it’s more about wooing and less about selling. This is a relationship you’re getting into, not a one-off hit-and-run sale.
- Looking for funding for company is like selling a used car, you just post it on Craiglist. It’s surprising the number of new entrepreneurs I see who seem to think looking for money for their startup is as simple as selling a used car — just post that you’re “looking for funding” on LinkedIn, a web marketplace, etc.–as if it were Craigslist–and an investor will call you up, check in hand. Unfortunately, that’s not the case. Lots of entrepreneurs have asked us if we’d put up a marketplace or bulletin board where they can post that they are looking for funding, but we’ve refused (we’ve even lost a few customers to our venture database), because that’s just not how venture deals get funded in the real world.
- No one else has had this idea, so we’ll rule the world! If you spend enough time wandering around technology conferences, you’ll discover that ideas are a dime a dozen. There’s most likely two or three other people with the same idea you have somewhere out there, maybe more (“The next FACEBOOK! REAL TIME! MOBILE GADGETS!”), and most likely at least one out there getting along the funding path. You discover that it’s–in most cases–execution, execution, execution (and prior connections) which investors care about, and which ultimately make a company successful.
- You have to sign my NDA first, before I tell you what I’m doing. It’s ultimately the badge of a new entrepreneur who won’t talk about what they are doing without an NDA, and who are literally paranoid that someone will steal their idea (see number 4 above). No investor signs and NDA, and if you idea is so easy to steal that if someone can just hear a high level overview of what your company is about, you’re in trouble–then, funding is the least of your worries.
