Five Things to Never Say to Investors

Every entrepreneur believes that his or her idea is amazing. If you don’t, why even bother starting a company? However, instead of simply stating that your idea is amazing, you should prove to investors that it is. You can do so with a well thought out business plan, a compelling product, and raving customer reviews, just to name a few.

It is a mistake to say that all you need is money to build your product because you also need money for monetizing and scaling it. Building a product is just the first step. When you make this statement, it implies that you misunderstand the very reason why your investors will invest in you. Their objective is to make money, and certainly not to just help you build your product.

Too many entrepreneurs think that if their product is disruptive, there is no competition. However, if this is actually the case, this is not good news. No competition means there is no demand, and if there is no demand, there is no future for your company. Just because you have come up with a better way to solve a problem does not mean that there are no other solutions on the market. It is just that they may be more costly or not as effective. Instead of saying “We have no competition”, you should say “We have competition, but here is why we are better.”

Who does not want to become the next Facebook or Google? Unfortunately, statistically, this is not possible. Most companies fail, only some companies make an exit, and very few of them reach a billion dollar valuation. For you to claim at the early stages that you are going to be a billion-dollar business, is simply… ludicrous. Instead of dreaming about a billion dollar valuation, produce results proving that you can achieve it.

Now, this is the only statement you can actually make, but only if you are a startup in high demand. Most of the time you have no leverage and you are lucky if you get an investment. Therefore, it is wise not to create hype before you can justify it.

Thank you to Tamara Towbin for giving me an idea for this article.

About Victoria Yampolsky, CFA: Victoria Yampolsky, CFA, is the President of The Startup Station, a finance & strategy consultancy for early stage startups. She evaluates financial feasibility of business models and specializes in the financial modeling and valuation of pre-revenue companies. She has also created a finance curriculum for early stage founders and launched the educational arm of The Startup Station in 2015. Since then, more than 1,000 founders have attended online and in-person finance classes and learned the basics of financial modeling, valuation, and startup financing.

Previously, Victoria worked for the Deutsche Bank Research Department and performed IT consulting for CapGemini’s Financial Services Division. Victoria holds a Bachelor’s Degree, Cum Laude, in Computer Science, with minor in Mathematics, from Cornell University and an MBA, with honors, from Columbia Business School. Victoria is also on the Advisory Board of the CIS Department of Cornell University.