Mistake #1: Your Team is Incomplete. Did you hire another R&D team member?
Many start-ups are comprised of an unbalanced team, overly biased towards one department (usually product oriented) at the expense of others. For example, if a product-focused company hires yet another member of the R&D team but has no one responsible for generating sales leads, it weakens their whole business. A balanced team with strong players in critical roles is a prerequisite to a successful funding journey.
Mistake #2: Your Product Isn’t Unique. Is your Value Unique and Impactful?
I’d be remiss not to remind you that eventually (and inevitably), your product will become commoditized and replicated. Think through to that stage beforehand, and strategize how you'll maintain a unique value proposition when your initial competitive advantage fades away. Invest in research alongside development. At the same time, remember your product’s natural life cycle.
To ensure that your customers value your offering as much as you do, be proactive about including them in your product’s design. Always start by "talk to them" approach. Seek out their responses using tools like surveys, proof-of-concepts, and pilots. Startups need to clearly identify the problem they’re addressing, and how their technology solves it.
Mistake #3: You Don’t Know Your Market. Is your Market Large enough and Growing?
Unfortunately, I’ve encountered many startups that don’t know their market as well as they think they do. There are no shortcuts: you need to learn, learn and learn again to understand your market thoroughly. If your addressable market lacks the willingness to pay for your product, is not large enough to be viable, or is not projected to maintain or grow from its current size, your startup will stumble. You don’t have to obsess over every fine detail, but having a robust go-to-market strategy with a clearly-charted methodology for customer acquisition is a vital component in securing funding for your startup.
Mistake #4: Your Business Model is Insufficient. Is your Unit Economics clear to you?
The business model you bring to your funding round plays a significant role in your odds of success. Make sure it is both reasonable and consistent by evaluating it across as many different dimensions as possible (top down, bottom-up, as well as industry benchmarks). Importantly, keep it clear and compelling. My motto is that it should be exhaustive, not exhausting, so maintain focus on your company’s value proposition while addressing your investors’ concerns and expectations like CAC (Customer Acquisition Cost), LTV (Life Time Value) and market penetration costs. You must be intimately acquainted with your long-term Unit Economics, in order to increase your chances of securing funding.
Mistake #5: You Aren’t Prepared (Enough). Are you ready for Funding?
There are many ways that insufficient preparation can kill your chances of Series A funding. One way is to fail to choose the right investors with whom you can enjoy a healthy, professional relationship. Another is by jumping to A round funding too soon. Even once your startup can tick all the boxes, I’ve seen that failing to prepare thoroughly for the meeting itself can torpedo all your previous hard work. When you get to the meeting, stay in control and present authentically; if you don’t know the answer to a question, it’s better to admit you don’t know than to try to bluff your way through. Investors will respond to your enthusiasm, so be sure to communicate your idea with passion.
These 5 mistakes are the most common ways I’ve seen startups sabotage their chances for success at series A funding. Not all of them are easy to solve.
In my next articles, I will elaborate more about each of the above. In addition, I will share practical insights from my experience, including examples (good and bad…), that highlight a startup’s journey from “Fundability to Funding”.
