Looking to get a new biz funded? Better not say these things—or you'll sink your chances before you're even gotten off the ground, says entrepreneur Seth Talbott.
Unfortunately, there are many different areas where you can fail with a startup—and raising money from investors is no exception.
Having founded numerous companies, advised dozens more, and put together more pitch decks together than I can count, I learned the hard way which pitching mistakes are fatal and which ones are survivable.
This is why having veteran entrepreneurs in your startup team is an attractive factor for investors; experience is often life’s best teacher. But if you don’t have that knowledge at your fingertips, instead be a student of other startups’ failures. Make sure that your pitch doesn’t reflect inexperience or naiveté—not just because investors won’t touch your startup, but because your survival depends on it.
Over my time as an entrepreneur, I’ve identified these as the four most lethal phrases to use when trying to raise money:
“We have no competition.”
Why it’s a pitch killer: It shows that you either don’t understand your customers or have done a terrible job analyzing the competitive landscape—and often it means both.
With any business, you are either competing against ingrained behavior or against a rival company, and you need to know the balance of that situation better than anyone.
Just because you think that you are a “first mover” doesn’t mean that you get a free pass in studying the competitive landscape. In fact, I would argue that you have even more work to do.
As a general rule, assume that any idea you’ve heard of has been done before. If there isn’t already a market dominator, there’s probably a really good reason for that.
So don’t discredit yourself by presenting your idea to investors assuming that you’re the first one to think of it and assuming that being a “first mover” will give you a huge advantage. Proceed with caution and skepticism about the uniqueness of your solution. Study, research and dig until you find prior failures and have a deep understanding of why they didn’t work.
“No one can copy us.”
Why it’s a pitch killer: It makes you look ignorant and it also shows arrogance about your development prowess, which is a red flag to investors.
If you are a small startup, you are likely working the kind of product or technology that would take GE, Amazon, Microsoft or HP a long weekend to copy.
Additionally, in the case of software companies, patents are often not useful because startups are rarely creating new technology as much as applying existing technology in new ways. Plus, enforcing and defending patents is expensive and a massive distraction.
“We will be profitable in one year.”
Why it’s a pitch killer: Investors don’t expect you to turn a profit quickly, and, in fact, will become highly suspicious of your financial predictions if you suggest a profitability roadmap that defies industry norms.
Also, while financial projections never end up being perfectly accurate, they do speak to your ability to estimate labor costs and whether the business will scale efficiently.
So don’t make the rookie mistake of giving wildly unrealistic financial predictions.
“We are cheaper.”
Why it’s a pitch killer: A lower price point is rarely enough to unseat an entrenched leader or differentiate yourself from the competition—which is why no one with a decent amount of entrepreneurial tread on their tires starts companies from that approach.
Undercutting competitors with efficiency improvements and brilliant execution can be one of a few competitive advantages. However, the “we’re going to be cheaper” approach almost always fails because new entrepreneurs typically don’t have appropriate expectations for the actual cost of doing business, the costs of labor, or the length of the sales cycle.
And think of it from an investor’s perspective: How sexy is it to be investing in a business that is trying to be cheaper instead of premium?
So now you know the worst of what to avoid in your pitch. But the point isn’t just to eliminate these phrases—rather to also realize why they are a problem and what blind spots they reflect. My point isn’t that a few words will ruin your startup, but that a few bad decisions based out of ignorance will.
Seth Talbott has founded numerous companies, including Promedev (which provides lab services for medical providers), AtomOrbit (which helps businesses create mobile workspaces with access to legacy data) and Preferling (which helps users find restaurants based on preferences).
Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. YEC recently launched StartupCollective, a free virtual mentorship program.
The looting and destruction of businesses in Ferguson could have long-term effects.
A grand jury decision not to indict police officer Darren Wilson for the shooting of unarmed black teen Michael Brown has stoked anger in Ferguson, Mo., where peaceful protests have given way to looting and violence, virtually shutting down the city last night. “People don’t want to come into the area,” Jason Bryant, a local pastor, told TIME.
The events echo those in August, when the shooting first caused long-standing tensions to erupt into violence, theft — and shuttered storefronts. TIME reported last night that local retailers have seen sales slow by as much as 80%.
While the loss of local business may seem trivial next to the potential for additional violence — not to mention the civil rights and other legal issues at stake — there is a danger that rioting could disrupt the lives and livelihoods of Ferguson residents for years to come.
In the ten years after the 1992 Los Angeles riots, for example, the city lost nearly $4 billion in taxable sales, according to research conducted by Victor Matheson of College of the Holy Cross and Robert Baade of Lake Forest College.
“Social unrest can have a lasting negative impact on a local economy in a way that’s much more persistent than even a natural disaster,” says Matheson. “Though Hurricane Andrew caused more damage upfront, businesses were able to bounce back as soon as cleanup began. We didn’t see that in Los Angeles.”
Matheson and Baade found that the steps toward recovery are relatively clear after natural disasters: Communities tend to join together to build shelters, clean up, and storm-proof structures against future events. After rioting, by contrast, it’s much harder rebuild confidence and community trust among frightened business owners, or to convince new employers to move in. “It’s not as simple to just stamp out violence and anger,” Matheson says. And reluctance to rebuild is dangerous because it is self-perpetuating, he adds.
Concerns about lasting damage to business-owner confidence similarly followed riots in London in 2011 (also triggered by a police shooting), and economic aftershocks are still felt today, despite the commitment of more than $116 million in riot-recovery funding.
While there are no easy fixes that will keep Ferguson from suffering a similar fate, quelling anger is a first step. Various experts and commentators have suggested policy changes that could help rebuild trust in the police department, including a consent decree like the one that eventually helped the LAPD improve relations with residents of L.A.
No matter what path Ferguson takes, says Matheson, the sooner the violence ends, the faster the local economy can begin to heal.
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The new charge to disrupt lending
Judging by the numbers, Max Levchin’s life has had a quantum-leap quality most people would envy. His first jump came in 2002, shortly after he sold off his ownership stake in PayPal to eBay for an estimated $34 million. He was 27 years old, flush with cash and adrift in an ocean of downtime.
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Small-batch producers want to take on the beer establishment
It’s Apple-pressing season in Michigan, and Greg Hall’s cidery in Fennville is filled with an earthy smell somewhere between an orchard and a wet bag of apples. Apples delivered by farmers across the state are being chopped, mushed and pressed into juice by half a dozen bearded men in plaid. …
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FireChat lets users communicate even when they can't get online or send text messages
Like pitchforks and placards before them, smartphones should be a powerful protest tool. But when cell towers get overloaded with traffic or governments decide to restrict Internet access, they’re as good as useless. Both have happened in the weeks since Sept. 27, when protests broke out in Hong Kong over Beijing’s decision to vet candidates for upcoming elections. …
A little bit of flattery and a lot of research can get you everywhere, says entrepreneur Travis Steffen.
Five years ago I was living in a cramped three-bedroom apartment in East L.A., trying to build two startups simultaneously with no clue what I was doing and no seed capital. I had very little income, no connections and, frankly, no friends. Nevertheless, I was determined to find a way to become successful.
I had recently attended an entrepreneurship conference and bought a DVD profiling young millionaires. One of the lessons from that DVD was to find a mentor—that is, a person who currently is where you want to be, who can take you under his or her wing and show you the ropes.
I hadn’t really made an effort to network with other entrepreneurs up until that point, so I couldn’t just call one up and ask for an intro. So, I carefully crafted a series of emails and follow-ups to all of the young millionaires profiled in the DVD I was watching!
Not only did I get responses, but I impressed one of them enough to agree to mentor me. This individual guided me when I needed it and eventually granted me access to her incredible network. I have since started, scaled and sold five companies.
The key to my success was simple. I didn’t want to blend into the crowd of others like me who I was certain were going after the very same entrepreneurs, so I set 8 simple rules for myself, as follows:
1. Do your research.
Before you seek out a mentor, know which industry you want to learn about, and in what way. Then, come up with a shortlist of people you’d like to target—and do your research on each. See if you can find their bios online; look for articles written on them; and check out their LinkedIn profiles.
When you do reach out, make sure your research is apparent. This attention to detail will show your prospective mentor that you’re not just blanket emailing a ton of people at once—that you actually want to learn from him or her specifically.
2. Don’t be desperate.
Many people seeking a mentor will resort to begging. They’ll talk about how they don’t know what they’re doing, how their company is failing, or whatever other negatives they think will demonstrate their need for a mentor.
However, just as a bank won’t loan to somebody who’s broke as they don’t want to risk not being paid back, successful people won’t mentor somebody they feel they can’t make an instant impact on as they fear wasting their time.
3. Show that you’re a self-starter.
You need to remember that the best mentors out there will often be the toughest to get.
To give yourself the best chance of success, demonstrate that you’re not starting from complete scratch, that you’ve made it pretty far on your own already.
If you’re an entrepreneur, for example, you’ve might explain that you’ve already got a business plan or spent a significant amount of time getting to know the industry. If you’re a career changer, you might show that you’ve taken some classes on the topic. If you’re looking to climb in the field in which you currently work, you might describe what you’ve done so far.
4. Demonstrate self-confidence.
Successful people were not always successful, but most of them were confident—even early on in their careers or entrepreneurship—in their ability to learn and become successful.
In your communications with your potential mentor, your ability and passion to make things happen needs to be apparent not just in what you say and do, but how you say and do it.
5. Establish specific, low-pressure terms.
Asking a successful entrepreneur, “Will you mentor me?” is akin to a man asking a woman he’s never met to marry him. He’s much more likely to be successful if he instead has a nice conversation and asks if he can call her sometime.
Approach a prospective mentor in the same way.
Don’t flat-out ask them to be your mentor. Instead, let them know that you really respect them and have learned a lot from what they’ve done, and then start with one specific question that shows you’re actively working on building your own empire. Get your first positive response, and then go from there—slowly.
6. Don’t create work for them.
When starting to work with somebody you want to mentor you, make it known that you’re aware how busy they are and how valuable their time is. Then propose something as simple as a 15-minute call once per month when their schedule permits.
7. Showcase your implementation.
There’s nothing more encouraging—and more flattering—to a successful businessperson than someone showing them how much they’ve learned from them, how they’ve implemented it, and the conclusions and next questions they’ve come to as a result.
After you ask your first question or two, don’t even think about asking anything else until you’ve implemented the advice they’ve given you and can show it.
8. Show your gratitude.
By and large, if you’re asking a successful person to give you their valuable time, you need to acknowledge that you understand that they are making sacrifice on your behalf.
While you likely don’t have much to offer them at this point, you can remember to thank your mentor each time you talk. But also show your appreciation in a unique way now and again, perhaps with a gift around the holidays or when they help you with a particularly challenging problem. I prefer something like Edible Arrangements as it shows how thankful you are without sending an inappropriate message.
Travis Steffen is currently the founder of UP (upshare.co) and one of the founders and VCs sharing their insight at MentorMojo, an entrepreneurial e-learning platform. Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs.
Q: I work for a small firm of about 20 people. The problem is that the boss’s daughter also works there and is a trial for everyone. She is 25, not particularly bright, and very arrogant. She acts and speaks like it is her firm and has alienated just about everyone. No one will dare say anything to the boss, not even during reviews. What should I do?– Name Withheld
A: You have two options: Find a non-confrontational way to make your boss aware of the situation and see if he or she is inclined to act. Or look for a new job.
The latter might seem unfair, but that’s the reality of working for a small, family-run business, says Dana Brownlee, a corporate trainer and founder of Professionalism Matters. “Your boss clearly wants his daughter to play a role in the company, and he calls the shots,” says Brownlee.
It’s not clear if her behavior is just unpleasant or if her attitude is affecting the business in a material way. As much as your boss loves and supports his daughter, if she is driving valued employees away or hurting client relationships, he may not want to jeopardize the business, says Brownlee.
Even at a small firm, your boss may not be aware of what’s happening, especially if no one is speaking up at reviews. If you can get your boss to see what’s going on, there’s a chance the situation will change.
Set a meeting with your boss. Don’t criticize his daughter. Instead, talk about the issues that are having an impact on business and ask for advice on how to handle them. For example, if you have a client who has complained about dealing with the daughter or a decision she made, you can report that and say you’re worried about losing business. Your case will be stronger if you can get several colleagues or even the client to bring the problem up with your boss too.
You could also recommend a change in how reviews are done so that staffers have a way to give honest and frank feedback confidentially. Brownlee recommends a 360-degree review process, in which employees receive anonymous feedback from the people who work around them. That might not be an easy sell in a small organization, but if you have any influence with your boss, this would be an objective way to raise his awareness, says Brownlee.
The best you can hope for is that your boss gets concerned enough about her behavior that he talks to her about it. Even if your boss does that, however, it’s not very likely he will fire his daughter. “If that’s not a situation you can live with,” says Brownlee, “your best strategy is to find a new job.”
Have a workplace etiquette question? Send it to email@example.com.
There's a lot that real-life startups can take away from the Emmy-nominated fantasy series.
The acclaimed HBO series Game of Thrones—which is up for 19 awards at tonight’s Emmys—provides interesting commentary on the modern state of politics and warfare. But speaking as the founder of an online folder printing company, I’ve noticed that the show also demonstrates some valuable lessons for first-time entrepreneurs.
These might not help you become king of a fantasy kingdom, but they’ve been invaluable to me throughout my more than a decade of successful entrepreneurship.
(Reader beware: This article contains several spoilers.)
Lesson #1: Knowledge is power
In Westeros: The Game of Thrones characters who are most likely to survive are the ones with the best information: Where would Varys be without his network of spies gathering secrets from all across the Seven Kingdoms, for example? Would Cersei and Littlefinger still be around if they didn’t have dirt on their enemies?
In your business: Knowledge is your best asset. But that doesn’t mean you need to train swaths of children to uncover your competitors’ deep, dark secrets a la Varys. You simply must to get to know your industry inside and out, so that you can identify what it is that you can provide your consumers that others aren’t already providing. When you understand your field and the needs that aren’t being met, you’ll be better positioned to fulfill those needs.
For me, recognizing an unmet need was the impetus for starting my own company. After discovering that those seeking custom presentation folders faced extremely limited choices, I set out to provide materials of more variety and greater quality.
Lesson #2: Unearned confidence can be dangerous.
In Westeros: Pride often precedes a fall. Ruthless, arrogant King Joffrey mocks his enemies and abuses his subjects in a display of power and privilege, only to be poisoned at his own wedding. Viserys Targaryen shamelessly proclaims his superiority to the people around him, one of whom happens to be a powerful warlord who “crowns” him with molten gold. Even fan favorite Oberyn meets a messy, head-crushy end when he lets his careless bravado get the better of him.
In your business: Know the difference between confidence and an overgrown ego. Starting a successful business requires boldness, determination, and trust in your own abilities and resources, but be careful not to let it turn into hubris. Make sure your actions are grounded in fact or reason; check yourself against someone you trust before making any rash moves. Overconfident people take risks that they can’t afford, and they often don’t listen to their peers’ good advice (“Trust me, Oberyn, wear a helmet”).
Back when my company was first beginning, I did a lot of different odd jobs on the side. A friend of mine told me that I should concentrate on my core competency: custom printed folders. I didn’t listen to that advice, and it ended up losing my business money in the long run. Once I started concentrating on folders, the company grew much stronger.
Lesson #3: A good mentor helps secure your success.
In Westeros: Each of the Stark children has flourished with the help of mentors, albeit unconventional ones. Arya Stark learned swordplay from her “dance instructor” Syrio; Bran has developed his psychic powers with the help of mysterious companion Jojen; and even Sansa seems to have picked up some lessons in court intrigue from Littlefinger.
In your business: Reaching out to a mentor can be a little scary, since it means acknowledging your own weaknesses as an entrepreneur. But remember that the person helping to guide you probably achieved their success with the help of a mentor of their own. When you make the choice to work for yourself, the only people you have to turn to for guidance are those who have already done the same.
Many of my friends are successful business owners, so I make it a point to consult with them periodically. Learning from their experiences helps me to avoid common pitfalls and ensure that my company is running as efficiently as possible.
Mentors aren’t just there to make you feel good about the work that you’re doing, though; they should have enough experience to tell you when you’re doing something wrong. Sometimes the advice that you need most comes from someone as bluntly honest as the Hound—though ideally, your mentor will be a bit more supportive.
Can you think of more business lessons to be learned from Game of Thrones? Share your thoughts on Twitter, with the hashtag #GoTbizadvice
Sex, loss, grief, redemption and a Mennonite chicken farmer who made dreams come true
The genesis of most small businesses is filled with some measure of triumph and sacrifice, the natural elements that make up the heroics of entrepreneurship. But few “how I got started” tales are quite as rich as Anne Beiler’s, the woman behind mall staple Auntie Anne’s soft pretzels. Her’s includes devastating personal loss, grief, adversity, an abusive sexual relationship, long odds, achievement and at least one wildcard that appeared in the form of a Mennonite chicken farmer capable of writing million-dollar checks.
Fortune wrote about Beiler’s story last year (behind a paywall). Now, the site has a video (not behind a paywall) in which Beiler talks about how she grew her soft pretzel business from a single store to a worldwide brand with over a thousand locations. Here’s an excerpt from the 2013 story:
I was 19, and my husband, Jonas, was 21 when we married in 1968. We were a happy couple, and my only dream was to be a mom. We had two daughters until my daughter Angela was killed accidentally in 1975 when she was hit by a tractor on our farm. My life turned upside down. My husband and I weren’t able to connect emotionally, and I sought counseling with a pastor outside the Amish-Mennonite community. For six years I stayed in an abusive sexual relationship with that pastor, living in guilt and shame. The pastor’s license was revoked when his behavior with several women came to light. In 1982, when I began a life again with my husband, we were living paycheck to paycheck. My husband was a mechanic, and during our marital crisis he had studied to become a marriage and family counselor. He wanted to offer counseling services for free to our community, and we needed income. So I told him, “You’ve stayed with me despite all that I’ve done. So do what you want to do, and I’ll go to work.”
A friend told me that an Amish-owned store selling pretzels, ice cream, and pizza in the indoor Downingtown, Pa., farmers’ market was for sale. The owners wanted $6,000. I was astounded at the price because those kinds of weekend stores can bring in anywhere from $25,000 to $200,000 a year, depending on the location. We had no money, so we went to my husband’s parents, and they gave us the $6,000.
For anybody even remotely interested in starting their own business (or just reading an unbelievable yarn), it’s worth checking out.