- Today, we're gonna look at
what you should never say to investor,
things that will make them walk away.
Investment killing statements.
Yes, we're gonna dig
into those investment killing statements.
(upbeat music) This is Raw Startup.
We have a full panel of experienced investors,
investors who've done 100s of investments each,
and walked away from 1000s.
Be aware though, this is a tough panel of investors.
- I tend to walk away,
and if it doesn't work, then we can't invest.
- Maybe you should not be considering
investing in the startup in the first place.
- The single point of failure
is something I never wanna invest in.
- Damn! This could get interesting.
You might already have lost an investment
because of something that's in this video.
Well, at least stick around,
so it won't happen in the future.
With the panel, we did a big brainstorm.
Then we voted to find the worst walkaway statements.
So here we are,
the nine things you should never say to an investor.
Let's get going.
Number nine
"I'm a sole founder,
"and I don't need a strong team."
Most investors do prefer two or three co-founders,
but they'll also back a fantastic solo founder.
However, they will not back people
that think they don't need a team.
They will not back people
that think they can do everything for themselves.
Building a startup is a team spirit.
- No matter what they come to the table with.
"I have all this experience,"
That's great, but you still need
to have a strong team around you.
So I think that single point of failure
is something I never wanna invest in.
- Yes, you can be a brilliant founder,
but building business as a team sports, I think,
and the sooner we realize that, the better.
Some people are not capable of doing that.
Even the founders that decide to go solo
because going solo and not building a team,
or denying the necessity
to build a complimentary teams is different things.
- Number eight
"My founder and I just met a few months ago."
My co-founder at Vivino ties,
and I have built businesses for the past 20 years.
That is an incredible strength.
- I look for a team, and if the team just met,
that makes me a little bit nervous as well.
If they know each other for a while,
they've gone to school,
they've grown up together,
they've got this relationship,
maybe two or three of them,
and they each hold some sort of a unique power
in the startup,
one's technologist, one's a salesperson or what not,
I think that helps a lot.
So I look for teams that have known each other,
have a good background, can work together,
can support each other,
and you don't have a single point of failure.
- One thing that I love doing is backing a band
that's getting back together again.
That phrase to me is like such a powerful one.
You get situations where a bunch of people did something.
Once upon a time, they ended up scattering,
and going off and doing other things.
And then a few years later,
they decide just like all the best bank heist movies,
they decided they're gonna do one last job
and they get back together again.
And there's a beautiful chemistry with people like that.
They know what each other does.
They can finish off each other's sentences.
They trust each other implicitly.
And all of that is very powerful.
- Hence they get back together though.
So Abba, but that's one, right?
- No, I agree.
I just,
I have this incredible company of mine that went through
several pivots and the front and center of their fundraising
narrative.
They made like we've been best friends for 16 years and we'd
been through all of that together, and we stayed together.
And to me it was really powerful.
And I would definitely bet on the team that gets together,
given that complex history of.
- The fact that , you just met each other.
It could be five, you might get an investment,
but let's not make it a big part of your pitch.
It's not a strength.
Number seven.
This will be a quick flip.
We'll have sold the company within two years.
- What we're looking for is people
who want to build something
really large and really enduring.
And so when someone comes to you
and in that first half an hour
tells you that they're not going to do that.
And that really,
this is all about trying to find a quick exit and make
some quick cash.
It's just not that exciting.
It's not that we won't make money.
It's not that I don't believe you.
I mean,
sometimes I don't because it's actually quite hard to do
that kind of thing. But even if someone can,
and even if I really believe it's possible that you could
build a business that could be sold in a couple of years
time,
it's just not going to make the venture capital business
model work.
And if it doesn't work, then,
then we can invest.
- You should think about building a market.
You should think about making as much revenue as possible
and giving yourself as many options as possible.
Because your idea of selling something a year
may not be true.
And then you're stuck with something else which could be,
oh, I've got to sit down and build a business.
So it's how do you build a sustainable business?
Long-term to give yourself as many options as possible.
So I think anybody that wants to sell fast is completely
naive about how the world works.
- When you think about MNA activities among startups and
larger enterprise it dies down.
Because the multiple revenue multiples that are
applied to startups that are raising capital recently,
like not a single company in that, you know,
functioning mind will acquire that asset
because it stuffs
like, like a Turkey at the moment.
So I do think that expecting that the company will be sold
to anyone. If you raise money as like skyrocketing,
multiple is a pretty naive.
- If you build a healthy business, you have options.
And then you can show, you may be able to flip it,
or we may do 10 other things with it.
Also kudos to Olga for doing the Thanksgiving reference.
That was.
- Perfect.
- It's actually really hard and really risky to build
something for a quick sale. What if you build it for that?
And it doesn't happen now you've built something that nobody
wants.
You should always try and build an amazing sustainable
business. And the rest will come.
Number six,
we're closing around next week and have a lot of interest
from other investors.
Do we really want to create a pressure cooker here?
Let's see what the investors shape.
- Yeah. I mean good for you.
I mean, now it's harder because the time lines timeframe,
so fundraising are getting very compressed,
but for me,
fundraising is a marathon, not a,
not a sprint.
In general artificially create a sense of
urgency is a major turnoff for me,
especially if it happens before the first meeting,
I hate feeling, you know,
being part of a rapid transaction and the way I think about
it, I'd love to be considered for lifelong relationships,
not for a one night stand.
- I'm personally have a high conviction,
but low-frequency investor. I would,
I would much rather miss something,
but then take the time to get to know someone and a business
and a market really, really well.
I think it will make me a much better investor and partner
for you in the long run as a founder,
because it means I really know what I'm doing and I know
what I'm getting into. And people talk about doing deals,
they talk about trades they talk about, you know,
that transactions. And, and as I would have said,
those words just don't, you know, they,
they just don't appeal to me.
When someone comes along and says, look, you've got,
you know, X days to decide, you know, do you do it or not?
I tend to walk away.
- I guess not they don't like it much.
This is also very much about timing,
having some sense of urgency when you're closing the
investment is fine,
but it shouldn't be a part of the initial conversation.
Number five
you need to sign an NDA.
Let's keep this simple investors, almost never sign NDAs.
And they have really good reasons not to it's this idea,
really that genius that everybody needs to sign NDA.
- So I have written an entire blog post,
which is actually the most read blog post on my medium about
why we don't sign NDAs.
So, you know,
this is a sort of pet peeve of mine.
It just doesn't work having, you know,
what you think is a clever idea. First of all,
there will be a whole bunch of other people who have the
same idea. I sort of guarantee it,
especially in our market and the technology industry right
now,
where so many of the smartest people on the planet today are
involved in what we're doing and what this,
what this market's doing.
And secondly,
really the winners are almost always defined by the people
who go the distance and he put the work in and who build the
right team and do all of those things.
So, so I think the idea that, you know,
this idea that you have an idea at an early stage,
that is the difference between success or failure is,
is a pretty naive starting point.
It's a waste of time.
You know, I think it just gets in the way of,
of you raising a great round for your company.
- To me, it goes to couple points.
First is trust.
I think that the moment you encourage an investor sign an
NDA from the get go that indicates a lack of trust.
And that might be problematic in terms of building the
working relationships and with the team element.
I think if you really think that somebody can easily steal
your idea and replicate that
that probably may be the team is not that valuable.
Maybe you are not the best people in the world to build this
kind of application. And if it's true,
so maybe I should not be considering investing in the
startup in the first place.
Number four
- the product can sell itself.
We don't need the sales team.
- You know,
if you have a super product and you get adoption from the
grounds up, I mean, that's great, right?
PLG is, is where it's at.
You got to have that, you got to build that,
but it doesn't stop there. And,
and there's no way that you can get the big numbers and the
big deals specifically,
if it's like an enterprise application,
if you don't have a sales team in place,
the thing will not grow inside those big enterprises.
It just won't.
And I recently had this amazing company and I was talking to
the CEO and they've been sort of positive on cash since
2017.
And I said to him, I said, okay, cool.
What, so what's should I do now?
And he told me, and I said, really?
I said, that's, that's amazing. I said,
if you had started it with a sales team back in 2017,
you'd probably have about a half a billion dollars
right now.
And he goes, that's crazy how, and I go, well,
this is how I said,
you have about 5,000 customers
out of like, you know,
the top companies in the world and your biggest contracts,
like $80,000.
I said,
can you imagine how much gold is sitting there for your
sales team to go and talk to these companies and find those
advocates inside the,
those companies to grow your install base?
Because PLG just doesn't have advocates that grow
big contracts.
They just don't and he'll get there,
but it's going to take 10 years.
- I think the,
the idea that a company doesn't need a sales team
is one of the symptoms of the kind of very engineering
centric world that we currently live in, in, in technology.
And I say that as a computer scientist and former software
engineer, right?
So I love the fact that that geeks like me are important
finally. But on the flip side,
I think there's such a mythos around how it's all about,
you know, the technology and the product and,
and everything else. You know,
sales and marketing in particular is,
is dumb and stupid and a waste of time and,
and wishy-washy and all the rest of it. And, and you know,
if as a founder, you think this,
what I would do is just say, look,
think about the company that you really respect because
there presumably are some,
and you will find that they will have sales teams.
They may not talk about it very much.
They may talk more about their tech.
They may put their engineers on the pedestal,
then not so much the sales people, but trust me,
they all have sales people too.
And those people are critical in that success.
- Yes, you will need a sales team.
Even if you have product led growth to maximize that
potential, you will need a sales team.
Number three
we just need your money and we're ready to go.
This is about resourcefulness. I don't care.
Just build something.
You need a plan B you can never wait for a specific
investor.
Investors love founders that are resourceful.
The opposite is a total turn off.
- Yeah. I think being an entrepreneur is all about being
resourceful.
And if,
you are basically saying,
I cannot do anything without your money.
You're not being very resourceful.
Of course you can do it faster. You can do it easier.
You can do it better with my money.
I get that. But if you were saying, oh,
it's just impossible for me to get out of, you know,
get out of bed without, you know,
you writing me a check then.
I mean, that really questions to me, how,
how desperate you are to do this thing.
That's a,
that's a pretty big turn off immediately.
if someone said that in there,
in that early conversation with me.
- Two guys from Switzerland
contacted me via LinkedIn and asked me for
advice.
And I said, yeah, why not?
I mean, come on.
They seemed okay. They're mathematicians.
You know, I'll spend 10 minutes with them.
I spent an hour with them.
I said, where are you?
And they go Mexico. I go,
why are you in Mexico well we can't fly in the U S you
know, cause they got that band.
But if we come to Mexico,
we think we can fly in to the United States
and we can get in that way.
And they did.
And then they went to San Francisco and then they sat in
San Francisco for three weeks
and, and they raised 800 K.
And I know this because I knew who they raised it from all
all angels, all like, you know, like three or four
or five or six people,
including myself after I heard about this.
And I'm like, how did you guys do this?
And they go,
well, we would just go to like certain We Works.
We knew where people would be
and we started talking to people and then those people are
introduced to these people.
And so there were a couple of CEOs of companies that are
kind of big, big startups.
You know, they're like, they're not unicorn yet,
but they're really close to unicorn.
Maybe one of them is a unicorn and their CEO invested.
And I know this guy, so I called him.
I said, why do you invest?
And they go because they're crazy because they came in here
with nothing and they,
and they snuck into the United States in there and they're,
and they're, they're,
they're showing us their tech and their tech looks great.
And their idea's great. But look at them.
I mean, wouldn't you invest in somebody like this.
That's amazing, right?
The resourcefulness that these young kids probably in the
early twenties showed mathematicians to just to get it
going.
It's amazing.
- The point is,
there's always something you can do and you may not be
technical. So you may not have to build the product,
but you can pull together some kind of prototype or you can
put together a video or you can do a survey,
we'd go talk to customers or whatever it might be.
And I think it's, again, it goes back to resourcefulness,
the best founders do something out of what they have,
whatever that is.
And I think that it's not about the traction you've actually
achieved.
It's about the fact that you decided you were going to do
something, whatever that was.
And the fact that you're showing this process of thinking
about that and measuring the feedback.
And that's you being used by you to iterate on how you build
your product and your company.
If you're not willing to do those things,
I would sort of question whether you really have the energy
to be a, to be a founder of a successful company.
- We are getting to the top.
Number two
we have no competition.
When I found that there is no competition.
It's usually one of two things
and none of them are very good.
First, no competition very often means no market.
If nobody else finds this market attractive,
maybe there is no market. It could also be,
there is competition and the Foundry just doesn't get it
either way. It's not good.
Any market will either have competition or get competition.
Otherwise it's pretty unlikely. It's a great market.
- I think when someone says that they have no competition,
I'm always slightly nervous because on the one hand you want
founders to be fearless and ambitious,
but you also want them to have just a slight edge of
paranoia, right?
I mean the paranoid survive and all of that.
And if someone says I have no competition,
it always makes me think,
are you really thinking in a paranoid enough way about it?
You know, if there really isn't competition now
there will be in the future, right?
If what you're doing is valuable and interesting.
So it will be,
it's always good to find someone who's thinking around
corners and you know,
a very flippant there's no competition makes me worry that
you're not that kind of person.
- Yes. This is it.
We're at the top.
Number one
anything that isn't true.
Yes.
We will pitch hard and we will exaggerate about the future,
but we can never say something that isn't true.
It will be found and the trust will be lost
and you can
never lose your trust with your investors.
- I think I want founders to believe that what they're
creating is unique, solves a compelling age, old problem.
You know, it might not have, like I said, have a name to it,
but they know this is going to be big and they have these
visions of where it could go. That's all good.
But when you go to the market and you tell somebody, yeah,
we do that now. And you know, they don't do that now.
You know, I, I can't go into it.
Still figure out which company I'm talking about.
And then all of a sudden you're like.
- Is it about blood testing?.
- No, no, but I use that example, but I mean,
that's obviously so well known because of books and
documentaries, but I use that example.
I go,
it feels like this because we're talking to customers about
something that simply doesn't exist and they're making
decisions based upon those statements that this currently
exist when it simply doesn't. So it, it, it was just sad.
And I was so shocked. Yeah.
But it's going to do this in the future and I'm like, fine.
Let's say that. Let's not say it.
Does it today.
- I think it's all good said earlier
that the trust is really
important between a company and the investors.
And I think that's what this is all about. Right?
So of course, Silicon valley and the technology industry,
you know,
involves to some extent setting slightly ahead of where you
really are. And, and, you know, we call that ambition,
right. And we call it aspiration.
And that's a good thing.
But I think we all know when that,
when that goes beyond an acceptable level and become
something, which if it were exposed, you know, would,
you know,
undermine the confidence the other person has in you.
And I really think in a while, it's one of those things,
it's a bit like, whatever it was that someone said about,
about pornography. Right.
I can't exactly define it, but when I see it, I know it.
And it's, it's, it's, it's one of those things.
I think that people do know when they've gone too far.
And what you're doing,
if you go too far is you're undermining trust between you
and your investor.
And that's a really fragile,
but really important thing.
Because today you might think it's worth sacrificing that
trust in order to get their dollar.
But later there'll be some of the situation when they won't
trust you anymore because of what happened.
And that will come and bite you. So, you know, honestly,
I really think it's important that people take that really
seriously.
- What's Suranga just said is incredibly important.
Don't lose the trust. It's really hard to win it again.
And you will need your investors in your corner later.
So don't lose the trust.
Finally, I want to hear what you have to say.
Put it in the comments.
What have you said?
What have you heard that made investors run away?
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